NZ Oil & Gas (NZO)

[fabs]

Fully aware of the strike-rate regards drilling and i am not particular hung up about that, but combined with the performance in the other 3 mentioned not very impressed.
All of them, Judgment, Governance & Strategic Planning have been trashed quite extensively on this forum over some time by quite a large and diverse number of contributors and i feel that this Public co. is not beyond improvement let alone criticism.

[geezy]

hi digger,

indeed. i do own both those stocks and did sell out some nog before their drilling campaign started as i was starting to have little faith, i do like their producing assets but chasing for another hopeful TUI well started to seem like a bad decision by them. Why not look at producing well in its infancy stage e.g. cue? well i m no expert but it just seemed sensible with the ready cash they already have.

i do own awe too and it has hurt me alot. i hope for happier days for nog but i m sure not all is lost.

For me Geezy your post hurts. I did take a look at Cue just before the cash issue at 15 cents. Bought 1/4 million at 14 cents and now it is the only oil stock up from that time. Would you believe i looked at selling all my PPP shares at the top and going into CUE big time.The rational in hindsight was 100% but talked myself out of it on the now very weak excuse that as the directors of PPP had a big stake they must know what they are doing.Boy was that 100% wronge .
Nog and PPP will have some very serious thinking to do before hoping into more drills.Most likely finding the size of Kupe and TUI is the now better way to go and leave out the wild card get rich [get poor] stuff until we have a better understanding of what we are trying to do. Clearly our it is back to the drawing boards.In fact now i am thankful we have no more drills coming up as that means no more falling SP. Today the SP is lower than if we had never done these wells and given the same monies to the poor.
This will be a discussion for the AGM. To drill or not to drill,where to drill,or even how to drill.Are we any better than a map on the wall and a dart.After our 4 nil drilling outcome of this season these questions have to be asked before any more money is thrown at dry holes.
So Geezy maybe your post is the best way to go. Cue is still under valued and better to buy the resource than to go off on our blind search looking for it.

[dsurf]

Get a grip - Kupe is a 20 year project that is performing. Tui still has 22m barrels versus 27m when project first mooted. PRC will perform at some point and the costs are already sunk. NZO has enough money from existing projects to pay a 5c divi and do 5 wells for probably 10 to 20 years. I do not like a falling SP but the world is very risk averse and liquidity is tight. That will change for all the same reasons that applied when the SP was $1.85, ie the world is running out of cheap energy

[digger]

Get a grip - Kupe is a 20 year project that is performing. Tui still has 22m barrels versus 27m when project first mooted. PRC will perform at some point and the costs are already sunk. NZO has enough money from existing projects to pay a 5c divi and do 5 wells for probably 10 to 20 years. I do not like a falling SP but the world is very risk averse and liquidity is tight. That will change for all the same reasons that applied when the SP was $1.85, ie the world is running out of cheap energy

Your view in my mind is only one path and it is time to consider if it is the best one.The facts about KUPE and PIKE are well known and i agree with completely.The problem is how best to spend that money and just drilling has a risk reward outcome which might not be as favorable as buying a distressed asset as CUE was during the last cash issue. The issue needs to have considerable airing at the AGM. Certainly this year we do not need to have another free gift to the the CE[DS] over and far above his income from NZO. This year we have all lost so no one needs insulating from that fact.

[Corporate]

This quarterly report will be an interesting one. We will get to see how Kupe is performing and how much net cash is left in the kitty.

[Bixbite]

This quarterly report will be an interesting one. We will get to see how Kupe is performing and how much net cash is left in the kitty.

Copy from NZO web-site

>>>>>>>>>>>>>>>
KUPE

A detailed reserves review was completed in 2010. The initial 2P reserves were increased to:
• 273 petajoules of sales gas (NZOG's share 41PJ)
• 18.6 million barrels of light oil/condensate (NZOG 2.8 mmbbls)
• 1.11 million tonnes of LPG (NZOG 167,000 tonnes)

Remaining 2P reserves as at 30 June 2010 were:
• 263 PJ of sales gas (NZOG's share 39.5PJ)
• 17.6 mmbbls of light oil (NZOG 2.6 mmbbls)
• 1.08 million tonnes of LPG (NZOG 162,000 tonnes)

<<<<<<<<<<<<<<<<<

From these figures, we can do our own calculations and estimate NZO’s revenues from Kupe.

