desparate attempt at nhc shareholders' expens, page-47

U308

Actually I dont have a subscription but the article was there for me to read:

herewith a copy of is Copyright WSJ:


By
Rhiannon Hoyle
March 19, 2013 11:07 a.m. ET

SYDNEY-- New Hope Corp. NHC.AU +1.75% , one of Australia's biggest coal miners, is aiming to become a diversified resources company through building a large oil and gas unit as it looks for ways to lower fuel costs and boost profitability.

Coal prices have been languishing near multiyear lows as demand from Asian buyers has slowed, making many of Australia's high-cost mines unprofitable. In an effort to protect earnings, Australian miners like New Hope have shut pits, cut jobs, sold smaller assets or delayed investments in recent months.

Robert Neale, New Hope's chief executive, said oil and gas output generally has higher margins than coal, and diversification could provide a "natural hedge" against fuel prices that are keeping costs high at its mines.

Mining trucks and equipment that dig coal out of giant pits are mostly powered by diesel, and New Hope uses more than 40 million liters (10.6 million gallons) of fuel a year, Mr. Neale told The Wall Street Journal in an interview.

The Brisbane-based company last year took full control of Bridgeport Energy Ltd., a crude-oil producer with assets in Queensland and Victoria states. It also owns a 19.9% stake in Planet Gas Ltd. PGS.AU +17.65% , which is developing natural-gas reserves in Central Australia's Cooper Basin.

As it looks to deploy a war chest totaling nearly 1.3 billion Australian dollars (US$1.35 billion), New Hope will target acquisitions in conventional oil and gas rather than the "more in vogue" shale gas or shale oil, Mr. Neale said. That is because conventional wells are cheaper to drill.

"From an Australian perspective we see it as a fairly good market to be in," Mr. Neale said. "We are no longer self-sufficient in refinery capacity, let alone production capacity."

As recently as 2000, Australia was self-sufficient in oil and gas but now its import costs are rising. Australia's oil production in 2011 fell by nearly 15% to 484,000 barrels a day--its lowest level since 1983--as conventional fields became depleted, BP BP.LN -0.63% PLC estimated in its statistical review of world energy.

New Hope's past bets on the energy sector have proved lucrative.

In 2010, New Hope booked a gain of A$326 million on the sale of its 16.9% stake in Arrow Energy Ltd. when Royal Dutch Shell RDSB.LN -1.80% PLC and PetroChina Co. 601857.SH -0.13% jointly acquired the coal-seam-gas business in Queensland.

Mr. Neale views the company's latest appetite for oil and gas assets slightly differently.

"With Arrow, we just had a shareholding. With Bridgeport, we acquired a pretty good technical team," he said. "I see Bridgeport not unlike New Hope was 15 years ago, and we want to build up the business through organic means and acquisition, if we find the right one."

New Hope's focus for oil and gas acquisitions will be centered on Australia, but it isn't ruling out locally listed companies with offshore operations.

The company also remains open to expanding its portfolio of coal assets, as the current downturn could provide an opportunity to acquire assets at an attractive price, Mr. Neale said. Several companies, including BHP Billiton Ltd. BHP.AU -1.46% and Peabody Energy Corp. BTU -1.41% , have put Australian coal mines up for sale as they review their operations amid a pullback in commodity prices.

"I think reality will hit in the next 12 months when people have to sign off on their accounts and there will be some opportunities in that time," Mr. Neale said.

New Hope on Tuesday signaled further cost cuts after its fiscal first-half profit fell sharply due to lower coal prices and a high Australian dollar.

The company reported a 32% fall in net profit for the six months to Jan. 31 to A$68.8 million, but kept its interim dividend steady at 6 cents a share.

New Hope warned weak demand for thermal coal, used in electricity generation, and the strong domestic currency would have "a negative impact" on both revenue and margins in the second half of its fiscal year. Mr. Neale said he expected this half to be "tougher" for the coal industry, but wouldn't elaborate on any possible impact on earnings.

Write to Rhiannon Hoyle at [email protected]