NZOG marks 'solid' profit with new drilling announcement

Wednesday 26th August 2009

New Zealand Oil and Gas this morning announced an expected 45% decline in profit in the year to June 30, which it described as "solid" and reflecting the reduction in production from the Tui oilfield, compared with the previous year.

The company declared a net profit for the year of $53.2 million, compared with $138.7 million in the previous period, and also announced an $8 million-plus investment to take a 40% stake in the "very prospective" offshore Taranaki Alabcore permit (PEP 38491), 80 kilometres north of New Plymouth.

"NZOG's internal analysis is that Albacore is more likely to contain oil than gas and, if successful, could support an offshore development similar to Tui," said chief executive David Salisbury. NZOG bought into the stake from Westech, a subsidiary of Energy Corporation of America. Local electricity producer MightyRiverPower also holds a 10% stake.

The partners will share in proportion to their investments in the $20 million to $25 million programme to drill the Albacore-1 well in October and November this year. The well will test structures at 1400 to 1800 metres depth, in waters of around 95 metres depth.

The company will pay a five cents per share total dividend for the year, fully imputed, payable on October 2, and compares with total distributions of 10 cents per share the year before, when Tui production was its height. Net tangible assets showed a 14% gain over the year, to $1.28, reflecting NZOG's balance sheet strength and retained earnings built up from Tui.

The result was earned on total revenues for the year of $138million, down 41% on the previous year.

In the year ahead, NZOG expects oil, gas and LNG revenues from the Kupe field, in which it holds a 15% stake, along with the continued extraction of the remaining 27.2 million barrels of oil equivalent remaining in the Tui field, whose total estimated reserves have been upgraded for a fifth time, to 50.5 mmbbls, from 50.1 mmbbls.

New drilling in the Tui field over summer will estabish whether further reserves are available, with two wells planned in the Tui prospect area.

NZOG's total commitments for its summer drilling programme now amount to approximately $30 million, and follow investment during the last financial year of $120 million in its existing portfolio and new opportunities.

"While many other companies were buffeted by the global financial crisis, our strong balance sheet haqs allowed NZOG to actively pursue a growth strategy," said Salisbury. "We continue to identify a range of potential investments and we are working hard to secure the best of them."

In the PEP 38491 area, there were three separate "play fairways" and "half a dozen interesting prospects", with the first targeted being Albaore, "which contains three separate target zones that may contain hydrocarbons".

The exploration well will be drilled by the jack-up rig ENSCIO-1.

Businesswire.co.nz

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