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The stake New Zealand Oil & Gas holds in the Tui field has swollen to more than $1 billion with an increase of estimated reserves.
The company yesterday said the initial proved and probable (2P) reserves for Tui had been increased from 47 million to 50.1 million barrels, following a field reassessment by operator Australian Worldwide Exploration (AWE).
NZOG, which has a 12.5 per cent share of Tui, said its share of the additional reserves was almost 400,000 barrels. Using current oil prices and exchange rates, that had a gross value to NZOG of around $70 million.
Yesterday's announcement follows a reserves upgrade last month from 41.7 to 47 million barrels.
Revenue from its six million barrel stake in the field would exceed $1 billion at current prices.
Before production started reserves had been at 27 million barrels, with an expected first year production of 9 million barrels and an international oil price of around US$70 a barrel, NZOG's chief executive David Salisbury said.
"Less than a year on, the reserves figure has almost doubled, production is about to pass the 14 million barrel mark and Tui oil is selling for over US$130 a barrel.
"It' s a very nice upside for us because the bulk of our investment was in the capital up front - we have by and large fixed operating costs so the bigger the field is it creates quite significantly more value for us - more bang for the buck."
Salisbury, who has been at a meeting of the field's partners this week, said there was little international consensus on long-term trends for oil prices.
International oil prices continued to drop yesterday after China said it would raise fuel prices, with light, sweet crude for July delivery falling to US$131.27.
The price fell US$4.75 overnight Thursday.
"Nobody's quite sure where it will settle and the pattern over the next few years - there's enormous uncertainty about it," he said.
"A year ago if someone had said oil would be US$130 a barrel people would have thought they were out to lunch. Now we'd say they were a guru."
Oil field reassessments usually took place once a year.
"Tui's performance has been so spectacular and completely different to what has been expected that it's led to these early revisions."
The field had so far this month averaged 42,500 barrels per day.
Production for the 2008/9 financial year was now forecast to be 9 million barrels, with NZOG's share of production in 2008/09 forecast to be 1.13 million barrels, an increase of 370,000 barrels.
Water content had steadily crept up to 60 per cent due to the strong water drive in the thin reservoir but that was easily within the capacity of the field's storage and processing vessel, Salisbury said.
Along with NZOG, the other participants in Tui are AWE with 42.5 per cent, Mitsui E & P Australia with 35 per cent, and Pan Pacific Petroleum with 10 per cent.
NZOG is looking at a cash boost of up to $208 million if options are all exercised by June 30.
Hamilton Hindin Greene director Grant Williamson said this would give the company further opportunity to expand.
"Eventually they may have to look further afield than New Zealand. If they don't get bigger and diversify they could well be a takeover target."
The company's share price closed unchanged at $1.56 yesterday.
