NZOG shareholders question OG offer
New Zealand Oil and Gas shareholders had mixed views on the partial takeover offer from OG Ofer at the company's annual meeting in Wellington this morning,
The oil and gas division of Ofer Global Group has offered 78 cents per share to lift its NZOG stake to a maximum of 70 percent, up from the 77 cents per share bid it initially floated. The new OGOG bid won over NZOG's independent directors who unanimously recommend shareholders accept the revised offer.
NZOG's chair, Rodger Finlay, said he would accept the offer for all of his shares, prompting one shareholder to remark that he clearly lacked faith in the business. Finlay said he believed OG would improve the company's financial and technological capability, and it was committed to New Zealand with a plan to continue NZOG's listing on the NZX and its base in Wellington.
The first shareholder to ask a question at the meeting noted that 78 cents was at the bottom of the range given by an independent valuation by Northington Partners, which valued NZOG at up to 93 cents per share. He said the offer undervalued the company and should be re-negotiated, a comment which earnt a "hear hear" and scattered applause from the crowd.
"The range by definition is a valuation exercise," Finlay said. "So we should hold out for a higher bid? All I'll say is we didn't solicit any of these bids. They came to us, we as your directors have diligently analysed them. Our advisers went around all other potential protagonists - is there a better deal, is there a better price, and by the way is there a better deal that leaves the company still with the opportunity for shareholders to be invested in it.
"When I took over the chairmanship of this company the share price was 39 cents. We've subsequently, in the partial offer by the OG Group, doubled that price. In the same period, we've returned $225 million to shareholders. We've doubled your return, and returned capital. I think it's an exceptionally good offer, and that's why your independent directors unanimously recommended it."
Both Finlay and chief executive Andrew Jefferies spoke about the challenge of the new government, which has supported a transition to renewable energy. NZOG wants to explore its Barque prospect off the coast of Canterbury under its Clipper exploration permit. A report the company commissioned has said it would deliver $3.7 billion in regional gross domestic product over 12 years if a major gas discovery was made.
Jefferies said NZOG wasn't ready to commit to drilling at the site, and if it does it would have about a 20 percent chance of success. He noted there are four other prospects in the South Island which would have similar potential gains: two near Barque, one at Toroa, and one owned by Shell.
NZOG is looking at prospects overseas, but Jefferies said this wasn't a change brought about because of the new government, but due to the company's need to diversify.
"We don't see the new government as being a dramatic change for the industry here," Jefferies said. "We can help provide gas as a transition fuel - it's increasingly transportable, it's low-emissions, it's all those things. If you find a new North Sea in the south, it would make a real difference to this country. This government knows that."
Duncan Saville, chair of Zeta Resources which had fielded a rival offer for NZOG, was seeking re-election to the NZOG board today. He said Zeta hasn't yet decided whether it will sell its shares to OG, as it was a tactical decision for the company to make, but is supportive of the offer. When speaking about his desire to be re-elected, Saville said the OG deal was strategically very good for the company.
OG Oil & Gas boss Alistair McGregor is also seeking to be elected to the board, after independent director Mark Tume chose not to seek re-election. Speaking via video link from the UK, McGregor said it was the right time to invest in exploration as there had been little investment in the sector following the latest oil price crash.
"The Clipper project is an elephant. It needs not just one partner, it needs several partners to develop fields of that size," McGregor said. "With exploration costs just to drill a single well in the order of $60 to $80 million US, and to develop a project like that we're talking hundreds of millions of dollars."
McGregor said maintaining the NZX listing would mean that if the exploration was successful, shareholders could buy back in.
Results from the meeting have shown that both Saville and McGregor were successful and will serve as directors on the board. A substantial product holder notice from OG this morning showed it held 19.5 percent of the shares.
The shares last traded at 71.5 cents, up 1.4 percent today.