Thursday 18 May 2017 09:31 AM
NZ Oil & Gas buys back into Kupe at lower price after Genesis paid premium to augment LPG strategy
By Jonathan Underhill
May 18 (BusinessDesk) - New Zealand Oil & Gas has bought back into the Kupe oil and gas field at a lower price than it sold to Genesis Energy just months ago when it took advantage of Genesis's appetite for natural gas assets to augment its LPG strategy.
NZOG has agreed to buy Mitsui E&P Australia's 4 percent interest in Kupe for $35 million in a transaction with an effective date of Jan. 1, meaning it comes less than two months after it agreed to sell its original 15 percent holding in the field to Genesis for $168 million, effective at that same date. The transaction prices indicate Genesis valued Kupe at about $1.1 billion while NZOG's deal with Mitsui puts an $875 million value on the field.
Genesis was willing to pay a premium because the 15 percent interest added to its existing 31 percent stake in the field, giving it greater influence over the joint venture and helping meet its integrated fuels strategy. It also provided an immediate boost to earnings. The country's biggest electricity retailer followed up this month by agreeing to buy the retail LPG business of Todd Corp's Nova Energy unit for $192 million, a deal that will lift its share of retail LPG in New Zealand to 19 percent from 3 percent and make it the second-largest player in that market by customers behind Contact Energy.
For its part, NZOG would get ongoing income from what it saw as a high-quality field and the funds freed up from the earlier sale could be used to buy other assets.
“The combined transactions allow us to better diversify our portfolio,” NZOG chief executive Andrew Jefferies said in a statement.
The transaction, which adds 2.6 million barrels of oil equivalent to NZOG's reserves as at Jan. 1, requires regulatory approvals and agreement from the other joint venture partners, who have first right of refusal.
Kupe is operated by Origin Energy, which has a 50 percent interest. First discovered in 1986, Kupe entered production in 2009.
NZOG shares last traded at 63 cents and have gained 31 percent in the past 12 months. Last month the company gained High Court approval for a $100 million return of capital to shareholders via a scheme of arrangement.