NZ Oil & Gas on cusp of gush

By Neville Bennett

Thursday 8th April 2004

New Zealand Oil & Gas shares have seen enough activity to be queried by the stock exchange.

Nothing untoward has occurred though: the price surge is obviously related to 13-year high international oil prices and the unexpectedly rapid depletion of the Maui field.

NZOG is also perceived as being poised on the cusp of transition from an exploration company.

It will soon become a substantial producer, with maturing interests in Pike River coal, Kupe, and Tui.

It also has new prospects being drilled.

The company has $20 million in cash reserves and will also benefit financially from a farmout to Mitsui. Mitsui will meet a high proportion of offshore drilling costs.

Being well funded, the company is not likely to call upon shareholders for more funds, except perhaps to develop its coal interests.

The company reported a loss on the six months to December 2003 owing to writedowns of exploration costs but it expects a profit on the whole year, arising principally from judicious sales of interests.

It retains about 11 licences, covering a vast area off the Taranaki coast.

The company has a 15% interest in Kupe and is negotiating sales contracts. Kupe's proven reserves are 5.8 million barrels of crude oil and natural gas liquids and 50 billion cu ft of natural gas. More gas may be found when the drilling platform operates in mid-2007.

The company has worked patiently for years to access a superb reserve of coking coal on Pike River. Most consents are now acquired including the great boon of consent to the optimal transport route across conservation land.

There are no published plans for financing the $50 million development costs but this is unlikely to be problematic as the mine is expected to produce $70 million a year for 20 years.

Exploration also continues, especially the Amokura prospect which is believed to have the potential for 15-35 million barrels, and could be worked with the proven Tui discovery, which will come on line in 2005.

The Ocean Bounty will explore the Pukeko prospect this year. Mangatoa lies near the shore and seems a a good prospect as Shell found gas nearby in 1986.

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