NZ Oil & Gas (NZO)

[fabs]

Look I Do Not See Any Need To Rush A B/b. [ Which I Favour At Below A Dollar ]

1 Poo Still Easing, Nobody Abel To Predict Bottom Yet.
2 Flow At Tui Going Down In Medium Term.
3 World Financial Crisis? Well Any Takers For Predicting Depth, Duration And Long Term Effects?
4 Big Question Marks On All Banks And Kindred Inst.if It Gets Much Worse
Why On Earth B/b Any Above, When An Average Of 1 Mill. A Day Sell For Less Than $ 1.20
Lets Be Frank, I Too Would Rather That All These Negatives Would Disapear, But That Is Not Being Realistic Is It?

[biker]

NEW YORK (CNNMoney.com) -- As the world loses confidence in the foundations of its economic system, the silver lining may be that oil prices are about to get a whole lot cheaper.

In a new report Friday, Deutsche Bank uses a number of interesting yard sticks to suggest crude is currently way too expensive and may fall to the $60 a barrel range as the economy worsens.

And the bank does expect the economy to worsen, painting a bleak picture - caused be the current financial turmoil - but stopping just short of predicting a multi-year recession.

The bank says it expects GDP growth to slow by 1.5% over the next few years - and hints that things could get even worse.

"Indeed if one examines the banking sector crises in Japan and Sweden, economic output declined for at least two years following the crisis," Adam Sieminski, the bank's chief energy economist, wrote in a research note. If the global economy slows to less than 2% growth a year, "oil prices could spiral down, much like they escalated in 2007."

Other analysts see oil prices going through the floor.

"As night follows day, low oil prices have always followed high prices, and the decline has always been swifter than the advance," said Peter Beutel, an oil analyst at Cameron Hanover.

Beutel sees a 2009 low of around $50 or $60 a barrel, then even lower prices in 2010.

"I'm not going to rule out some extraordinarily low numbers, even $20 a barrel," he said, acknowledging that five months ago many respectable analysts though we'd never go below $100. "Whatever the market does, it's going to make us all look like fools."

Deutsche Bank compared oil prices to several other measures, and came to the conclusion that "crude oil is the most richly priced commodity currently."

Compared to crude's historic price average of $35 a barrel, it's currently 100% higher, higher than any other commodity. The next highest is gold, at 56%. Many other metals are only 20 to 30% higher.

And contrary to press reports talking about how expensive food is, adjusted for inflation many food stuffs are actually lower than their long-term historical average price, according to the report.

Relative to per capita income, the bank said oil prices would have to fall to about $45 a barrel to return crude to it's historical average.

In the early 1970s, the average American family could buy about 1,000 barrels of oil on a year's salary. That 1,000 barrels was the norm for most of the last few decades, with the exception of the early 1980s and 2008, when that number dropped to around 300 barrels of oil. Today, oil would have to cost around $45 a barrel for the average family to afford 1000 barrels.

The bank also calculated how high oil prices have to be for OPEC countries to maintain their budgets. Iran and Venezuela, who are often the first to call for production cuts, need the highest price per barrel - $95.

Russia needs about $70, while Saudi Arabia, OPEC's largest producer and de facto ruler, needs about $55 a barrel.

Other measures pointed to a higher price for oil. The bank estimates crude needs to cost $80 a barrel to keep new production coming online, and as a percent of a U.S. consumer's disposable income, current prices are about average.

But taking all these measures together, the bank says $60 a barrel seems like a probable place for oil prices to bottom out.

That would represent a gasoline price of just over $2 a gallon. Good news for motorists burned at paying over $4 a gallon for much of the summer, but bad news if that price drop at the pump also comes with a pink slip from the boss.

[sideline]

NEW YORK (CNNMoney.com) -- As the world loses confidence in the foundations of its economic system, the silver lining may be that oil prices are about to get a whole lot cheaper.

In a new report Friday, Deutsche Bank uses a number of interesting yard sticks to suggest crude is currently way too expensive and may fall to the $60 a barrel range as the economy worsens.

