Sharechat Logo

Daily ShareChat: New Zealand Oil & Gas

By Jenny Ruth

Wednesday 3rd March 2010

Text too small?
 Jenny Ruth

New Zealand Oil & Gas's first-half result, a net loss of $6.5 million, was overwhelmed by its support for its "prodigal child," 29.5%-owned Pike River Coal's recapitalisation, says ASB Securities analyst David Boyce.

NZOG is subscribing for its share of Pike's $50 million share issue, will provide a $US28.9 million ($NZ42 million) convertible bond facility replacing US-based Liberty Harbour and a $15 million bridging loan. NZOG will get a two-year option to buy up to 30% of Pike's production for the remaining life of the mine at market price.

"While we do not regard NZOG committing this heavily to Pike as an ideal outcome, we are at least relieved that a deal seems to have been done," Boyce says.

The option may help NZOG when it comes to sell its stake. "While this could possibly put NZOG back into the coal market as an active participant, it's likely an attempt to assist with the future sale of the Pike stake to an industry player," he says.

NZOG will be paid 10% interest on the convertible bonds. "We are not crazy about this part of the package," Boyce says, adding that 10% interest doesn't reflect the risk or what Pike would have to pay a third party lender and it deepens NZOG's exposure to a non-core investment.


ASB Securities Investment rating: marketperform.




  General Finance Advertising    

Comments from our readers

No comments yet

Add your comment:
Your name:
Your email:
Not displayed to the public
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.

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