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NZOG throttles back on Tunisian oil and gas field project

Friday 1st March 2013

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New Zealand Oil & Gas's attempt to diversify into international territories has taken a knock, with the company declining to support a development plan to develop the Cosmos South oil field, offshore Tunisia.

NZOG announced the decision along with a writedown of $6.5 million against the cost of the Cosmos investigations to date.

"The decision, by itself, isn't a final decision in any respect," chief executive Andrew Knight told BusinessDesk. Rather, NZOG had told Storm Ventures, the Canadian operator also holding 40 percent of the licence, that it was unhappy with cost escalation in its proposed development plan. It has already paid US$3 million to participate in assessing the prospect.

NZOG is committed to a US$19 million spend if it goes ahead with a development project at Cosmos.

"NZOG's assessment of the current development plan for the project does not meet the company's investment criteria and on that basis NZOG would not proceed," the company said in a statement.

The company also has interests in another offshore Tunisian field, Diodore, where it was awarded a two year exploration licence, in 2011, and in Indonesian oil and gas prospects.

NZOG shares were placed in trading halt on the ASX and NZX for about a day before the announcement because of its impact on NZOG's earnings for the year to Dec. 31 represented a material difference from previously issued guidance.

The shares rose and fell after the halt was lifted, trading down 1.1 percent to 92 cents just after 5pm.

Knight has made much of NZOG's ambition to find producing oil and gas fields outside New Zealand to diversify its opportunities. It is currently drilling onshore prospects in the Kisaran oil and gas field on the Indonesian island of Sumatra.

"At its core, we still believe the strategy of bringing new opportunities (from outside New Zealand) is important," said Knight.

Last week, NZOG lost a partner, Raisama, in its Kakapo prospect, offshore Taranaki.

Meanwhile, the company reported a $7.7 million tax-paid profit for the period, up from a $1.7 million result in the same period a year earlier, when it took a $6 million hit from writedowns on its investment in the Pike River coal mine and a loss in the value of US dollar holdings caused by the strong New Zealand dollar.

Total revenue for the half-year was $47.9 million, down 12 percent from $54.6 million in the comparable prior period, reflecting in part the gradual rundown in its producing assets in the Tui oil and gas field and a maintenance outage at the Kupe field.

Revenues from Tui and Kupe produced net operating cashflows of $25.2 million for the six months, compared with $26.5 million in the prior half.

The company was sitting on a net cash pile of $171 million at the half year mark, has resolved to start paying two dividends a year and declared an interim dividend of 3 cents per share, fully imputed, payable on April 5.



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