And the bank does expect the economy to worsen, painting a bleak picture - caused be the current financial turmoil - but stopping just short of predicting a multi-year recession.

The bank says it expects GDP growth to slow by 1.5% over the next few years - and hints that things could get even worse.
..........................

How do they expect GDP to grow at all while the oil supply declines????
If prices really fall much further it will stall new developments and nothing will compensate the
natural decline in existing oil fields, estimated to be around 4 to 5% per year.

[fish]

[QUOTE=Unicorn;227886]Hi Fish

To clarify my earlier posts.

The type of buyback that I would prefer is on-market, designed to spend minimal funds, to stabilise the share price, and to mop up bargain basement shares from distressed investors in a market lacking the usual buyers. NZO needs to transition itself in the minds of the investment community from being a volatile explorer to being a stable producer with a stack of cash in the bank. A minor buyback to eliminate some of the lowest intra-day trades and to lift the closing price would help this. Simply announcing that the company is awash with cash and may buy some of its shares should in itself help price stability.

I would definitely stop this type of buyback at $1.40, as that is close enough to the NZOOD issue price to assume the market has resumed normal function. It also marks a level where the company can say it has made a good return for shareholders over the last year, so they should have confidence in supporting the growth strategy going forward. An on market buyback should not be a matter of forcing the share price against the natural market, but of countering the panic element and marketing the company as now being mature and stable.

I do not think that spending $45M on a buyback is appropriate, or is necessary to achieve these ends. I calculate current profit at around $9M a month (and by next month/week it could be anything). Spending $45M would be somewhat more than a 3/4 month profit commitment. Basing a buyback on nta is not appropriate in this case - NZO published nta is nothing more than a random number to keep the accountants happy.

A further compulsory buyback may be a good idea later on, but that is a different issue entirely. If no suitable investments can be found under the 'growth strategy', then by all means return the excess funds to shareholders. But it is far to early to make a call on that type of buyback yet. There may be some great investment opportunities ahead, and those funds may be the key to the future of NZO.

I also think the dividend policy needs to be clarified, and made appropriate to the current situation. Shareholders are more than ever looking for safety and for cashflow. Random special dividends at the whim of the board are no longer appropriate. I would like to see a solid commitment to paying 50% of net profit in dividends. But for the current year, noting that this is a 'quiet' year prior to Kupe coming on stream, 75% of the profits to be paid in dividends.

Hi Unicorn,

Your wisdom and logic make my original suggestion of a 1 in 6 cancellation at $1.50 look inappropriate . I had been thinking at the time that it was a way of fairly apportioning excess funds .
As you point out a small and limited buyback has obvious advantages-not least that the company in effect cancels far more shares for the same budget . Hence more rewards -higher dividends and higher sp in the longterm .

[digger]

Hi I have spare time now so thought i would tabulate the results of the poll.
I gave 1 point for each one hunderd thousand,including adjusting for greater than 10 points when i knew the real shareholding.This can be seen as rough as unless you actually ask people exactally how many shares they have it will not be true but like all polls should average out. I also put the weight on your comments when they said something different than your vote.Example fish and unicorn are both heavily in supporting a buy back by comments but both voted somewhat across the board.
The results are
1--just carry on as we are in Taranaki----57
2--buy back supporters-----------------69
3 -- Leave it up directors /overseas acquitions---31

All my points went to 1 but clearly some sort of buy back is most heavily supported.
Cheers Digger

[digger]

So here is my thinking why i do not support a buy back although clearly most investers here do.


