KEY POINTS:
The success of the Tui field for New Zealand Oil & Gas has highlighted the company's appeal as a target for takeover and merger deals, analysts say.
NZOG is also looking to get a significant cash boost with most of a potential $208 million in options likely to
be exercised by the end of the month.
Already about 4.2 million of the 139 million $1.50 options have been exercised and the company says the expected capital injection will increase the scale of opportunities it "can sensibly pursue".
The company is this year's second-best performer on the NZX, behind Pike River Coal in which it has a 31 per cent stake.
ABN Amro analyst Rob Foster said given takeover and merger activity in the energy sector across the Tasman, it was "possible" NZOG could be a target.
"It's one of the upsides of our investment view. With the oil price running so high you would expect that NZOG could be seen as a target. NZOG is by far the best New Zealand opportunity."
The company had an open share register, was producing good revenue and had good oil and gas prospects ahead of it.
"It could be attractive to someone, I just don't know who's been going around the globe looking at these things but it's definitely an option," he said.
Forsyth Barr analyst Andrew Harvey-Green said merger or takeover activity could go either way.
"They've [NZOG's] got the cash reserves themselves - if they want to have a go at someone they could probably do that but equally those cash reserves could be attractive to someone else coming in," he said.
"If you look at the smaller Australian stocks a lot of what they lack is cashflow but they have better exploration acreage than what NZOG has."
A merger with such an Australian company would be a nice. "It's certainly not outside the realms of possibility."
In a briefing for investors released yesterday NZOG outlined milestones reached in the Tui field, in which it has a 12.5 per cent stake.
In the past 10 months the company's share of production has been 1.75 million barrels, with the average net price per barrel of US$96 ($127). It repaid its share of exploration and development costs of $52 million in 4 1/2 months.
The company is due to announce a revised appraisal of Tui reserves any day.
Foster said although it was hard to predict, his firm was working on the assumption that about 80 per cent of options would be taken up.
NZOG shares closed up 2c at $1.56 yesterday.
