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29-10-2009, 12:06 PM
#8531
Member
Snapper - DS (or TR) said the terms where favourable, so I assume a good rate, and worth taking down to mean the had the cash ready to go if something they wanted came up, rather than needing to draw it down later and wait. Thats the only thing I can think of, as I too would have thought bringing some USD back would have been worth while, rather than adding an interest expense on.
Its not that uncommon. Borrow money to invest for greater returns. Just means they have more cash available.
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29-10-2009, 12:48 PM
#8532
Member
Originally Posted by Sehnsucht888
Its not that uncommon. Borrow money to invest for greater returns. Just means they have more cash available.
The company borrowed the NZD money for the NZ expenses.
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29-10-2009, 12:56 PM
#8533
Member
Everyones going on about the Forex, what about the KUPE blowout?
From NZOG site...
"The Final Investment Decision was made in June 2006 based on a budget of NZ$980 million. The project has not been immune from international industry cost pressures and expected development costs have risen by around 20%"
This made the overall cost about $1.2 billion, NZOG share of 15% is $180m
From yesterdays AGM
"As the project approaches completion the operator has advised that the final
cost will be higher than previously estimated. NZOG has contributed NZ$180m
to date and our final bill appears likely to be in the range of NZ$195-$200m"
So the total cost must now be up around $1.34 billion.
Thats NZ$140m extra they just slipped in yesterday.
From the original budget of NZ$980m, the project will be nearly NZ$360m over !!!
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29-10-2009, 12:58 PM
#8534
Member
Originally Posted by Bixbite
The company borrowed the NZD money for the NZ expenses.
Yes, but in not converting the available USD to cover it, it has left them with more available USD cash - was what I meant to imply.
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29-10-2009, 12:59 PM
#8535
Member
Re. NZO hanging on to PRC
To be fair, if PRC had not encountered the problems it had and continues to have in bringing the mine to full production, NZO shareholders would probably very happy with their 30% holding in PRC.
Had NZO bailed out when the ventilation shaft collapsed and the PRC shareprice plummeted from the highs it experienced early on, not only would the PRC shareprice have been hammered further, NZO would not have shared in the modest recovery that has taken place in PRC.
I'm not sure that NZO were in the business taking profits on investments when their shareprice spikes. They had a pretty clear commitment to bringing the mine to full production before bailing out. Its just a bugger that bad luck got in the way.
That's my take on things for what its worth. Probably too simplistic and tolerant but someone has to be.
Disc. Hold both NZO and PRC.
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29-10-2009, 01:07 PM
#8536
Member
Originally Posted by Mr Tommy
Everyones going on about the Forex, what about the KUPE blowout?
From NZOG site...
"The Final Investment Decision was made in June 2006 based on a budget of NZ$980 million. The project has not been immune from international industry cost pressures and expected development costs have risen by around 20%"
This made the overall cost about $1.2 billion, NZOG share of 15% is $180m
From yesterdays AGM
"As the project approaches completion the operator has advised that the final
cost will be higher than previously estimated. NZOG has contributed NZ$180m
to date and our final bill appears likely to be in the range of NZ$195-$200m"
So the total cost must now be up around $1.34 billion.
Thats NZ$140m extra they just slipped in yesterday.
From the original budget of NZ$980m, the project will be nearly NZ$360m over !!!
Yes, but no surprise, it has been increasing for a while - especially when a lot of the costs where during the phase where commodities where soaring, and thus things costs lots more.
Also remember, that the revenue is also looking much higher than the project was scoped on.
Even if NZO pay NZ$200 Million, they are expecting around USD$50 million a year for the next 10 to 15 years based on 70 dollars a barrel. If there are other finds near by, then they will be even sweeter.
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29-10-2009, 03:39 PM
#8537
Originally Posted by Mr Tommy
Everyones going on about the Forex, what about the KUPE blowout?
From NZOG site...
"The Final Investment Decision was made in June 2006 based on a budget of NZ$980 million. The project has not been immune from international industry cost pressures and expected development costs have risen by around 20%"
This made the overall cost about $1.2 billion, NZOG share of 15% is $180m
From yesterdays AGM
"As the project approaches completion the operator has advised that the final
cost will be higher than previously estimated. NZOG has contributed NZ$180m
to date and our final bill appears likely to be in the range of NZ$195-$200m"
So the total cost must now be up around $1.34 billion.
Thats NZ$140m extra they just slipped in yesterday.
From the original budget of NZ$980m, the project will be nearly NZ$360m over !!!
So they really shouldn't be throwing money away!
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29-10-2009, 03:41 PM
#8538
Originally Posted by geezy
are the losses in FX a realised loss or just a paper loss?
The cash has gone down, yes its a loss!
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29-10-2009, 04:28 PM
#8539
Originally Posted by Nita
A little bit of ping pong here and nothing wrong with a good debate Shasta.
You have taken my comment out of context based on your post here and replied accordingly.
Should nzo's situation change and by that i mean have no need to spend USD for say 5 or ten years then your arguement has far more merit.
Please explain where i am wrong and as an accountant yourself what you you have done in the same situation. i.e. taken what action at what time and for how long? The second question i have on this is, with the benefit of hindsight what would you have done? i.e. again, what action, at what time and for how long?
This is a bit of a challenge, because now you are going to have to predict the future as well with the currency?
The contention is about what NZO did/didn't do!
For the record i have previously worked for a private energy company as a Financial Accountant, where we imported goods in 6 different currencies from memory.
So i do have working experience with FX deals both there, & in my time with a large Crown Entity.
Had NZO been monitoring the USD currency at all, they would have noticed around 9 months ago they were sitting on a tidy FX gain.
At the time they had quite a large amount in $US currency, far more than was required for $US denomination expenses, that was the time to crystalize the gains.
Remember they don't speculate in FX & i'm not going to either!
As they don't hedge there oil receipts they get the Tapis spot rate, why not just pay the spot rate for there expenses, if you are ignoring the currency fluctuations you may as well be consistent?
If the $US goes down they pay more for expenses, but get the upside from the increased revenue. (assuming roughly the same FX rate is used)
Should the $US go up, they pay less for expenses, & get the downside from reduced revenue. (as above)
When all converted back into $NZ, there should be little in the way of currency movements to account for, although there are always "timing differences", as it's not an exact science!
The USD/NZD cross rate at ~0.75 is historically alot higher than the normal range, the $US v $NZ is probably closer to "fair value" in the 0.55 - 0.60 range. (these figures are just off the top of my head)
Will 0.75 be the top, hard to say, if the US keeps printing money it could hit 0.80 in the short term, my thinking is that it won't get there, or if it does it won't stay long.
Mid - longer term the USD/NZD should trend back down below 0.60, what path it takes getting there again is more speculation!
There is a large gulf though between NZO saying "we don't speculate", & having proper cash management system & proceedures in place.
For example, Crown Entities are required to hedge 50% of forward cover contracts, this is probably enscribed in the Public Finance Act???
NZO by way of holding $US currency (acquired at more favourable terms in the first place) is diminishing through a lack of cash management.
For a start NZO would earn a higher interest rate on those funds in $NZ, rather than $US, so there is a loss of potential income as well.
Hope that helps explain it!
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29-10-2009, 05:00 PM
#8540
With 20/20 hind sight you are possibly right Shasta but they would be stupid to return US funds to NZ at the current levels. Locking in the loss would not be that smart.
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