New Zealand Oil & Gas, founded in 1981, is set to be absorbed by major shareholder OG Oil & Gas, the energy arm of Monaco-headquartered Ofer Global. Shareholders will decide the firm's fate on November 14.
The improved final offer from OGOG has cooled some of the initial anger at the proposed takeover, which came just eight months after both companies spoke positively at the last AGM about NZOG's brighter future.
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OGOG, which acquired a controlling stake in late 2017, wanted to retain NZOG's listing to help fund the capital needed for major projects like the Barque play off the South Island and the Ironbark project off north-west Australia.
That future had already darkened in April 2018 when the government banned new offshore exploration. But it turned black last December after the onshore Kohatukai well came up dry and Brent crude oil prices plunged below US$60 a barrel.
Raising capital with a share price below 50 cents – when the major shareholder had just paid 78 cents – was never going to work.
While long-term followers of the company may be disappointed, the broader investment community is unlikely to notice if NZOG does depart the exchange, said Mark Lister, head of private wealth research at Craigs Investment Partners.
While that may sound harsh, he said investors are more comfortable than even 10 years ago looking overseas to access sectors that aren't strong here.
Craigs likes the New Zealand market, and doesn't want to see stocks delisted, but the firm has to invest in the best stocks it can find, Lister said.
New Zealand has strong candidates in the utilities, technology and healthcare sectors, but if it wanted to invest in the financial sector, it would tend to buy Australian banks, or the likes of Wells Fargo and JP Morgan in the US, he said. For consumer-staples it might pursue Nestle, Unilever and Procter and Gamble.
Lister is not a strong fan of the energy sector – given the volatility of oil prices – but he says BHP or Woodside in Australia would be options for local investors wanting that exposure.
In truth, NZOG has struggled for years to maintain sufficient scale to fund its local exploration and replace declining reserves from its stakes in the Tui and Kupe fields. It tried exploring off Tunisia and in Indonesia, but more recently turned its attention back to the gas-hungry Australian market.
It was deja vu all over again. Twenty years ago, NZOG was getting about 80 per cent of its revenue from Western Australia through its controlling stake in Pan Pacific Petroleum. Most of its New Zealand cash came from the Ngatoro field it discovered in 1991.
But it has always been a long time between drinks.
Tui, discovered in 2003, would not come on stream until 2007, the same year the firm listed Pike River Coal, almost 20 years after acquiring it. Kupe, discovered by NZOG in 1986, would not deliver gas until 2009.
Maintaining a viable business in New Zealand – where exploration activity is sporadic and expensive – is hard. The sector is dominated by Vienna-based OMV and Todd Corporation. Wellington-headquartered New Zealand Energy Corp operates the onshore Copper-Moki and Waihapa-Ngaere fields and remains listed on the Toronto exchange.
In a world that in theory has more oil, gas and coal reserves than it can use, the argument for exploration may get harder over time, BP group chief economist Spencer Dale said last month.
But he said firms should still be able to explore if that will deliver cheaper, lower-carbon energy resources.
For BP, that means focusing on fields that will be low-cost, or prospects that lie near existing infrastructure – such as the company's North Sea interests, he told BusinessDesk.
NZOG and Adelaide-based Beach Energy believe they have such a low-carbon prospect at Barque, off the Oamaru coast, but they need a third partner for drilling.
NZOG also tried to join Beach's Otway gas venture off the western coast of Victoria. But Beach wanted a bigger partner and earlier this year sold OGOG a 40 per cent stake for A$344 million.
Fund managers have largely left NZOG. The Accident Compensation Corporation was the only one still listed among the firm's top-20 shareholders at Aug. 12. A decade ago there were half a dozen, including the New Zealand Superannuation Fund, Guardian Trust and AMP.
Craig's Lister says growing investor concern for sustainable investment is also changing people's attitude to stocks – even for the likes of Z Energy, the country's biggest fuel retailer.
New Zealand's mining and fossil fuels sector is important, but is also relatively small in terms of the total economy, he noted.
"We're seeing much, much less appetite for those sorts of businesses and much more appetite for businesses that are seen as more future-proofed."