How risky is the investment?
Austral Pacific's only independently assigned reserves (Sproule International, April 2005) are for the Cheal field. These reserves are predominantly oil and production is expected to enjoy firmer pricing along with the rise in international oil prices.
The Cheal oil reserves support around half of Austral Pacific's current value with the remainder being cash, Cardiff deep gas potential and other exploration permits and properties.
The Cardiff deep gas field has not yet tested commercial rates of gas flow. Thus resource potential exists rather than "reserves". In the short term the success or otherwise of production testing at Cardiff will be material to the total reserves of Austral Pacific.
Infratil expects Austral Pacific to continue to invest cash resources in exploration, including reinvestment of the Cheal oil production revenues.
Thus Infratil does not expect near term dividends and sees the investment as carrying oil and gas exploration risk, at least until more material production volumes are obtained following exploration success.
Does the Austral Pacific investment link with Infratil's other energy sector investments?
Austral Pacific's immediate production prospects are the Cheal oil reserve and the Cardiff deep gas prospect. While Austral holds a 25% interest in the prospective Cardiff gas field and is the field operator, Genesis Energy holds options to purchase gas produced from the field.
In the short term no specific linkages are seen between Austral Energy and Infratil's other New Zealand energy sector investment at TrustPower.
Infratil considers that knowledge from participation across the upstream and downstream energy sectors will inform better investment decision making and, over time, offer opportunity for integrated investment strategies.
How did Infratil evaluate the Austral Pacific investment?
Austral Pacific Energy is listed on the Canadian TSX (home listing) and it is also listed on the US AMEX exchange and the NZX. As such Austral Pacific complies with quite stringent disclosure requirements across the various listing jurisdictions. Infratil has accessed the considerable public disclosures made by Austral Pacific Energy.
Infratil's Chairman David Newman was also Chairman of Austral Pacific - did this influence Infratil's investment decision?
Infratil's Chairman disclosed an interest in Austral Pacific and was excluded from Infratil's consideration of this investment.
Where can I learn more about Austral Pacific?
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