Compressor failure hits Kupe production and NZOG revenues

Compressor failure hits Kupe production and NZOG revenues

by Pattrick Smellie

April 29 (BusinessDesk) – Reduced output from the Kupe oil and gas will cost New Zealand Oil & Gas Ltd. between $5 million and $6 million in the current financial year, the company says in its latest quarterly report, for the three months to March 31.

A compressor failure is limiting gas production to 50 Terajoules a day, compared with production capacity of up to 70TJ, limiting both oil and LPG production in the process.

While the repair costs will be at the manufacturer’s expense, “the timing of this failure is disappointing,” says NZOG’s chief executive, David Salisbury, as it coincides with high oil prices and comes when the business is still weathering the impact of last November’s disaster at the Pike River coal mine, in which NZOG had a 29% share.

With the mine’s receivers expecting a sale by August, NZOG remained confident it would “at a minimum, recover its secured debt through the sales process” and broker consensus was that NZOG shares had been oversold in the wake of the tragedy, which claimed 29 miners’ lives.

Kupe production is now expected to be similar in the June quarter to March, when total of 0.7 Petajoules of gas, 2800 tonnes of LPG, and 67,000 barrels of oil were produced, compared with 0.6PJ, 2200 tonnes, and 53,000 barrels respectively in the previous quarter.

“Revenue from Kupe will be down $5 million to $6 million lower than it6 would have otthwerise been,” said Salisbury. “However, if oil prices remain at or near their current levels, NZOG still expects its total revenue for the 2011 financial year to exceed $100 million.”

The company also took advantage of New Zealand dollar weakness against the greenback to convert US$13.7 million to kiwi dollars as it rebalances to 50/50 holdings of US and New Zealand currency.

The company had cash on hand equivalent to NZ$130 million at the end of the quarter, had $63 million drawn down against its $75 million debt facility with Westpac, for a net cash position of $67 million.

Tui oil field production came in at 97,000 barrels, compared to 90,000 barrels in the December quarter.Meanwhile, Salisbury announced NZOG will open a European branch office as it closes on a “securing some attractive exploration acreage in the northern hemisphere”, after being outbid on a “bundle of significant assets in South-East Asia,” the company says in its latest quarterly update.

The plan was still to “establish one or two new core areas beyond our shares” as there were insufficient opportunities for NZOG in New Zealand.

The company has also taken on operatorship of the Barque exploration licence in the Canterbury Basin from AWE Ltd., subject to Ministerial approval, with the partners in the block also seeking extra time to develop the prospect and investigate drilling rig availability.

After a long delay, NZOG also expects permits to issued shortly on the adjoining Clipper prospect, in which it holds a 40% interest.

Rig options are also under consideration for a US$15 million 2012 exploration well in the Kaupokonui licence area off the southern Taranaki coast, near the Kupe field, with unrisked recoverable oil deposits of more than 200 million barrels. NZOG is looking to expand farm-outs on the prospect.

An 18.9% Interest in the Kahurangi prospect was relinquished last month.

(BusinessDesk) 10:03:30

© Scoop Media