NZOG, Genesis reach agreement over Kupe

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 million-$2 million.

''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 yesterday.

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 Energy.

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 Kupe.

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 and Genesis.

• 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 million.

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.

simon.hartley@odt.co.nz

 

 


Kupe field
Ownership of the Kupe oil and gas field, Taranaki

 

50%:           Origin Energy, operator.

31%:         Genesis Energy.

15%:           New Zealand Oil & Gas.

4%:              Mitsui.

SOURCE: NZOG


 

 

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