NZOG prowling for cheap assets as slide in oil price shakes out bargains

Friday 29th January 2016

New Zealand Oil & Gas is looking at several buying opportunities as plunging oil prices have flushed out sellers looking to restructure their portfolios.

The Wellington-based energy exploration company is actively considering potential acquisitions as the global glut of oil continues to depress prices and prompts some investors to sell their assets, NZOG said in a statement. The company has been looking to hoover up undervalued assets when oil prices fell last year, and has previously pointed to ASX-listed Cue Energy Resources as a successful example of that strategy.

Chief executive Andrew Knight told BusinessDesk the drop in prices this month has seen a number of buying opportunities come to market, and while they are looking at number of options, nothing is imminent.

"It really took the last little blip in oil prices for those distressed assets to come to the market," Knight said. "The quarterly report wasn't a signal that we've got anything immediate, but it was an opportunity to create value for our shareholders."

If sale processes already underway don't attract buyers, that may shake out more assets if bankers get nervous about the viability of oil-based businesses, he said.

NZOG has previously indicated it's focusing on acquisitions on gas, gas condensate or oil assets in New Zealand and Indonesia where it currently operates. The company had $96.6 million in cash as at Dec. 31, but that wouldn't constrain its ability to buy assets.

"You want to try and do as much as you can, but it'll depend on what comes up and where the value's at," Knight said.

International oil prices fell near a 13-year low earlier this month as the Organisation of Petroleum Exporting Countries appeared set to maintain production, even with Iran returning to the global market. They've been persisting with the current supply in a bid to keep market share and fend off US shale-based gas producers.

NZOG's Knight said the future of oil prices will depend on how US shale investment reacts to a downturn on Wall Street and as US interest rates rise.

"The bit that's uncertain is how the US shale plays out," he said.

NZOG increased quarterly revenue 13 percent to $30.8 million in the three months ended Dec. 31.

The shares rose 3.8 percent to 41.5 cents, and have declined 5.9 percent so far this year.

BusinessDesk.co.nz

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