[dsurf]

I hope management increase the dividend to say 6c or 7c a share. With a SP of $1.23 and even below $1.50 NZO is trading uncomfortably near NTA and IMO is in takeover target territory. Just as PPP, CUE etc are "cheap" relatively compared with the previous year / s trading range so is NZO and a cheaky takeover offer of say $1.50 could get a large % stake. To make matters worse a conditional offer for 100% could be mostly debt funded with the interest paid using NZO's existing cash! Shortly KUPE will be proven and producing 40? million or more per year. IF TUI contributes another 30million then without PRC there is 70million available for the next couple of years. With 390 million shares on issue at $1.50 a 100% offer would cost 585 million assuming the usual creep to tidy the "hold outs" the offer may be increased to say $180 for the last say 20% so all up would cost say $700million. These numbers are not meant to be accurate and I suspect the real cashflow will be much higher. For illusttative purposes though 70mill will fund interest costs at 10% for 700mill. Looks very doable to me.

The next question is why? Answeris to get a free carry for the 30% of PRC. There are doubters but I think that most people would accept that PRC will be profitable in 2 years time and if it is producing even 500K tonnes per year will generate substantial cashflows on SUNK costs. So PRC should be far more valuable in a coupkle of years time at which point the 30% stake could be sold, reducing the loan and keeping the Kupe earnings stream.

An increased dividend of 6c would send an important message to the market that the future earnings are very likely to grow. Increasing the annual dividend by an extra two cents would cost 7.8 million - the same as an expensive drill? The SP would rise since yield investors would become more attracted to NZO. At $1.50 SP a 7c dividend gives an investor a return of nearly 8%.

The executive / board need to carefully consider how important retention of ownership is and whether a fate of possibly becoming a private company is desirable. Most posters here may say that they would not sell at $1.50 but in times of tight liquidity and recession like conditions a substantial many might take it. The board needs to ask themselves whether 8million is a lot of money when compared to the risk of losing ownership? Also I do not think many shareholders would disagree with a decision to increase the dividend so it should not be an onerous decision to make or communicate. If the board truly believe that PRC will be profitable in the future then they should not hesitate as there will be plenty of money for further exploration and / or acquisitions. But the decision needs to made very quickly as NZO is substantially de-risked with long term earnings and is looking very cheap.

Discl long term holder

[boysy]

the question remains why buy into a oiler for a yield play they are inherently risky raising the divi by 1 or 2 cents isnt going to stop a takeover attempt. The real question holders have to ask is what managements plans are so far they have paid a special divi only to get far more cash back which they couldnt use in the middle of the GFC. If NZO couldnt find a value creating opportunity in the GFC what makes people thing management will be up to the task when competing with other players with more money and vision in the world of today ?

[Bilo]

dsurf - are you suggesting that NZO should just stop drilling, sell down licences, sit on existing investments, manage currency properly, reduce staff to an accountant and a secretary and pay plenty to long term holders for the next 20years as Tui, Kupe and Pike deliver?

We could just produce a mimimum amount if the price wasn't deemed sufficient. Makes sense while all small holders are having their liquidity constrained. The GFC certainly contributes towards a situation where long term holders are less important than new sources of capital to management. Seems to have more value creating potential than is currently on show to small long term holders being squeezed by bigger players.

[neopoleII]

i agree with your comments dsurf.
nzo passed the stage of speculative oiler where all its cash goes into drilling wildcats.
it has 3 very good income producing jewels....... one just needs some more polishing.
look at BP.... its an oiler and pays divies to its long term loyal shareholders on a very regular basis (except for what it going on now).
management has said they will pay a portion of profits each year in divies....... but the last divi has so many clauses and thingamejigs added on or subtracted that the 5cent divi was not a 5 cent divi........ so why was that?
then there was the shares in leu of cash arrangement..... with what..... a 2 or 3 % discount to a high share price........ price is what now?

it seems that management is bending over backwards to avoid or restrict cash going to it shareholders.
and that could easily explain the low sp, along with other things of course.

i remember reading here some 4 or 5 years ago about every one talking about the wealth they will have.
turbin hats 10 gallon hats, ferraris, and someone mentioned that 20 to 50 cent divis arent too far away.

instead, we have "sort of 5 cent" divies a low sp and the oil is flowing and the gas is flowing, and no where near the $2 to $3 sp like we all hope for.
cash is coming in so we cant blame the gfc, traders dont care about companies, they just want sp volitility to make a profit, so that leaves the loyal long term shareholder to carry the company with very little reward.
nzo is no longer a spec oiler its a producer first, prospector second, and as a producer should act as one......
also......... why not spend money on buying shares in one of the kupe partners? or for that matter maari or tui.
well that was my bleat ........ im happy to sell my lot now if a good take over offer appears.
ive held for 6 years, and was really hoping for some good returns now that nzo is a producer.