NZOG increasingly focused overseas

Friday 29th April 2011

New Zealand Oil & Gas says it is increasingly focusing on overseas opportunities, being outbid for a bundle of significant assets in southeast Asia during the March quarter.

While that result was disappointing, the company would not overpay for an investment, simply to be seen to do a deal, NZOG said today in its activities report for the three months to March 31.

It was pursuing potentially attractive investments in this country and overseas, and was in the final stages of officially securing some attractive exploration acreage in the northern hemisphere, where a branch office was to be established.

NZOG reported March quarter operating revenue of $32.3 million from its two offshore Taranaki operations, with $12 million from the sale of Tui oil and $20.3 million from the sale of Kupe sales gas, LPG and light oil.

Oil prices had risen strongly in 2011 at the same time as production from both fields was higher than in the previous quarter.

But for Kupe, the short term forecast for production and associated revenues would be constrained until a faulty gas compression unit was replaced, NZOG said.

During the March quarter there had been no significant downtime at Kupe, where NZOG has a 15% interest. The field produced 4.4 petajoules of sales gas in the quarter, 18,750 tonnes of LPG, and 450,000 barrels of light oil.

The timing of the gas compression unit fault, in early March, was disappointing as a higher gas offtake, and associated liquids production, had been forecast for the June quarter. Now June quarter production was expected to be similar to that seen in March.

Because of the limit on production at Kupe, revenue from the field would be about $5 million to $6 million lower than they otherwise would have been. Despite that, if oil prices remained near current levels, the company still expected total revenue for the 2011 financial year to exceed $100 million.

The Tui area fields, in which NZOG has a 12.5% interest, produced more than 776,000 barrels of oil in the March quarter.

For the half year to December 31, NZOG reported a loss of $99 million, including provisions of $98.6 million from the disaster at the Pike River mine last November where 29 men died.

NZOG - a 29.4% shareholder in the Pike River Coal company which developed the mine and is now in receivership - previously said it was a secured creditor of Pike River Coal in respect of a US$28.9 million convertible bond and $12 million of funding advanced in late November. It was an unsecured creditor in respect of $13 million of short term funding.

In its report today, NZOG said it remained confident it would, at a minimum recover its secured Pike River Coal debt through the sales process the receivers were now carrying out.

NZPA

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