An excellent example can be found on reading the article on THEOILDRUM.COM. Story is called Energy Margin Calls---Chesapeake. Here this american company was trading at $70 US in july where the CEO heavily leveraged his holding.With the downturn he got caught in a never ending series of margin calls.This last week he was finally taken out at a low sum of $11-99. In total he had 300 million to sell.
The problem with having a buy back is that we do not know the bottom and is it fair to ask the company to use its cash to interven in the market where that intervention will most benfit sellers.I certainly would not want to be on margins at the moment and i am not. But lets remember if the SP had not ran into the world finanical mess the current price would be well north of 2-00. Would the margin borrowers then want to give some of this money back to help the company. We must always be careful that we are not both at the same time capitalist in the good times and then want to solicalise the costs when things turn sour.
The very first policy NZO wants and needs to do is save all monies required to complete TUI ,PIKE and KUPE developments. According to a email from Chris the company is doing just that. Good that is priority one in order.
Now for priority 2
Unicorn spoke my mind exactally when he said that the company should set out a clear dividend policy.Such a policy is what i want and feel at this time would do the most for all in supporting the SP in this mad world we have crashed into these last few weeks. Note the government today has guaranteed all bank deposits to give confidence.NZO needs to announce a minium dividend policy paid twice yearly.At this stage two 5 cent payments for the next 12 months one in march and then in sept would be well inside the comfort zone of our current income and show much needed company confidence in the future. Such a small and minium dividend plan would leave plenty of space to also follow other plans.
Priority three is to drop the acquisition thing. As some of you said in supporting comments to your vote this can wait until things settle down a bit. At this stage just too risky. Think if we had bought into Chesapeake at 50 dollars saying what a great deal it was as they were 70 not long ago.No one knows enought at these times so it it too risky.
We need a clear minium dividend policy .It will cost the company probable nothing as likely going to do it anyways and it will go a long way to give the SP the support that you voters want from a buy back. A dividend also helps all,a BB mostly aids the seller with debatable benifit to other shareholders.
Digger

[arjay]

I think a few posters are looking at the value of a buyback the wrong way round. I support the idea of buyback not because it supports the shareholder but because it is a way for NZO to make value for itself. There is a level at which the company is clearly worth more than the SP suggests. So, buying back now and cancelling the shares will strengthen the company. The shares may even be re-issued later for a nice profit when McDunks $200 oil arrives.

[sideline]

....................At this stage two 5 cent payments for the next 12 months one in march and then in sept .......................

Just one thing digger, some of us need to do a bit of tax planning and the timing can be important.
So this years timing of 15 April was just perfect, pushing the payment into the
next financial year! (Also note that income tax might be lower for income received after March 31, 2009).

[fabs]

Digger & Arjay,
more or less agree with most, since my last post the bank deposit garantee has for the time being, removed some of my concerns regarding deposits in oz & nz banks.
Personaly i have no need to sell any more of my holding in nog, they cost me origionaly 40 cents and by buying and selling heads and selling various options over the years have had tremedous returns also did not take up the last option offering. Sold just a 100k"s heads at $ 1.75 a few weeks ago, so can at lesure come back in again anytime and this applies to a co.B/B if they can do it for under $ 1.00
In 2-3 years they can always do another option issue when everyting has hopefully settled down with all 3 systems in full swing. May issue the same number of shares as canceld by B/B say for $ 2-3.00 if needed. Do not no how it works exactly but another setting up of Tressury Stock maybe also be an option.
BTW i would certainly cherish a B/b AT $ 1.40 as unlikley that would be, the way things are going i would sell them all at that and bid my time to come in under a dollar.
AYE
ALBERT

[digger]

Just one thing digger, some of us need to do a bit of tax planning and the timing can be important.
So this years timing of 15 April was just perfect, pushing the payment into the
next financial year! (Also note that income tax might be lower for income received after March 31, 2009).

Sideline are you sure with dividends it works that way.I had the impression that the dividend would be taxed on the year it was earned.This is though splitting hairs as it will only be one off and should not get in the road of establishing a long term and regular dividend policy.I would like to get this going and talked about in the AGM.To me this is more important than acquisitions in this time.The empire building can wait.To my thinking it has enormiously jumped the que as many of us have waited for decades now for a on going return from NZo and only to find it risked by get rich or get poor scheme,depending on an uncertain outcome from events far beyond the control of directors.
See directors want more money and more perks.I will be voting and speaking against this until a dividend policy is in place.Directors and CEO's on a help yourself is exactally what has got the world into the finanical mess it is in.Their reward from the company has be be tied back to the size of reward all shareholders get. So i will be voting against this motion.Anyone care to to join me??