NZ Oil & Gas to return $60M to shareholders via reduction, won't pay dividends
New Zealand Oil & Gas, the listed energy explorer, will return about $60 million to shareholders, saying cash on hand will be more than it needs to grow its business as production ramps up at the Tui field.
The Wellington-based company plans to make a capital reduction amounting to 15 cents a share and will call a special meeting to seek shareholder approval, chairman Peter Griffiths said at the annual meeting today. A meeting would likely be held before Christmas.
"The company has a robust balance sheet with no debt, and in the near term we expect increasing cash flows from increased levels of production at Tui," Griffiths said in speech notes for the meeting. "Consequently, our cash on hand will grow well beyond what the business requires for its planned activities."
NZ Oil & Gas, which has interests in the Tui and Kupe fields, can contemplate returning capital even though it is actively seeking to acquire new reserves, with a number of possibilities under review, and looking to squeeze more from its existing portfolio, Griffiths said. In August, the company posted a 61 percent drop in annual profit, partly reflecting a jump in exploration and evaluation costs.
"We consider the current market dislocation provides significant opportunity to acquire production and reserves at attractive prices and we will seek transactions that create compelling value," Griffiths said.
The company would seek more value from existing exploration acreage, "by increasing the focus on its optionality but we will set a higher hurdle for investing cash in exploration into the future.
The New Zealand exploration "remains attractive to us", with "vast, under-explored basins, an acceptable financial regime, a regular process for bidding for acreage and it is attracting credible large explorers including Woodside, Shell, Anadarko, and Statoil," he said. But it also had challenges, including high cost due to its remoteness from major centres of oil activity, challenging geology and limited data.
The company paid a final dividend of 3 cents a share in September but doesn't expect to declare any more dividends "in the near term" because it is deducting exploration expenses from its tax bill and isn't accruing imputation credits, he said.
Chief executive Andrew Knight told the meeting that the Kupe field "is a fantastic asset for us, and it will continue to produce for many years."
The permit is currently producing only gas and light oil but a search for oil as well as further gas and condensate will be a focus in the coming year, he said.
Shares of NZ Oil & Gas last traded at 73.5 cents and have fallen 8.7 percent this year.