NZ Oil and Gas cedes promising Kakapo permit after failing to attract farm-in partner

New Zealand Oil & Gas, the nation’s biggest listed energy explorer, has ceded its Kakapo permit off the South Taranaki after failing to find a partner to share costs of a prospect it says could be several times bigger than the Tui or Maari fields.

NZOG won exploration permit PEP 51311, which lies to the west and south of the Kupe field, in early 2009 and has said recoverable resources, un-risked, may be in excess of 200 million barrels of oil. The decision to relinquish the permit comes after ASX-listed Peak Oil & Gas, formerly known as Raisama Energy, withdrew from a farm-in arrangement in February saying it preferred to focus on Asia.

“We have made strenuous efforts to find a farm-in partner to share the investment risk,” Wellington-based NZOG said in a statement. “While interest in New Zealand’s prospective basins continues to grow, it has not been possible to farm out the prospect and secure a suitable rig contract before a deadline at the end of July.”

Perth-based Peak had an agreement with NZOG to earn a 10 percent interest in the permit by paying 20 percent of first well costs, capped at US$3 million. Total costs of the well had been estimated at US$25 million to US$30 million.

NZOG chief executive Andrew Knight said his company is heavily committed to New Zealand drilling, including Matuku and Tui. Kakapo didn’t fit the company’s portfolio “at 100 percent exposure when there is so much other activity underway.”

The company hadn’t been able to farm out the prospect or secure a suitable drilling rig before a deadline of the end of this month, he said.

Knight has previously said Kakapo had “the potential to make a considerable contribution to our community and the New Zealand economy.”

Shares of NZOG last traded unchanged at 83 cents on the NZX and have declined 5 percent this year. The stock, which has shed 50 percent of its value in the past five years partly reflecting the failure of the Pike River Coal mine, is rated a ‘buy’ based on the consensus of six analysts polled by Reuters, with a price target of $1.

(BusinessDesk)