|
|
For the financial year ended June 30, 2009, New Zealand Oil and Gas recorded a net profit after tax of $53.2 million from total operating revenue of $138.7 million.
The Tui area oil field was NZOG’s sole source of operating revenue in the 2009 financial year, after the field produced more oil (and less water) than expected. The company has a 12.5 percent stake in Tui. “We are very pleased with the outcome of a competitive process which has seen Shell in Australia take a forward sale contract for a large portion of Tui production in the 2010 calendar year,” says NZOG chief David Salisbury. NZOG also became a key shareholder in Tui project partner Pan Pacific Petroleum (10 percent), after purchasing a 14.9 percent shareholding, which has increased in value, returning the company a dividend payment in June 2009 of $3.3 million. There’s potential for additional reserves and sustained levels of production from the Tui project as joint venture wells are drilled in the Tui North East prospect, followed by either the Tui South West prospect or the Tui South East prospect, depending upon the results of the first well, he says. The Kupe field was discovered in 1986 but it wasn’t economical to develop it until recently. The first gas from this field was brought ashore for commissioning of the processing station near Hawera this year. NZOG has a 15 percent stake in Kupe. The final cost of the project will be higher than previously estimated, says Salisbury. “NZOG has contributed $180 million to date and our final bill appears likely to be in the range of $195-$200 million.”
“Kupe will provide a solid income stream for the next 15 years.” NZOG’s share of the Kupe LPG is contracted to Vector for a minimum of 10 years, while its share of gas sales is contracted to Genesis in a ‘take or pay’ arrangement. The light oil/condensate will be exported from Port Taranaki.
Exploration summerThis summer marks NZOG’s return to its exploration portfolio after three years focussing on the Tui, Kupe and Pike River (coal) developments. The company says is prepared to spend at least $30 million on extended off-shore exploration this summer. “NZOG is now involved in eight permits and will participate in the drilling of at least four wells this summer. New exploration opportunities secured in the past year include four permits in the Taranaki Basin,” says Salisbury. NZOG acquired a 40 percent stake in permit PEP 38491, which lies in the northern Taranaki Basin and is 90 percent owned by Westech (the operator), a subsidiary of Energy Corporation of America and 10 percent by the state-owned Mighty River Power. This permit contains a number of prospects and one has been drilled already – the Albacore-1 exploration that was completed earlier in the summer by the jack-up rig, Ensco-107, at a cost of $20-25 million.
Exploration drilling is a high-risk activity with no guarantee of success, he adds, but any commercial discovery could potentially be brought into production within 18 months. Salisbury says that, financially, NZOG remains in a strong position to back its projections, having a cash balance at the beginning of summer of $178 million, mostly held in US denomination accounts with Kiwi-based banks. In September 2009 NZOG and drew down $50 million from a revised $75 million funding facility with Westpac, secured against the Kupe project. “This preserves our US dollar holdings. The US dollar is the primary currency of the international oil industry. A large proportion of exploration and investment costs are either in US dollars or set by reference to US dollars, providing a natural hedge against currency fluctuations.” A portion of those US dollar funds will be used pay for this summer’s drilling campaign.
Energy NZ No.11 Summer 2009 |
While lower than in the previous year, which had included the initial high production from the Tui area oil fields, the profit result is the second best in the company’s history.
Offsetting this, expected revenues have also increased and development costs need to be seen in the context of a field with revenues of several billion dollars.
The potential is significant, Salisbury says. “NZOG’s internal analysis is that Albacore is more likely to contain oil rather than gas and, if successful, could support an offshore development similar to Tui.”