New Zealand Oil & Gas reported revenues of $22.1 million from the Tui oil fields in the September quarter, while costs for developing the Kupe field have risen.
In his report to Wednesday's annual meeting, NZOG chief executive David Salisbury said Tui, offshore from Taranaki, had produced more oil and less water than expected.
But, as always anticipated, its daily oil production was slowly reducing.
In the second year of development 9.1 million barrels of oil were produced, slightly above forecast, while for the current year the forecast was for 5.1 million barrels, Salisbury said.
In the financial year to the end of June, Tui - in which NZOG has a 12.5% interest - was NZOG's sole source of operating revenue, earning $139 million.
Now the company is looking forward to the start of production from the Kupe field, off the south Taranaki coast, in which NZOG has a 15% interest.
Pipeline gas was scheduled to be introduced to the production station near Hawera next week.
A few weeks later the first raw gas should be brought ashore from the Kupe field, effectively signalling the start of production, Salisbury said.
The project operator had advised the final cost would be higher than previously estimated. NZOG had contributed $180 million so far and the company's final bill appeared likely to be in the range of $195 million to $200 million.
"Offsetting this, expected revenues have also increased since the project was approved and the development cost needs to be seen in the context of a field with revenues of several billion dollars."
Kupe would provide a solid income stream for the next 15 years, Salisbury said.
New business
NZOG was also keen to secure new business opportunities that strengthened its portfolio.
In the past year the company had invested around $120 million in new and existing ventures and would have liked to have done more.
Several large asset investments had been contemplated but were found after detailed evaluation to be technically deficient or financially unattractive.
Earlier this year, some opportunities were thrown up by the global financial crisis, but most did not stack up on close inspection, Salisbury said.
"Companies fought hard to retain quality assets and the assets that were available were generally the higher risk and more marginal projects.
"Contrary to our expectations, not many opportunities of sufficient quality came to the market.
"By mid-year oil prices had rallied and the financial markets had revived. Ironically, the global financial crisis had proved to be too short to force many `fire sales' in the oil and gas sector," he said.
Despite that, deals remained to be done, and a number were under consideration.
Salisbury also said that in the past year NZOG's exploration portfolio had expanded significantly. NZOG was now involved in eight permits and would take part in the drilling of at least four wells this summer.
The exploration opportunities secured in the past year included four permits in the Taranaki Basin.
Offshore drilling did not come cheaply and NZOG expected to spend at least $30 million this summer, Salisbury said.
While New Zealand remained NZOG's primary investment destination, it did not provide enough depth and breadth for a company of its size to be confident of meeting its growth objectives.
An indication of the company's willingness to look further afield was the low cost investment in a consortium reviewing opportunities in Romania.
NZOG said that at September 30 its cash balance was the equivalent of $177.7 million.
About 80% of that cash was held in US dollar-denominated accounts with major New Zealand-based banks. This summer's drilling would be funded from those US dollar holdings.
