Daily ShareChat: NZ Oil and Gas

New Zealand Oil & Gas's recent announcements have represented one step forward and two steps backwards, says Forsyth Barr analyst Andrew Harvey-Green.

The company's bad luck with exploration drilling has continued with three wells being dry, costing about three cents a share which Harvey-Green says isn't significant as he had expected a low probability of success.

Production difficulties at the Tui field means production in the year ending June 2011 is likely to be about a million barrels less than previously estimated.
“There has been no significant value impact from this as reserves are unaffected and the cost is not material,” Harvey-Green says.

On the positive side, the about 10% upgrade in the Kupe field's reserves, adjusting for tax, royalties and additional capital spending, is worth about four cents a share, he says.

Given the failure of the exploration program, the near-term catalyst for the stock is now news on the Kaupokonui and Barque farm outs. Harvey-Green's $1.72 a share valuation includes 22 cents for those two prospects.

“Falls in the oil price and the unsuccessful drilling campaign has seen sentiment move against NZO,” Harvey-Green says. “In our view, the fall in NZO's share price has been overstated.”

The company also has good exposure through its 29.4% stake to upside in Pike River Coal, he says.

Recommendation: Buy.

Comments from our readers

No comments yet

Add your comment:

Your name:
Your email:	Not displayed to the public
Comment:
Comments to Sharechat go through an approval process. Comments which are defamatory, abusive or in some way deemed inappropriate will not be approved. It is allowable to use some form of non-de-plume for your name, however we recommend real email addresses are used. Comments from free email addresses such as Gmail, Yahoo, Hotmail, etc may not be approved.

Anti-spam verification:

Type the text you see in the image into the field below. You are asked to do this in order to verify that this enquiry is not being performed by an automated process.

Related News:

Debt-free NZ Oil and Gas will use cash buffer as it hunts for oil
NZ Oil and Gas cedes promising Kakapo permit after failing to attract farm-in partner
NZOG chair Griffiths backs director liability over health and safety failures
NZOG in trading halt, Tunisian oil field announcement due
NZOG returns to interim dividends after more than a decade
NZOG's first well outside NZ to spud in late Jan
NZ Oil and Gas buys interests in three Taranaki permits from Octanex
NZ Oil and Gas has $162 million to add oil and gas reserves
NZ Oil and Gas farms out quarter-stake in Kaheru prospect
NZ Oil and Gas misses out on stake in deepwater Taranaki permit