9 Jul 2014

NZOG delivers good and bad news

10:41 am on 9 July 2014

New Zealand Oil & Gas had good and bad news for the market on Tuesday.

On the one hand, the Indonesian government granted the MNK Kisaran consortium, in which New Zealand Oil & Gas has an 11.25 percent share, the right to explore for unconventional oil and gas resources in central Sumatra.

The consortium has already successfully drilled two conventional wells in the area and is currently assessing their commercial viability.

Unconventional oil and gas resources are where substantial volumes of oil and gas trapped in rocks are extracted using new fracking technology.

On the negative side, the company advised the market its Oi-two well hasn't found any oil. New Zealand Oil & Gas owns 27.5 percent of that consortium and the drilling programme of both Oi-one and Oi-two has cost it nearly $10 million.

Chief executive Andrew Knight said he thought Indonesia's unconventional resources could prove to be very significant but added it was very early days.

Mr Knight said his company had reasonably low expectations for the Oi drilling. He said NZOG's probability of success for Oi was 16 percent, which was lower than the company usually works with, and it took a lower equity stake as a result.