NZ Oil & Gas (NZO)

[Bilo]

Onthemoney a question for you.

On what point of law do you say that "NZO can only buy back shares"?
And how do you see that stopping NZO buying back the 2008 Options?

Secondly what is to stop NZO offering to convert options to shares, buy them back for (say)15c, and cancel that share?

I didn't see anything that would stop the company from buying the options back on market, but that may be what you are referring to.

I had a look at my prospectus and it was difficult to tell (without a complete knowledge of company constitution, the Companies Act and NZX rules). The prospectus refered me to Brian Roulston (are you following Brian?) if I had a problem with this investment. And I do.

A few snippets from the Prospectus indicate (to me anyway) that change to option terms is up to us:

"NZ PART A 7. Can the investment be altered?
The rights and obligations attaching to 2008 Options and/or Shares can only be altered by special resolutions passed at a general meeting of Option holders and Shareholders of NZOG, respectively.

Australia PART B 7.9

“Under the companies Act 1993, NZOG can cancel its shares

“Buyback of Shares

Subject to the Companies Act 1993, the Constitution and the Listing Rules, NZOG may repurchase its shares from Shareholders.

Variation of Rights Attaching to Shares (and other securities)
The rights attaching to a class of Shares can only be varied with the sanction of a special resolution passed at a separate general meeting of the holders of that class of shares and any other class of securities (for example 2008 Options) which are affected. ……A variation of the rights attached to the 2008 Options will be treated as also affecting the rights attached to the Shares.”

Some danger that this is taken out of context, and the prospectus may have to be read in conjunction with NZOG’s Constitution but anything seems possible. This includes waiting until next year and letting us shareholders (and option holders) elect not to take up our options.

Surely as shareholders, given that the company doesn't need to touch us for the couple of hundred million NZD, and has no stated use for it, we would vote to have the 2008 share options cancelled for this small amount instead?

[shasta]

Bilo

NZO (& in particulcar the CEO, David Salisbury) has recently stated "as a priority" to ensure they do get the options converted?

Why do you question this, i believe the money raised will be used to fund an acquistion, in which case they will want as much as they can get.

Do you hold options & heads, just options?

In any case Shareholders MUST approve of any share buyback, & this is usually done as a resolution at a companys' AGM, & normally states something like "...to buyback up to 5% of shares of the total shares on issue over the next 12 month...".

I dont see it on the Proxy form either...

[upside_umop]

bilo,

they would be giving money away if the options didnt get converted in the end. be a bit of a waste of company resources really...and a bit of risk to give 20 million away. rather bang a few more holes into the ground to find a gusher.

i also dont see, at this point how it would be anti-dilutive and raise the sp before option date, which essentially they would have to try to be doing.

simple story is, the company will want the options converted, but they wouldnt be doing any share buy backs before option date imo. they will be trying to build a mini war chest (remember they have minimal debt also so can leverage to buy quite a bit) to get hype and really turn up the pr machine making a lot interest and the sp jump a bit...its not out the of question, and im hanging in for the ride. exciting isnt it!

the only thing about an acquistion at this point is that some companies could want too much for their assets given the oil price. i hope they announce more drilling permits, acquire a few more assets, and get that drilling for kupe spudded before june 30th.

[shasta]

bilo,

they would be giving money away if the options didnt get converted in the end. be a bit of a waste of company resources really...and a bit of risk to give 20 million away. rather bang a few more holes into the ground to find a gusher.

i also dont see, at this point how it would be anti-dilutive and raise the sp before option date, which essentially they would have to try to be doing.

simple story is, the company will want the options converted, but they wouldnt be doing any share buy backs before option date imo. they will be trying to build a mini war chest (remember they have minimal debt also so can leverage to buy quite a bit) to get hype and really turn up the pr machine making a lot interest and the sp jump a bit...its not out the of question, and im hanging in for the ride. exciting isnt it!

the only thing about an acquistion at this point is that some companies could want too much for their assets given the oil price. i hope they announce more drilling permits, acquire a few more assets, and get that drilling for kupe spudded before june 30th.

UU

My comment re NZO would want the "options money" for an acquistion is based purely on the timing of it.

By June 08, Pike River should be up & running & independent, Kupe drilling campaign will be in full swing & Tui will be ticking along largely forgotten as we anticipate Kupe coming on line in 2009.

The fall in Tui reserves during the 2008/09 year, & before Pike & Kupe really contribute to NZO's revenues, is the most likely time they will go hunting for an acquistion.

NB, My question to DS (via Bermuda) was, how do NZO intend achieving there stated 2mmbo annual production target, & no surprises they do see acquistions playing a part!

Yup, exciting times ahead, though you might wanna check NZO's debt/capital committments though, it's quite high & too leveraged to go looking at the moment, & i hope they don't.

Remember we are holding back $25m to assist PRC, we already hold 31% of PRC, plus with the options & convertible notes, we hold 34.6%.

NZO will want to sell down some of the PRC shares eventually, possibly during 2009, or sell out altogether at the right price, which would add to the warchest.

