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NZOG Drops Into Half Year Loss

Fuseworks Media
Fuseworks Media

Wellington, Feb 24 NZPA - A $10.9 million exploration write-off hurt New Zealand Oil & Gas in the latest half year, but the company is pushing ahead with more exploration wells in the offshore Taranaki Basin.

The company today reported a sharp turnaround in its half-year performance, with a net loss of $6.5 million in the six months to December, compared to a net profit of $54m a year earlier.

Revenue was down to $37.7m in the latest period from $103.2m in the half year to December 2008.

NZOG chief executive David Salisbury said the reported loss did not reflect the underlying health of the balance sheet and expanding petroleum production.

Factors contributing to the loss in the latest period, along with the Albacore well write-off, included slowly reducing production, as expected, from the Tui field, lower average international oil prices, $4.2m as an apportioned share of Pike River Coal's reported loss, and $14m in unrealised foreign exchange losses.

All of the revenue for the latest half year came from NZOG's 12.5 percent share in the Tui area oil fields off the Taranaki coast.

While two more wells are to be drilled in the Tui area later this year, NZOG's first well of the current summer autumn period, Albacore in the northern Taranaki basin, found only non-commercial traces of hydrocarbons, the company said.

"The results are being evaluated and will add to our knowledge and understanding of the other leads and prospects in NZOG's acreage in the norther region of the Taranaki Basin."

In early March the Hoki-1 well was expected to spud. It was a "relatively high risk prospect targeting a potentially large oil structure", NZOG said.

It was further from shore than any previous Taranaki well, in water depth of more than 300m.

The further two wells planned in the Tui permit area were of a different nature, the company said.

There were at least half a dozen potential drilling targets around the existing Tui oil fields, and NZOG and its joint venture partners had devoted considerable resources to evaluating various possibilities.

Further activity would be influenced by the results of those two wells.

For the second half of the financial year, NZOG is expecting its results to be boosted by its involvement in the Kupe oil and gas field project.

Mr Salisbury said the start of production from Kupe in early December 2009 was the major milestone achieved during the latest period.

Once in permanent production, and depending on exchange rates and international oil prices, Kupe was expected to provide NZOG with a long term annual revenue stream of about $60-65m, Mr Salisbury said.

Along with ongoing, albeit reducing production from Tui, that would provide the cash flows to support the company's growth strategies.

In the six months to the end of December, Tui produced more than 2.7m barrels of oil, of which NZOG's share was 340,000 barrels.

While still in a commissioning period, Kupe was producing substantial quantities of sales gas, LPG and light oil, NZOG said.

The company's production in the second half of 2010, on a barrel of oil equivalent basis, was expected to be about double that of the first half, as a result of the contribution from Kupe.

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