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Daily ShareChat: New Zealand Oil & Gas

By Jenny Ruth

Thursday 11th February 2010

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 Jenny Ruth

Key points from New Zealand Oil & Gas's second quarter activities report include the Kupe field beginning to produce in December and the commissioning process is going well, says ASB Securities analyst David Boyce.

A review of Kupe reserves should be complete by mid-2010.

Boyce says when the company reports its first-half results on February 24, he expects a loss, reflecting lower earnings from the Tui field, reflecting reduced production, a lower oil price and a stronger New Zealand dollar, the write-off of exploration wells, equity accounted losses from its Pike River Coal stake and unrealised foreign exchange losses.

He has cut his forecast net profit for the year ending June by 59% to $5.8 million but left his 2011 forecast largely unchanged at $34.1 million.

"NZ Oil & Gas has a solid base for growth with cashflows from Tui (albeit declining) and Kupe and cash in the bank to fund further exploration to replenish its production assets," Boyce says.

A key risk is the likely contribution the company will have to make to Pike's funding and the longer the Pike delays, the greater the amount of capital it will need to raise and the wider the discount required.


Investment rating: marketperform.


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