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NZOG lifts stake in Pan Pacific

Monday 22nd December 2008

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New Zealand Oil & Gas (NZOG), whose shares have gained 10% this year while the NZX 50 Index tumbled, has lifted its holding in Pan Pacific Petroleum to 14.9% after announcing plans to buy a strategic stake in its drilling partner.

The acquisition increases NZOG's exposure to the Tui oil field, one of its most lucrative ventures. Australian Foreign Investment Review Board rules restrict NZOG from gaining more than 15% of the Australian oil company unless it gains clearance, which it isn't immediately seeking, NZOG said in a statement last week.

Pan Pacific holds 10% of the Tui oil field while NZOG has 12.5%. Investors have been awaiting moves by NZOG to acquire more reserves or make acquisitions.

Production from Tui began in July 2007 and proven and provable reserves were increased to 50.1 million barrels in June this year. It raised $190 million through the exercise of options in 2008, stoking its war chest, and said it is "actively pursuing" new growth opportunities.

In October, the company agreed to acquire an interest in a permit in the offshore Canterbury Basin, making it the biggest holder in permit PEP38259. The permit gives access to the Barque gas and condensate prospect, which NZOG estimates has recoverable resources of 600 billion cubic feet of gas and 58 million barrels of light oil.

NZOG's shares fell 0.8% to $1.27 today after crude oil for January delivery edged lower to US$36 a barrel on the New York Mercantile Exchange on Friday.

Chief executive David Salisbury declined to comment on the purchase.

By Jonathan Underhill

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