No dividend for NZOG shareholders after Pike impairments

Wednesday 23rd February 2011

Provisions of $98.6 million for the Pike River Coal mine disaster pushed the interim results of major shareholder New Zealand Oil & Gas (NZOG) into the red and there will be no dividend for shareholders this year.

"Given the substantial loss resulting from the Pike River Coal situation, the board does not intend to pay a dividend for the 2010/11 financial year," the company said today.

NZOG is a 29.4% shareholder in Pike River Coal Ltd, which developed the mine where 29 workers died last November. NZOG is also a secured and unsecured debt holder.

Before the financial impact of the mine disaster the company reported a gross profit from operating activities of $3.1 million, which is down from a profit of $12.64 million in the same period last year. After taking account of the disaster and foreign exchange losses the company reported a $99 million loss compared to a loss of $6.49 million last year.

The Kupe gas and oil field, provided $27.4 million of revenue in the period, while the Tui area oil field produced $13.1 milllion of revenue. The company had total operating revenue of $40.5 million, down 7% from the same period last year.

NZOG said it remains committed to exploration and it provided investors with a rundown of plans for the offshore Taranaki basin and the Canterbury basin.

The company is optimistic, particularly about investments outside New Zealand.

"New Zealand remains an attractive investment destination, but the number of available opportunities will always be limited. As a result we cannot be confident of meeting our growth objectives from New Zealand alone and our business strategy includes the goal of establishing one or two new core areas," the company said.

"Since 2008 we have been carefully evaluating opportunities around the world. NZOG is now in the process of establishing a northern hemisphere presence."

The location and nature of the initial investment will be announced as soon as the final regulatory approval are granted.

Commenting on the Pike Coal mine, NZOG said it was a secured creditor in respect of a US$28.9 million convertible bond and the $12 million funding advanced on November 26. No impairment has been taken against the secured debt.

"While there is considerable uncertainty about the future for Pike River Coal Ltd we expect to recover NZOG's secured debt and we are actively taking steps to maximise the value of our total Pike River Coal investment."

NZOG is an unsecured creditor in respect of the $13 million short-term funding.

NZOG's 29.4% shareholding in Pike River Coal and holding of 2011 options, with a combined book value of $77.1 million, ranks equally with other shareholders. An impairment provision has been taken against all of this equity value.

NZPA

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