KEY POINTS:
New Zealand Oil & Gas faces a fall in revenue during the current six months but beyond that its prospects improve as the Kupe gas and condensate field comes on stream.
The company yesterday reported a 30 per cent rise in December 31 half-year net profit to $54 million, but said with just around a third of Tui production for the year falling into the second half, revenue would
drop off.
However, annual supply agreements with Genesis Energy for three petajoules (PJ) of natural gas and Vector for 15,000 tonnes of LPG from the Kupe field guaranteed revenue even if oil prices remain relatively
low.
Falling oil prices were also balanced by the low New Zealand dollar, NZOG chief executive David Salisbury said.
The company was in the final stages of concluding a deal that could lead to some preliminary exploration work in an undisclosed country.
"The best of these opportunities are being fully assessed against technical and commercial parameters," said chief executive David Salisbury.
The company holds a 12.5 per cent stake in the Tui oil fields off the coast of Taranaki and for the six-month period total production was approximately 5.6 million barrels, with NZOG's share being 700,000 barrels.
Tui is now producing about 25,000 barrels of oil a day with the rate at which it is declining now slowed down.
International oil prices and exchange rates were extremely volatile during the six-month period.
Tui oil is sold against the regional Tapis benchmark crude, which ranged from US$152 to US$40 a barrel.
The NZ dollar/US dollar cross rate ranged from 0.77 to 0.57. NZOG achieved an average sales price of approximately $150 a barrel.
Total production, freight and marketing costs were approximately $16 a barrel.
"Tui has been a stellar performer and continues to provide a reliable cash flow. Kupe will provide a significant new source of revenue later this calendar year," Salisbury said.
Late this year the drilling rig Kan Tan IV was expected to drill at least two exploration wells within the Tui permit area. Any new discoveries could be tied into the existing facility.
NZOG was benefitting from a downturn in the exploration sector, which has resulted in more equipment being available with shorter lead times and reduced costs.
The company said that for the six months to the end of December, revenues from ordinary activities were 8 per cent ahead of a year earlier at $103.2 million.
The profit result included recognition of a net foreign exchange gain of $19.4 million.
During the six months, NZOG paid the Government more than $50 million - $18.4 million in royalties and $32.4 million in corporate tax.
NZOG closed up 2c at $1.22c.
