Coal float announcement due within three weeks

New Zealand Oil & Gas is to make an announcement within the next three weeks on a float of its Pike River coal mine project on the West Coast.

Details of the initial public offering for Pike River were previously delayed. NZOG has a stake of about 60 per cent in the $144 million coal development.

At NZOG's annual meeting today, chairman Tony Radford said the delay with the float was necessary as a $20 million investment in Pike River by Indian company Gujarat NRE Coke was bedded down, and a debt facility arranged.

The development of Pike River was going well and an announcement on a float would be made no later than November 15, he said.

As well as Pike River, NZOG, which describes itself as this country's only home-grown public oil and gas exploration and production company, has two other "cornerstone" projects.

The other two are the $980 million development of the Kupe gas and oil field, in which NZOG has a 15 per cent stake, and the Tui oil project, where NZOG's stake is 12.5 per cent. Both are offshore from Taranaki.

Development of the Tui field remained on track for oil production to start by mid-2007, Mr Radford said.

The Ocean Patriot semi-submersible drilling rig, which was now drilling in the Canterbury basin, would be moving into the Tui area in November.

Its schedule indicated the Tieke prospect, near the Tui field in NZOG's permit area, should be drilled before the rig started the four Tui development wells.

"Drilling Tieke first could impact favourably as the prospect shows potential to deliver up to a further 15 million barrels and such a discovery would significantly enhance the Tui project," he said.

A further satellite prospect, Taranui, would be drilled after the Tui development wells in the second quarter of 2007.

The Tui field operator had recently recommended that due to increased construction and other costs the project budget be increased from US$204 million ($312.5 million) to US$225 million, Mr Radford said.

NZOG was reviewing the revised budget proposal.

"It is notable that Tui production enjoys such an initial high flow rate, that the payback on NZOG's share of project costs will be in as little as three-four months from full production."

As well as the Tieke and Taranui prospects, NZOG had several other exciting exploration opportunities, Mr Radford said.

In particular, the Hector prospect in offshore Taranaki, was a "tremendous prospect that could deliver substantial rewards".

"Hector has potential recoverable oil of 50-60 million barrels, or more, and discovery would trigger drilling of follow up targets."

The Hector-1 well would be drilled using the Ocean Patriot following the Tui development drilling which necessarily took precedence, he said.

NZOG was also the operator of the Felix and Opito Updip permit area in the northern onshore Taranaki basin and would make a decision on whether to drill an exploration well on those structures in the first half of 2007, after new seismic data was evaluated.

The Kupe permit also contained oil and gas prospects which were outside the area now being developed.

For the year ended June 30, NZOG posted a net profit of $2.3 million, turning around a $2.6 million loss the previous year.

NZOG shares were up 2c at mid-afternoon today to 89c.

- NZPA