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New Zealand Oil & Gas has spent around $1 million buying a 40 per cent stake in an offshore Canterbury Basin exploration permit from Australian company Tap Oil.
NZOG chief executive David Salisbury said the permit area included the promising Barque gas and condensate prospect.
The area had potential recoverable resources of 600 billion cu ft of dry sales gas and 58 million barrels of light oil/condensate, the company said.
"A lot of work remains to be done to assess the prospect, beginning with further seismic studies. There is no certainty that an exploration well will be drilled or that a commercial development will be the end result," Salisbury said.
Operator AWE was planning a marine seismic survey in early 2009, with a decision on whether to drill needing to be made by August 2010.
A spokesman for NZOG said spending so far had been minor.
In its quarterly report released yesterday, it said it had fully paid its debt on the Kupe gas project but retained the $125 million debt facility to ensure ready access to funds, if wanted.
After debt repayment the company still had substantial cash reserves of around $220 million and a good income stream from its offshore Tui oilfield, with revenue from the Kupe gas and condensate field less than a year away.
In spite of unprecedented volatility in oil prices, NZOG had been able to sell its share of of Tui light sweet crude at prices far higher than pre-production estimates. Oil prices have dropped nearly 60 per cent from a record high US$147.27 a barrel inJuly.
The Tui project was approved in 2006 when oil was around US$50 a barrel, and at that price was profitable.
Yesterday light, sweet crude fell US87c to US$62.35 a barrel, the lowest since May last year.
NZOG shares fell 1c to $1.21 yesterday, down from a year high of $1.91 in July.
BIG RISE IN DIRECTORS' FEES ON AGENDA
New Zealand Oil & Gas has its annual meeting in Wellington today where shareholders will vote on increasing its pool of directors' fees from $340,000 to $600,000.
The company over the past year paid its first dividends in over a decade and a spokesman said it was paying fees on a par with other top 20 companies.
NZOG does not face the same opposition from at least one vocal critic of Contact Energy's near doubling of their fee pool last week.
Shareholders Association chairman Bruce Sheppard said directors of NZOG were more hands-on and dealt with more difficult operational issues.
