Daily ShareChat: New Zealand Oil & Gas

By Jenny Ruth

Monday 13th July 2009

New Zealand Oil & Gas may have already missed the best value opportunities to spend $193 million received from the exercise of options a year ago, says John Kidd at McDouall Stuart.

"Shareholders have a growing basis to ask hard questions, starting with: what is the strategy?," Kidd says.

When the options were exercised, oil was trading at $US149 a barrel. Option holders "were reacting rationally to what was, at precisely the right time, a perfect cocktail of positive NZ Oil & Gas economics," he says.

"In doing so, however, (the option holders) took a leap of faith" because there was no investment mandate for the option money.

"Twelve months on, other than ongoing ‘trust us"-like assurances, there continues to be little in the way of strategic guidance from NZ Oil & Gas," Kidd says.

"In the meantime, there is growing evidence to suggest that the trough of the current economic cycle may have passed, bringing with it concern that the most distressed and perhaps best value opportunities may already have been missed."

Despite this, NZ Oil & Gas shares still present "fundamentally attractive metrics." Kidd currently values the shares at $1.88 and the company has "genuine and significant" near-term exploration potential from its Tui joint-venture drilling program.

BROKER CALL: McDouall Stuart rate NZ Oil & Gas (NZX: NZO ) as buy.

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