New block for NZ Oil & Gas

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New Zealand Oil & Gas is trying to hook a 50 million-barrel big fish off the Taranaki coast, taking a 40 per cent stake in the Albacore oil prospect to be drilled by November.

NZOG called Albacore an "exciting block", more likely to contain oil than gas. If successful, Albacore could support an offshore development similar to the 50 million-barrel Tui field, where NZOG is a 12.5 per cent shareholder.

A month ago, NZOG spent $10 million to take a 10 per cent stake in the offshore Hoki permit area, where a well is to be drilled in December, though Hoki could be much bigger than earlier suggested.

The major shareholder in Hoki, Australian-based AWE, said this week that Hoki could hold as much as 300 million barrels of oil. NZOG puts the potential of Hoki at about the size of Tui about 50 million barrels, with Albacore in the same league.

After Hoki, two wells will be drilled at Tui early next year to expand the existing field.

NZOG posted yesterday what it called a "solid" net profit of $53.2m for the June year, down from $97.2m the previous year, as production from Tui slowed.

Operating revenues were $138.7m, down from $222.8m the previous year. The average price for each barrel of oil in the year just ended was $122, compared with $125 in the previous year.

As expected, Tui started with a high level of production but that fell rapidly, with more water limiting the amount of oil extracted from the field.

NZOG will pay a 5-cents-a-share dividend on October 2, though shareholders have the option to take shares instead of cash. NZOG held $174.8m in cash at the end of the June year.

Chief executive David Salisbury said the company expected to spend about $40m on exploration this financial year.

It is also still looking at large investments $100m to $300m deals though Mr Salisbury wants to keep a "relatively good" cash cushion for its operations.

Last year, NZOG spent $30m buying almost 15 per cent of Pan Pacific Petroleum, and the market value of the stake has more than doubled since, on top of a $3.3m dividend.

NZOG would not reveal how much it is paying for its 40 per cent share in the Albacore prospect area, but the first well will cost up to $25m.

The stake was bought from Westech, which has reduced its share from 90 per cent to 50 per cent. Westech, which belongs to privately owned Energy Corporation of America, has accumulated losses of $53.9m since starting in New Zealand in 1995.

NZOG is also a 40 per cent shareholder in the offshore Canterbury Barque prospect, which NZOG said last year could contain 58 million barrels of oil. AWE this week put a figure of 150 million barrels potential on Barque, with the possibility of drilling a well next year or the year after.

NZOG is also a partner in the offshore Kupe field.

- © Fairfax NZ News