In an intriguing move, New Zealand Oil and Gas (NZOG) has acquired 20% of Australian-listed oil and gas explorer Cue Energy, buying its stake from Todd Energy.
Forsyth Barr broker Andrew Rooney said the deal made sense only if NZOG went on to take over Cue.
As NZOG's investment in Pan Pacific Petroleum showed, holding a significant, but non-controlling, stake was ineffective.
''We expect a full takeover bid in due course - most likely a scrip bid, given NZOG is about to repay $63 million of capital to shareholders.''
Cue's shareholding structure appeared more conducive to a takeover, with no directors owning a significant stake, Mr Rooney said.
The largest shareholder after NZOG was PetroChina with 16.2%, followed by Zeta Resources (12.7%) and Todd Energy (7.1%).
PetroChina acquired its Cue stake in 2009 after the takeover of Singapore Petroleum.
There were some obvious synergies between Cue and NZOG that made a full takeover attractive, he said.
First, there was a good overlap of regions where both companies operated.
Cue's production assets were Maari, in New Zealand, and Sampang PSC, in Indonesia.
It also had exploration interests in the Carnavon Basin, in Australia, as well as New Zealand and Indonesia.
Secondly, Cue's 2014 corporate costs of about $7 million could probably be stripped out of a merged business, Mr Rooney said.
From a value perspective, Cue, having recently sold its Papua New Guinea assets, had about $47 million of cash out of a market cap of $59 million.
That valued Cue's about three million barrels of oil equivalent (3mmboe) reserves at $4 a barrel.
NZOG's capital return, which was approved at a special shareholders' meeting in December, had been delayed - possibly until early next month - due to the lack of availability of the High Court during the holiday period, he said.
NZOG was returning the equivalent of 15 cents per share, through the payment of 75c for every five shares held.
Since Forsyth Barr's last report in mid-December, oil prices had continued to fall and were down a further 20%.
The Brent oil price was sitting at around $US50 ($NZ63.97) a barrel.
Forsyth Barr had amended its short-term 2015 full-year operating earnings forecast but maintained its long-term assumption of oil at $US80 a barrel.
The forecast operating earnings for NZOG were now $49.6 million, 14% lower than the older forecast.
The target share price had been trimmed by 1c to 62c, the price the shares traded at last.
