KEY POINTS:
New Zealand Oil & Gas (NZOG) has spent more than $14 million building a stake in a Tui field partner, Pan Pacific Petroleum of Australia.
NZOG had yesterday afternoon built a 7 per cent stake of Pan Pacific's shares and says it could acquire a bigger holding.
A spokesman for NZOG said this was the first big spending programme of more than $230 million of its cash reserves it had amassed in revenue from the Tui field.
NZOG has a 12.5 per cent stake in Tui and Pan Pacific has 10 per cent.
The Pan Pacific shareholding was being acquired at a premium to the shares' recent market price, NZOG said.
NZOG chief executive David Salisbury said his company believed it was paying a fair and attractive price to achieve a meaningful shareholding in Pan Pacific.
Australian Foreign Investment Review Board requirements restricted NZOG to a shareholding in Pan Pacific below 15 per cent unless review board approval was received.
Pan Pacific's share of the remaining Tui reserves was about 3.2 million barrels and its share of total production for the current financial year is forecast to be about 900,000 barrels.
The Australian company also had around $180 million in the bank at the end of October.
Hamilton Hindin Greene research analyst Bruce Mathieson said the NZOG move was expected given its own cash position.
"With interest rates heading down they want to start deploying that cash somehow."
There had been growing speculation about how the company would spend it and the Pan Pacific stake was a sensible option, Mathieson said.
On Monday, NZOG said confirmation of a 2009 drilling campaign within the Tui permit was expected shortly.
The Tui partners had agreed to defer a proposed additional development well in favour of further exploration.
There are five potentially attractive prospects near Tui. These could contain 50 million barrels of oil, using a P50, or average figure, of the best current estimate of what each of the prospects might contain.
