End in sight for Tui

NEW ZEALAND Oil & Gas is the latest listed oiler to post a half yearly loss as it struggles to cope with the $US30/barrel world, with the company open to new assets to replace production from the Tui Area oil fields.
End in sight for Tui End in sight for Tui End in sight for Tui End in sight for Tui End in sight for Tui

Its $NZ45.2 million ($A41.7 million) loss was much larger than the $7.7 million loss of a year ago due to asset revaluations and changes in the capitalised value of exploration assets as a result of a change to accounting policy to the ‘successful efforts' approach, under which exploration costs are expensed as they are incurred.

Despite the loss, NZOG said cash flows into the business remained strong, with a cash surplus from operations of $31.7 million, up by $9 million from a year ago.

During the half year the company upgraded reserves in the producing Kupe project, in the offshore Taranaki Basin and announced that it had defined prospective resources in the frontier Barque prospect off the east coast of New Zealand's South Island of 530 million barrels.

The Pateke-4H well in the Tui oil fields is continuing to produce ahead of operator estimates after coming into production in 2015.

But the company's new chairman, Rodger Finlay, said the company is taking the oil price plunge seriously, and would seek significant corporate savings, minimising its overall cash burn.

"The board intends to lead by example. The outgoing chairman will not be replaced on the board and directors' fees will be reduced, providing a cost reduction of around 30% as a demonstration of the board's determination to restructure corporate costs," Finlay said.

"Exploration costs have been minimised, with no intention to spend further on exploration beyond our contractual obligations."

CEO Andrew Knight said the first half of the financial year had seen consistent operational performance despite the lower oil price, and continues to produce enough cash to sustain it despite low oil prices.

"During the year the average oil price achieved was $NZ60/bbl. At contracted gas prices the Kupe asset has positive cash flow even if oil and LPG prices were nil. Kupe gas revenues alone are more than double the operating cost of the asset," Knight said.

Operating costs were down by $900,000 in the half year.

Net group revenue was up by $11.3 million to $65.4 million, including $28.5 million revenue contribution from the 40%-owned Cue Energy Resources and a $3.4 million gain on foreign exchange, offset by a negative oil price impact of $14.5 million and a negative $6.1 million from lower sales as shipments were deferred to exploit the potential for some recovery in prices.

The value of the 27.5% New Zealand Oil & Gas interest in the Tui oil fields has been written down by $8.7 million owing to the lower global oil price, and the field's end date has been brought forward to 2018.

The latest loss included an $8.7 million impairment charge on Tui and a $26.8 million charge on the Maari field.


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