nz51 mill revenue nz60mill cash, page-7

New Zealand Oil and Gas Ltd has one word to describe its three months to December - outstanding.


While worries about the United States economy triggered a flight from risk globally, the small New Zealand company operating in the traditionally risky area of oil and gas exploration and production was buoyed by a high oil price and by a key project coming on stream.

Its Tui development off the Taranaki coast produced 6.4 million barrels of oil in five months and had its reserves upgraded by 50 per cent.

That allowed NZOG to publish a cashflow statement for the three months to December 31 today that showed it had $60 million of cash at the end of the quarter.

Stuff.co.nz 1/2/8

"The December quarter was an outstanding period for NZOG with operating revenue easily exceeding any other period in the company's three year history," chief executive David Salisbury said.

He said the company hoped to provide profit guidance with its interim report.

"What has happened with Tui is the field is much bigger than we anticipated. Where we thought we were going to get 28 million barrels from the Tui development, we now expect to get about 42 million barrels.

"Associated with that the field has been performing better than expected."

A lot less water was breaking through into the oil flow than predicted.

"We had expected to see a lot of water flowing in already but we are seeing far less water than had been anticipated, which means we are getting more oil for relatively less water.

"So we are seeing much better production volumes than expected and we have increasing confidence that that will continue," he said.

All the joint venture partners were getting increasingly confident about the field, he said.

He declined to talk about the Pike River Coal field development in detail as NZOG was now an investor rather than manager.

But he said the tunnel to the coal face was now "the better part of 2000m" long and the pit bottom was being dug out. This is the area where the slurry pipeline and crushing occurred.

Coal production was still expected to start in July. The coking coal price had also been going "from strength to strength", he said.

The change to the use of rail transport meant a rail loadout facility had to be designed and built.

The company is also buoyant about its Kupe gas field project off the Taranaki coast.

"We have the development underway and we've seen some significant milestones," Mr Salisbury said.

He said the offshore infrastructure was largely completed. The platform was installed during the quarter. It is joined by a pipeline and a 30km long line carrying chemicals, power and communications cables.

The line was installed and the pipeline was currently being installed and should be finished by the beginning of next week.

The drilling of production wells was underway and was proceeding according to schedule. Production is expected to start in mid-2009. A production station onshore still has to be built.

Mr Salisbury declined to comment on gyrations in the share market, simply saying that his company was in a good position.

The company had all its funding in place and was not affected by any tightening in credit.