NZSA to oppose NZOG take-out

NZSA to oppose NZOG take-out

Ofer Global Group’s planned buy-out of the minority holders in New Zealand Oil & Gas is “opportunistic” and will be opposed by the New Zealand Shareholders’ Association.

The association notes the 62 cents-a-share offer from OG Oil & Gas – to be effected through a scheme of arrangement – values the company at $101.6 million. That is $3.7 million less than NZOG’s cash holdings at June 30 and $44.4 million less than the firm’s equity at the same date.

But it is OGOG’s previous strong endorsement for keeping its 70 percent-owned subsidiary listed that the NZSA leans on most heavily. Chairman Sam Kellner told the NZOG annual meeting in November that the firm’s interests in the Barque prospect off Canterbury and the Ironbark prospect off north-west Australia were too interesting to ignore and would need a public listing to raise capital.

In a note to members on Friday, the NZSA acknowledges that exploration is risky and that circumstances since November may have changed.

But with the offer priced at the bottom of the 62-84 cent independent valuation range, and needing the support of 75 percent of the minorities to proceed, the association believes it is important all shares are voted. It will vote undirected proxies against the plan.

“It is the policy of NZSA to support the retention of listed companies on the NZX and it appears to NZSA that the offer is opportunistic.

“We encourage all shareholders to vote.”

NZOG shares have traded between 60.5 cents and 64 cents since the offer was announced on July 10. They last traded at 62 cents, having been below 50 cents prior to the offer.

NZOG has a 4 percent stake in the Kupe gas field and a 5 percent interest in the Maari oil field through its Melbourne-based Cue Energy subsidiary. It also has controlling stakes in the Clipper and Toroa exploration permits off the South Island and a 15 percent direct interest in the Ironbark project. Drilling of that prospect by the BP-led venture is scheduled for late 2020. Cue also has a 21.5 percent stake in that venture.

OGOG’s offer is a stark contrast to the 78 cents it offered for most of its 70 percent stake in 2017.

Independent appraiser Northington Partners acknowledged the latest 62-cent offer was “not overly compelling” even if it was reasonable.

Shareholders will vote on the plan on Oct. 16.

Those who didn’t participate in the earlier partial offer by OGOG will find it especially unattractive. The timing is also aggravating for many, closing out the chance to share in any upside from the approaching drilling off Western Australia and potential drilling off the South Island.

Ironbark lies about 50 kilometres north of the giant North West Shelf LNG development in the Carnarvon Basin. Its gas reserves are estimated at 15 trillion cubic feet, based on a best-case technical assessment.

But the odds of a large-scale discovery, and then commercial development, are low. Northington noted that a dry hole there could reduce NZOG’s valuation to 47 cents.

NZOG also owns half the Clipper permit off the Oamaru coast in partnership with Beach Energy. A decision to drill is due by April 2022 but the firm has struggled for several years to find another partner.

In July, Beach announced that OGOG had agreed to take up a 37.5 percent interest in the nearby Carrack-Caravel permit it operates. A well must be drilled by October 2021 and the venture is understood to be in talks on using the COSL Prospector rig which is due to drill four wells – three in Taranaki waters and another off the South Island – early next year.

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