Hard coking coal specialist Pike River Coal appears set to repeat the performance of its former parent company New Zealand Oil & Gas - both of which have taken years to get their respective products to market and create cashflow.
While Pike River is just metres away from beginning to mine its specialist hard coking coal from the Paparoa ranges, near Reefton, on the West Coast, and begin a cashflow, NZOG is after years of development reaping the benefits for its 12.5% stake in the oil flows of its offshore Tui oil field, which began last July.
ABN Amro Craigs Broker Peter McIntyre said NZOG's after-tax profit of $97.2 million, posted yesterday for the year to June, was within expectations and "outstanding".
Its previous result was $6.8 million.
NZOG now had $285 million cash in hand, worth about 74c of its $1.60 share price, which left it plenty of options for acquisition and growth, possibly in Australia as indicated earlier by the company, Mr McIntyre said.
He was surprised at the final total 10c a share dividend, with NZOG adding 5c to the first half 5c, possibly as a thank you to shareholders who had not received a dividend for a decade.
Total production for the year was 14.2m barrels of oil, of which NZOG's share was 1.8 million barrels, at an average price near $US100 ($NZ144.44) a barrel, the company said.
Mr McIntyre said the year ahead for NZOG looked "very promising" as the Kupe project, of which it has a 15% stake, was about 80% complete and due to begin commercial production by about June next year.
In May 2007 NZOG spun off its subsidiary Pike River Coal, dropping its holding from 61% to 31%, and this year booking $10.8 million gain from the float.
Pike River is now entirely independent of NZOG and the latter has suggested a divestment of its stake in the future to focus on its core oil and gas exploration and production.
Yesterday, Pike River reported a $1.14 million loss for the year to the end of June, which the company said reflected the development phase of its new mining operation and related one-off costs, NZPA reported.
Chief executive Gordon Ward said the outlook for the year ahead was positive with forward orders in place and prices for premium hard coking coal tripling to $US300 a tonne for first coal sales, compared with a year ago.
Pike River has almost completed its 2.3km tunnel in the Paparoa Ranges to begin mining the specialist hard coking coal which is already under contract to foreign buyers.
Pike River expects to deliver 200,000 tonnes of export coal by next June before moving to 1 million tonnes per annum for potentially 17 years.
Mr McIntyre said Pike River was similarly poised to move ahead into production and he expected actual production to be positively reflected in its share price, especially with the forward order contracts in place.
Mr McIntyre's financial disclosure document is available on request.
