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NZ Oil & Gas posts $6.2M loss on writedown of Tui field

NZ Oil & Gas posts $6.2 mln loss, higher oil production offsets lower prices

By Pattrick Smellie

Aug. 27 (BusinessDesk) - New Zealand Oil & Gas ramped up production during the year to June 30 to offset the sharp decline in world oil prices, turning in a net loss of $6.2 million, compared with a profit of $10.1 million the previous year.

Revenue of $116.2 million was up $12.6 million on the year, some $11.1 million of that reflecting the consolidation into NZOG's accounts of Cue Energy, the Australian oil and gas minor that the Wellington-based company acquired in a hostile takeover bid during the year.

A major contributor to the statutory loss was a $36.2 million writedown on the value of the offshore Taranaki field, Tui, where oil and gas extraction will become uneconomic earlier than anticipated because of falling global prices.

Exploration costs fell to $32 million from $75 million in the previous financial year, with "exposure to exploration ... being carefully managed to match the reduced risk tolerance in this part of the pricing cycle," chief executive Andrew Knight said in a statement to the NZX.

"Some legacy commitments exist in our portfolio and I expect Cue Energy to undertake a strategic portfolio review shortly," he said. NZOG booked a $15.6 million cost during the year after it surrendered three Taranaki exploration permits. Knight warned there could be further asset impairments if lower oil prices were sustained.

Earnings before interest, tax, depreciation, amortisation and exploration costs improved slightly to $77.1 million, from $75.4 million the previous year.

Revenue from Tui production rose 54 percent, despite lower prices, as production increased, in part because of production from the newly completed Pateke 4H well, which began production in April, had performed more strongly than expected producing more oil and lowering average production costs.

Cash flow from operations for the year were $59.3 million. The company had cash on hand of $83.7 million at balance date and carries no debt.

"Our cash flows and balance sheet provide the opportunity to acquire under-valued assets," said Knight. "Our screening has identified opportunities where significant value is available. We are prepared to be patient to ensure shareholder value is enhanced."

Also under evaluation are plans to improve the operation of the Kupe oil and gas field, in which NZOG has a minority interest.

The shares last traded at 45 cents, and have dropped 26 percent this year.


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