KEY POINTS:
New Zealand Oil and Gas (NZOG) Ltd is looking to earnings before income tax, depreciation and amortisation (ebitda) of about $60 million in the first year of production from the Tui oil area.
In the year to June 2006, NZOG's total revenues were $7.5m and its profit $2.3m.
Today, NZOG said production well drilling in the Tui Oil Area, off the Taranaki coast, was on schedule for production to start from the fields in June. NZOG has a 12.5 per cent interest in the Tui project.
"Commencement of oil production from Tui will give a major boost to NZOG and help set the company on course for future growth," executive chairman Tony Radford said.
When Tui was fully commissioned, production peaking at 50,000 barrels of oil per day was anticipated, NZOG said.
The ebitda figure of $60m was based on NZOG's share of the production from Tui, the approved work programme and budget, an oil price of US$45 per barrel and a NZ dollar exchange rate of US65c.
NZOG said it had hedged approximately 36 per cent of the first 12 months of production to guarantee a minimum price of US$50 barrel.
Overnight, oil eased below US$53 a barrel, having touched a 19-month low below US$52 last week as it retreated from a peak of US$78.40 last July.
Back in August, when NZOG released its 2006 annual report, it had been basing its predictions on a price of US$65 a barrel. At that price NZOG had put its gross oil sales revenues from Tui in the first production year at $70m.
NZOG said its decision to develop Tui was based on oil prices of US$40 a barrel. Its share of the proved and probable oil reserves at Tui is 3.5m barrels.
In addition to the drilling programme, construction activities were making good progress, NZOG said.
The critical path item, the Umuroa floating production storage and offload vessel under conversion in Singapore, was on target to arrive in New Zealand waters in April.
The Tui area development includes the Tui, Amokura and Pateke oil pools discovered in 2003/04, in a water depth of 120 metres.
Project facilities are designed for a maximum initial oil flow rate of 50,000 barrels of oil a day.
Production rates were expected to initially be high but to have a relatively rapid rise in water production and associated decline in oil rate.
Other participants in the Tui project are AWE with 42.5 per cent, Mitsui E&P New Zealand, with 35 per cent, and Pan Pacific Petroleum with 10 per cent.
NZOG shares were unchanged around 1.30pm today at 91c.
- NZPA
