New Zealand Oil & Gas says it eventually wants out of its stake in Pike River Coal in spite of plans to more than double its financial commitment to the miner and options to buy its coal.

NZOG has a 29.5 per cent stake in Pike and has invested about $67 million developing the mine before its float in 2007 and taking up rights issues and convertible notes since then.

Yesterday it announced a further commitment of up to $72 million to Pike, comprising a $14.75 million stake in a $50 million share issue, a $15 million loan and a new convertible bond facility allowing the repayment of the existing Liberty Harbor facility.

Pike River will use the extra money to get the West Coast mine into full production after being delayed by 20 months.

Chief executive Gordon Ward said the latest extra funding package would "absolutely" be the last time the company went back to the market for more money.

The funding announced yesterday would give a $20 million buffer to move into full production.

As part of the deal Pike will grant an option to NZOG exercisable over the next two years to enter into a coal purchase agreement at market prices.

This could be be up to 20 per cent of production for the first three years - when Pike has other supply obligations - and 30 per cent for the remaining life of the mine.

The bond facility and coal contract option are conditional on Pike shareholder approval and if those options do not proceed Pike must pay a break fee of $1.2 million.

NZOG chief executive David Salisbury said his company would receive an attractive return on its secured convertible bond while the potential to hold a coal contract would enhance its investment in Pike.

If NZOG converted bonds to shares it could increase its stake in the miner by 25 per cent but Pike would become less relevant to his company "as we have already stated in due course".

"We have no current intention to convert," Salisbury said.

"This proposal has some regulatory approvals to go through but it would give us the potential to go to a 40 per cent shareholding.

"We have had the view for quite a considerable time that Pike is non-core asset for us and it will become less relevant to us over time so we still have the view that at some point we would be looking to exit Pike."

If it chose to exercise the coal offtake agreement NZOG could market the coal itself or assign contracts to other parties.

Pike River's other shareholders are India's Gujarat NRE and Saurashtra Fuels and institutions with 27 per cent among them. Small shareholders have a 43.5 per cent stake.

Last Friday it shipped the first of its coal offshore after delays last year.

First NZ Capital analyst Jason Familton said the proposal, on commercial lines, appeared to be a good one for both companies.

"From the NZOG perspective they're looking to protect the investment they already have in Pike and at the same time getting a better return. From that perspective it's a win-win between the two parties."

There remained potential for further hitches, given the the project's chequered history.

"All things going well they will start producing reasonable amounts of coal in the 2010-11 financial year but there's nothing to say they won't have future problems."

Pike reported a loss of $14.1 million for the six months to December 31, compared to a loss of $9.6 million a year earlier.

Pike shares closed down 5c at 89c while NZOG closed down 2c to $1.55 on the NZX yesterday.