In a report to the North American market TAG Oil Ltd (TSX: TAO) said its move to sell-out of New Zealand and focus on Australia was “a shareholder-friendly move” that was also bold.
After the clear decisions of the Ardern Government to cripple new petroleum exploration in New Zealand, outside of the onshore Taranaki, TAG sold its Cheal field and other permits in NZ to Tamarind Resources, which now operates the maturing Tui oil fields.
NZ Resources reported that in recent years TAG had been a good risk taker on exploration in NZ, but obviously just saw obstruction ahead and sold to Malaysia-based Tamarind for $US30 million and a 2.5% gross overriding royalty on future production from all NZ assets, and up to $US5 M from milestone events.
Last week North American analyst Ed Stacey of Capital Network discussed TAG Oil’s announced sale if NZ assets on Reuters Insider programme.
When asked about the sale of Stacey said TAG was made an offer that was a 50% premium to the pre-deal announcement enterprise value of the company.
The benefits Stacey laid out included:
• It releases value to shareholders.
• Kept TAG’s incoming royalties in place.
• Allowed TAG to focus on “favourable, low-cost, well-supported Australian assets.”
This, he said leaves multiple options going forward, including payback to shareholders and adding to the Australian asset base.