GENERAL: NZO: Participation in Pike River Coal Equity Issue

20 Apr 2010 12:29 pm

NZO 20/04/2010 GENERAL

REL: 1229 HRS New Zealand Oil and Gas Limited

GENERAL: NZO: Participation in Pike River Coal Equity Issue

Pike River Coal Limited (Pike) has today confirmed the details of its previously announced planned equity raising.

The NZ$50 million underwritten equity raising will comprise a NZ$10 million placement of shares and a NZ$40 million renounceable pro rata rights issue to shareholders and option holders. New Zealand Oil & Gas Ltd (NZOG) will participate in the placement and rights issue.

The equity raising is part of a funding package agreed between NZOG and Pike which was announced on 24 February 2010. The funding package includes:

a. Pike to undertake an equity issue to raise NZ$50 million, with NZOG to subscribe to the extent of its existing 29.5% equity interest in Pike.

b. NZOG to provide a new convertible bond facility for US$28.9 million with an interest rate of 10%, to fund the redemption of a convertible bond currently held by Liberty Harbor, LLC.

c. Pike to grant an option to NZOG (the Coal Contract Option), exercisable at any time until 31 March 2012, to enter into an offtake agreement to purchase Pike coking coal at market prices to be negotiated annually. The maximum volumes which may be purchased under the offtake agreement would be the currently uncontracted coal quantities until 31 March 2013 and up to 30% of annual coal production for the remaining life of mine.

Under the rights issue two new shares in Pike will be offered for every 19 (approximately) Pike shares or options held at the record date , at a subscription price of $0.88 per share.

The placement will be offered to institutional investors, to NZOG and to Pike customer and shareholder, Gujarat NRE Limited. NZOG will participate in the placement and will jointly underwrite the rights issue to the extent of its existing 29.5% equity interest in Pike.

The underwriting of the rights issue and NZOG's subscription for the new convertible bond is conditional upon Pike shareholder approval of the convertible bond and the Coal Contract Option, which will be voted on at a Pike shareholders' meeting to be held on 7 May 2010.

NZOG Chief Executive David Salisbury says the overall package has benefits for both companies.

"Subject to approval from its shareholders, Pike will have in NZOG a supportive major shareholder providing the funding it needs, allowing Pike to focus on ramping up to full production during this period of very buoyant prices for metallurgical (coking) coal.

"NZOG will receive an attractive return on its secured convertible bond, while the potential for NZOG to hold a coal contract enhances NZOG's overall investment in Pike," David Salisbury said.

ENDS. End CA:00193930 For:NZO Type:GENERAL Time:2010-04-20:12:29:39

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