By Neil Ritchie
New Zealand Oil & Gas – this country’s largest listed explorer – remains “cautiously optimistic” about its future, saying its stake in the Kupe gas-condensate field offers some “insulation” from the continued affects of low global oil prices.
Chief executive Andrew Knight recently told shareholders he was still cautiously optimistic despite his company writing down its 27.5 per cent stake in the offshore Taranaki Tui oilfield by NZ$13 million because of the lower oil prices.
This led to a net loss of NZ$10.5 million for the half-year to December 2014.
But he said NZOG was “particularly pleased” with its 15% stake in the offshore Taranaki Kupe gas-condensate field as about 75% of that field’s revenue came from gas (all of which is sold to partner Genesis Energy) and LPG (all of which is sold to Vector) on long term contracts, leaving only about 25% of the revenue from the sale of condensate.
“Despite lower oil prices, the company expects gas sales volumes and prices to continue to sustain strong, positive cashflows which New Zealand Oil & Gas is using to focus on acquisitions . . . while revenue will be further supported by additional production from the Pateke-4H well.”
He added that Tui oilfield operator AWE now expected work to connect the latest Pateke well to the field’s Umuroa floating production, storage and off loading vessel to start during March, with first oil now anticipated as early as April, weather permitting.
NZOG has already started its planned acquisition program by recently purchasing 19.99% of Australia–listed junior Cue Energy Resources from Todd Energy at A10 cents per share in an off-market transaction. It is now making a full takeover bid for the Aussie listed junior, as it is required to do to increase its stake above 20%, at the same price, terms and conditions. The offer remains open until 27 March.
By gaining a significant stake in Cue, NZOG would own part of Cue’s 5% interest in the offshore Taranaki Maari-Mania oilfield, as well as its 15% interest in the Medura Strait Oyang and Wortel fields in Indonesia where NZOG already participates in four production sharing contracts.
Some financial commentators and business journalists are saying that by mounting this bid for Cue, NZOG is fulfilling predictions that falling oil prices will prompt mergers and acquisitions among smaller oil and gas players.
However, the NZOG chief executive says his company will be happy if it only gets an additional 10% or so of Cue.
So it appears NZOG’s aim is to buy the remaining 7% of Cue still owned by Todd, which can only be acquired by mounting the formal takeover offer.
Some analysts say Todd Energy, formerly led by industry veteran Richard Tweedie, used its stake in Cue primarily as an investment vehicle for gaining overseas assets.
However, Todd Energy International executive vice-president Paul Moore is now leading that overseas acquisition and development program from Austin, Texas.
Todd is already a 16% partner in Maari-Manaia, so selling its 27% stake in Cue is not seen as significant.