Debt-free NZ Oil & Gas will use cash buffer as it hunts for oil
By Jonathan Underhill
Aug. 27 (BusinessDesk) – New Zealand Oil & Gas says its balance sheet is strong enough to give the company a few more years to find oil to replace declining output from the Kupe and Tui fields.
NZOG had $158 million of cash at June 30 and no debt, according to the company’s annual results, which showed production from its two producing assets fell to 1 million barrels of oil equivalent from 1.1 million barrels a year earlier. That means it has cash to invest in exploration and continue to pay dividends in the near term, chief executive Andrew Knight said on a conference call.
The company is forecasting similar production in 2014 before declining in 2015 and reaching an average 800,000 barrels from 2016 through until 2012, based on existing wells, according to projections given in its first-half report.
“We do have declining assets,” Knight said. “Ideally we would be doing development now – or ideally a couple of years ago.”
“I think we’ve got a few years,” he said. “A healthy balance sheet gives us a bit of capacity to invest.”
Investment is likely to run at about $35 million a year, he said. The company today posted a 31 percent gain in full-year profit as impairments against its Pike River loans a year earlier weren’t repeated, helping making up for lower production and prices.
Profit rose to $25.9 million, or 6.3 cents a share in the 12 months ended June 30, from $19.9 million, or 5 cents, a year earlier, the Wellington-based company said in a statement. Revenue fell 15 percent to $99.3 million. Profit beat First NZ Capital’s forecast of $21.1 million.
Finance costs in the latest year were about $1.7 million, compared to $19.4 million a year earlier, when it recognised impairments to a loan to the failed Pike River mine.
Revenue from 15 percent-owned Kupe fell to $68.8 million from $74.3 million a year earlier, mainly reflecting a planned maintenance outage, while revenue from 12.5 percent owned Tui fell to $30.4 million from $42 million as the field entered its natural decline phase.
Royalties paid to the government over the two fields fell to $9.4 million from $12 million. The company also got a $5.6 million capital return from Pan Pacific Petroleum during the year.
During the year, the first well was drilled at the Kisaran Production Sharing Contract onshore Sumatra, Indonesia in what is the first overseas well for NZOG. In February, the company withdrew from its Cosmos concession in Tunisia, with $8.8 million expensed.
In New Zealand, the company is preparing to drill at Matuku, offshore Taranaki, next month, followed by Pateke and Oi, and Kaheru in early 2015.
Knight described Kaheru as “a pretty exciting prospect.”
NZOG will pay a final dividend of 3 cents a share on Sept. 27 with a record date of Sept. 13, making 6 cents for the year, unchanged from 2012. The shares fell 0.6 percent to 83.5 and have dropped almost 2 percent in the past 12 months, while the NZX 50 Index has gained 25 percent.
The stock is rated a ‘buy’ based on the consensus of six analysts surveyed by Reuters, with a median price target of 99 cents.