NZ Oil & Gas (NZO)

[macduffy]

If its any consolation, AWE is trading at 21% below its high for the year - and its got 42.5% of Tui plus other producing fields.

Disc: Hold AWE but not NZO.

[duncan macgregor]

True, you have picked a winning argument because at the moment the market agrees with you.

Tell me this, was NZO worth $1.30 prior to receiving any cashflow/revenue as a producer, probably not back then?

And now that it is producing, why is the market devaluing NZO for being a producer?

Sometimes the markets remain irrational, & creates buying opportunities.

Hard to disagree with $5m revenue coming in each & every week...

SHASTA, The market never gers it wrong, it dictates the price. The investor gets it wrong when they seem to think its the market wrong, and they are right. The market is always right, the point being study the market not your own little perception of right and wrong, then beat the market to getting it right next time. Argue with the market and average down in your own little i am right you are wrong at your peril. Macdunk

[Unicorn]

regardless of your views about NZO or NZOOD something must surely have sunk in to the investor that has an open mind. NZOOD went to over 30c, the heads went to over $1-30 twice, then dropped back on two different occasions. Surely with that in mind you looked at your investing strategy. Options might have been bought all the way up with a running stop loss. Heads might have been bought all the way up with a running stop loss. Its not if the company is good or bad it reverts back to is your system good or bad with the companies that you invest in. I would suggest to investors caught out with the hype and downtrend to look at their methods then learn from past mistakes. Macdunk
DiscL sold options at the start at 9c

I don't agree on using a stop loss with NZO in those circumstances. Those price movements are not down to normal market forces, but have been event driven. The drops in share price result from unsuccessful drills, and are immediate - by the time the stop loss triggers it is usually too late to take action (unless you are very close to the market).

The simple way to make money from NZO, and this has worked every time in the past, is to buy 6-8 weeks prior to a drill and sell shortly after spudding (and definitely before target depth is reached). My observation is that the market assigns minimal value to exploration assets until a couple of months prior to a drill, and then it quickly changes the share price to reflect the risked value of that drill. Of course if you sell and then the drill is successful you will not make as much as those who held their shares (and took the risk). But by selling when interest in the drill nears it's peak you are almost guaranteed a good profit. When a drill fails, the share price invariably returns to somewhere near where it was before the drilling interest began.

So in these circumstances a stop loss is not appropriate - rather it is matter of making a deliberate choice between taking a profit or risking that profit against a potential somewhat larger profit.

I have held my NZO shares through the last four (unsuccessful) drills, but sold my PPP holdings as per plan. With hindsight of course I would have done it differently, but given what I knew at the time I was happy to take the risk. No regrets, I knew the odds and took them on.

[Unicorn]

SHASTA, The market never gers it wrong, it dictates the price.

If the market never gets it wrong, why do share prices suddenly move by large amounts? Look at recent graphs of AIA, SKC, and WHS - some major adjustments as the market changed it's perception (it can't have been right before and after, for the prices to move so much so quickly).

The value of NZO has increased significantly over the last year or two. The market has not recognised that. The market may never recognise that, or then again it might - I pick that it will.

[Nitaa]

I agree with your post Unicorn. The other thing i have noticed is that there is not quite the same gains as there used to be leading up to the drill.

AWE looks so solid as an investment. with a market cap of around $AU1.3b it looks the best value of all the Tui JV's. What is stopping NZO in my view is the uncertainty of PRC. clearly PRC needs more capex and that will come out in the wash over the next 6 to 12 months. As Bermuda nd others have pointed out, the revenue stream long term looks great. So the day traders will come a nd go just like they have in the past but the faithful should do ok imo.

Even by the oracle DM, he thinks NZO wont really go above $1.50 in the next 8 months but shouldnt go below $1.00 give or take. That makes a heads buy a good bet medium term.

The other thing that could be upsetting the apple cart is the possibility of an aquisition. To me the horse has bolted for most similar companies to purchase at a fair price, especially with oil prices so high. Hopefully they concentrate on oil exploration around Taranaki, Kupe and even possibly flog off PRC.

[Unicorn]

I agree with your post Unicorn. The other thing i have noticed is that there is not quite the same gains as there used to be leading up to the drill.

Two good reasons for the lesser gains now compared to earlier drills ...

1. NZO capitalisation is much larger, so any new discovery will represent a proportionately smaller increment in company value.

2. PPP gave better leverage to recent drills, so much of the speculative investment would have gone there.

[duncan macgregor]

If the market never gets it wrong, why do share prices suddenly move by large amounts? Look at recent graphs of AIA, SKC, and WHS - some major adjustments as the market changed it's perception (it can't have been right before and after, for the prices to move so much so quickly).

The value of NZO has increased significantly over the last year or two. The market has not recognised that. The market may never recognise that, or then again it might - I pick that it will.

Its the market that dictates the price, dictators are never wrong, if you know whats good for you. The idea is to think in advance of the market movement, therefore the company fundamental considerations come after the market consideration. NZO is a perfect example, fundamentely its sp is worth 40c north of what it is at the moment, which means nothing at all. In the real world its the perception of the company in the market place, nothing more nothing less. Macdunk

[Nitaa]

Unicorn. Without trying to pee in your pocket and give you the warm fuzzies, I want to thank you for your informative posts. You have pretty much called it as it is, pro or against. Keep up the posts and novices such as myself can keep on learning.

One thing that stands out from many posters (not just on sharetrader) is their insistance on trying to justify their position (that includes me). For that, you along with plenty of others have helped me open my eyes and look at things from a different perspective.

[Mike.Gayner]

I dont often agree with McD, but I'm with him on this one. How can you say the market is wrong? That's like meteorologist saying the weather got it wrong. Rather, he should be working to predict the weather and stay on top of it, helping people plan their next move. The market cannot be wrong - but we can be.

[Nitaa]

Its a common catch phrase.."the market is always right". since its us (the investors, traders etc) that effectively control the market then we must also be right all the time. In the end it doesnt really matter if its right or wrong. what it is is what it is. What the market does do is tell is what the we (all potential investors) think the current fair value of a stock is.