New Zealand Oil & Gas (NZOG) is expected to report an "outstanding" result for the past full financial year - on the back of strong oil production and record global prices - with more than $100 million in after-tax profit positioning it well for future growth.
In New Zealand's present recession-headed downturn, the ill-effects of the global credit crunch are finding their way on to the majority of balance sheets.
NZOG is expected to have one of the strongest results of the present financial reporting season when it reports today.
ABN Amro Craigs broker Peter McIntyre said NZOG was in an enviable position compared with many companies, with cash in hand of $280 million ($4 million last year), and growth potential on several fronts, ranging from its present assets to new opportunities.
"NZOG couldn't have timed its production run better in a year highlighted by record, sustained global oil prices," he said.
ABN had upgraded NZOG's 12-month share price target by 4.4% from $2.27 to $2.37 and described the company as an "excellent local opportunity" for New Zealand investors wanting exposure to the global oil market and carried a "buy" recommendation.
Mr McIntyre noted the Tui field was providing all the field owners with $890,000 revenue per day.
For every $US1 dollar fall in international barrel prices, Tui lost $US5000.
However, for every 1% decline of the New Zealand dollar against the US dollar, Tui recouped $US12,000.
NZOG's 12.5% interest in the offshore Taranaki Tui field had produced oil beyond expectations - more than 15 million barrels - with its estimated reserves having risen, and its 15% interest, Kupe, would likely see oil and gas production begin by mid-2009.
NZOG had paid its first dividend in a decade, of 5c, in April, with ABN forecasting subsequent annual dividends of 5c, 10c and 11.5c, which equated to dividend yields rising from 3% to more than 7%, Mr McIntyre said.
ABN is forecasting an after-tax profit of $103.6 million, compared with $6.3 million a year ago before Tui came fully into production and global oil prices began steady rises to a record $US147.17 in early July.
Oil was about $US114 this week.
Mr McIntyre said the oil "bubble" had burst in recent weeks, lowering the record prices, and while predicting NZOG would lose some revenue as oil eased towards $US100 per barrel, the weakening of the New Zealand dollar could offset some of that downturn.
He said NZOG had signalled a divestment of its share in listed high-quality coking coal company Pike River Coal on the West Coast, which NZOG spun off in May 2007 dropping its holding from 61% to 31%.
NZOG would expect to get a good price for its shares, and would look elsewhere for more oil-orientated investment - possibly in Taranaki, overseas or in the frontier Great South Basin.
Peter McIntyre's financial disclosure document is available on request.
