NZOG advises shareholders to reject Zeta offer

AUCKLAND: New Zealand Oil & Gas independent directors have recommended shareholders reject a partial takeover offer from ASXlisted Zeta Resources because it undervalues the company and favours capital return over investment for growth.

An independent valuation of NZOG by Northington Partners values the company at 78c to 93c a share, above Zeta’s 72c offer, which the directors said was inadequate and ‘‘appears to take no account of exploration upside, which while risky, could be significant’’.

Zeta is seeking 42% of NZOG’s fully and partly paid shares it does not already own, subject to scaling. Zeta, which is advised by NZOG director Duncan Saville’s ICM unit, has lockup agreements with H&G, Bermuda Commercial Bank, Pan Pacific Petroleum and UIL. It has also pitched its bid with the lure of another $50 million capital return to shareholders in the next six months. NZOG shares rose 0.7% to 73c yesterday and have gained 15% this year.

NZOG’s target company report says the company’s current strategy is to seek further investment in exploration and development opportunities over the next 12 to 18 months, which it believes is a superior strategy to returning cash to shareholders.

‘‘Although exploration carries risks, and if it is not successful the cash spent on it will be gone, outsized returns are available in return for that risk,’’ chairman and independent director Rodger Finlay said.

The appearance of OGOG, the oil and gas division of Ofer Global Group, with a proposal to offer 77c a share for no more than 70% and at least a controlling stake ‘‘further supports the view that the Zeta partial offer is too low,’’ he said. OGOG has yet to make a formal offer. — BujsinessDesk