New Zealand Oil & Gas has settled a decades-old oil field
royalty claim with Genesis Energy, which will initially boost
annual profit by $5 million.
At issue was the level of royalty payments from the Kupe oil
and gas field in Taranaki, which had been under negotiation
following a buy-in dating back to the the 1980s.
NZOG chief executive Andrew Knight said the agreement would
initially see an increase of $5 million in after-tax profit
for the 2013-14 financial year, which included payments due
from previous years, then an annual revenue increase of $1
''The overriding royalty has been under negotiation for
several years. Negotiations are continuing with another Kupe
partner, Origin Energy,'' Mr Knight said in a statement
For the quarter ended March, NZOG booked revenue of $15.8
million, for its 15% stake in Kupe.
Craigs Investment Partners broker Peter McIntyre said the
decision was positive for NZOG, removing the uncertainty of
the long-running negotiations, and its shares rose more than
2%, to 81.5c after the announcement.
He said the outcome would have no material impact on Genesis
Under negotiation was the calculation of the value payable,
which had been disclosed in earlier financial statements as a
contingent asset, Mr Knight said.
The royalty arrangements started from a series of
transactions in the 1980s, when National Petroleum acquired
an 89% stake, in what was then the prospecting licence in
As part of the acquisition, National Petroleum agreed to pay
overriding royalties to the parties it acquired its interest
from, Mr Knight said.
''Complex corporate reorganisations and transfers since have
affected those arrangements,'' he said.
Negotiations continue between Kupe stakeholder Origin Energy
• NZOG said in a separate market update yesterday costs
had risen in its exploration drilling of the joint venture
0i-2 well, in 120m of water about 37km off Taranaki's coast.
Well costs had been adversely affected by winter weather
conditions and are estimated to have gone up to $US50.9
million ($NZ58.1 million); NZOG's share being $US9.54
Casing had been installed and cemented at a depth of 1487m.
Drilling was to begin shortly for the target sandstones,
expected to be at 3690m.
Ownership of the
Kupe oil and gas field, Taranaki
Origin Energy, operator.
New Zealand Oil & Gas.