[duncan macgregor]

Only nine months left for pass the parcel for the SP to reach $1-50 to make the options worth while.
At 11.5c that makes it $1-61.5c to break even, plus add to that whatever profit you expect the market to pay back for risk taken. How many noggers actually think the price will be that high?, even wearing those rose tinted glasses. What the company could do to raise the sp price against what the company will do going from their record is open for discussion. The SP was 20c higher at one stage, two years ago and only dropped back because of the contempt shown by the company to its owners the shareholders.
The company has learned nothing from past experience, simply going by the unanswered questions that the shareholders discuss on this forum.
Its all public relations, letting the mums and dads know what is going on, not keep them in the dark as this company does with no open disclosure. I walked out of the last AGM half way through nothing but waffle, i would expect this one to be equally as informative. Last time they announced a PR lady to keep you informed which was just to shut you lot up thinking all would get revealed. I wonder what this years condescending gift to the shareholders will be?. Macdunk

[bermuda]

Macdunk,
You are not in a good mood about this company eh?

Why dont you email Chris Roberts at chris.roberts@nzog.com with all your 'unanswered 'questions and see if you get a reply. Chris is their new Public Relations Manager.

I remember at last years AGM there was one rather irate fellow who had a go about Tui being a bit of a 'pipedream' and that NZO didnt understand and didnt have the expertise to ever pump any oil. I doubt if that was you but you are starting to sound like it.

It is a beautiful morning here in CHCH. Is it raining where you are?

[shasta]

Only nine months left for pass the parcel for the SP to reach $1-50 to make the options worth while.
At 11.5c that makes it $1-61.5c to break even, plus add to that whatever profit you expect the market to pay back for risk taken. How many noggers actually think the price will be that high?, even wearing those rose tinted glasses. What the company could do to raise the sp price against what the company will do going from their record is open for discussion. The SP was 20c higher at one stage, two years ago and only dropped back because of the contempt shown by the company to its owners the shareholders.
The company has learned nothing from past experience, simply going by the unanswered questions that the shareholders discuss on this forum.
Its all public relations, letting the mums and dads know what is going on, not keep them in the dark as this company does with no open disclosure. I walked out of the last AGM half way through nothing but waffle, i would expect this one to be equally as informative. Last time they announced a PR lady to keep you informed which was just to shut you lot up thinking all would get revealed. I wonder what this years condescending gift to the shareholders will be?. Macdunk

Macdunk

Not sure if we will get to the $1.50 before 30/6/08 or not, i'll let the market decide that & the NZO management sort out how, however...

By the end of the year we will know if there is more OIP @ Tui, & whether is it recoverable. New technology & drilling methods are able to recover more OIP these days, so it seems.

What say the Tui reserves are upgraded from 32mmbls to 40mmbls???

That would get the oppies over the line, being worth an extra million barrels to NZO

Far too much could happen between now & the end of June.

Who knows Oil might be $US120bbl by then

[shane_m]

for me water cut rate is critcal paramter. Answer to burmudas q to DS indicated this is as per expected water cut. I would like to know exactly what value the water cut is, BWR indicated that these will be published in the quarterly last time I questioned, but I could t find the water cut % on the quarterly.

If they find lot of water coming up few months down the track not so rosy for NZO. TUI is fairly high risk for me, but i will continue to hold my entry at 86c hoping NZO SP will follow the oil price re-rating.

[bermuda]

I came out of the meeting very happy about Tui's performance. Pateke's drilling was expensive due to a drill collapse but the actual production volume could go above 100,000 bpd. It is the collection facilities and the FPSO design that are limiting factors because they were designed to handle 50,000 bpd.

Since production startup there have been hiccups in acheiving the target of 50,000 bpd due to gas tripping. Production has probably averaged 40,000bpd but these hiccups are currently being resolved. I am very happy to throttle it back a bit. Oil field research has shown more often than not that the slower you take it out the more oil you will ultimately get.Read Twilight in the Desert.And despite volatility the fundamentals say oil goes higher.

The price acheived is at a premium to Nymex but it must be remembered that initially cargoes will be discounted slightly until refiners get to know and understand just what Tui is all about. Although not giving the figures DS did say that the water cut was below that forecast which was a good sign.

Dont really see too much of a problem with Tui. My concern was where NZO was going to get a drilling rig to drill in and around Tui. The good news was that the "Industry" was gearing itself up to act as a 'club' to get another rig out here to do a number of wells next summer.

AWE are currently doing a thorough assessment of the Tui fields which could possibly improve the stated reserves again. Their report will be out before the end of the year.

[Bilo]

Shasta $ Upside_down
It was the the Chairman's review in the Annual report (30th June - wasn't that a long time ago) that stated "One clear objective is to ensure that NZOG's value is fully recognised in the marketplace ahead of the 30th june 2008 final date for option holders to exercise the share options which the company has on issue."

DS's statement indicating that NZOG didn't need to ask shareholders for more money was in early October. I for one felt that the company had moved on from the June statement, to focus on delivering profitable growth to shareholders which the Chairman also included in his Annual Report review.

Who in their right mind would give $200M to someone who hasn't got an outstandingly clear view of how they are going to make a return on it?

Which directors would be acting in their shareholder's best interests by taking on another $200M when they haven't been able to demonstrate a satisfactory return (for the level of risk) on the ~$200M they already have?

As McDunk correctly points out, June 2008 is far too late to have indicated value, the options will be sold down months before then unless they are well in the money. The options are not near "in-the-money" according to recent company releases on company value. Reducing the conversion price to $1 might do it...but DS still needs to demonstrate future return on investment.

To answer your other question, I am a long term holder and have lots of both heads and options. I think most of the investors in the company are in a similar position wrt heads and options. Although a number of major shareholders notably appear to have fewer than their allotment of options, I guess that the numbers of shareholders with both heads and options out-number those that do not have options.