Pan Pacific affirms profit forecast, faces possible NZOG offer

Friday 16th January 2009

Pan Pacific Petroleum, the Australian oil company that New Zealand Oil & Gas has regulatory approval to acquire, affirmed its profit forecast and said its current share price doesn't reflect the value of its stake in the Tui oilfield.

NZOG, which has lifted its stake in Pan Pacific to about 15%, yesterday said it gained approval from Australia's Foreign Investment Review Board to lift its stake to 19.99% and to make a full takeover of the target. Acquiring Pan Pacific would about double NZOG's exposure to Tui.

"Profit outlook advised at the November 2008 AGM remains broadly on track in the range A$50-A$55 million," Pan Pacific said in a statement released by company secretary Belinda Flatters-Wright.

The estimate reflects higher oil prices in the company's first quarter and assumes an average oil price of US$50-60 per barrel and an Australian dollar at about 65 U.S. cents for the remainder of the year. Pan Pacific holds 10% of Tui while NZOG has 12.5%. Investors have been awaiting moves by NZOG to acquire more reserves or make acquisitions after it raised funds and lifted cash reserves.

Pan Pacific's New Zealand shares were unchanged at 40 cents and have soared 21% in the past month. NZOG fell 1.6% to NZ$1.21 and is down 7% in the past month. Its shares have declined with the price of crude oil.

Crude February delivery fell US$4.06 to US$33.22 a barrel on the New York Mercantile Exchange yesterday.

Production from Tui began in July 2007 and proven and provable reserves were increased to 50.1 million barrels in June this year. NZOG raised NZ$190 million through the exercise of options in 2008, stoking its war chest, and said it is "actively pursuing" new growth opportunities.

In October, the company agreed to acquire an interest in a permit in the offshore Canterbury Basin, making it the biggest holder in permit PEP38259. The permit gives access to the Barque gas and condensate prospect, which NZOG estimates has recoverable resources of 600 billion cubic feet of gas and 58 million barrels of light oil.

Pan Pacific said it has retained Origin Securities Pty to help assess the value of its assets and advise on options. It also retained law firm Allens Arthur Robinson as legal adviser.

The Australian company had zero debt and cash equivalent to A$153 million as at December 31.

"Current market trading prices continue to place nominal value" on the Tui stake," Pan Pacific said today.

By Jonathan Underhill

Comments from our readers

No comments yet