Australia's Cue Energy Resources Ltd. announced Friday that company Chairman Andrew Knox wrote the following letter to shareholders.
"With the recent sharp decline in the price of oil and the emergence of New Zealand Oil and Gas Limited (NZOG) as a substantial shareholder of Cue, your Board considered it appropriate to update you on the implications of both events for Cue.
In late December 2014, NZOG announced that it had purchased 19.99 percent of Cue’s issued capital by way of an off market purchase of a block of shares held by Todd. We have welcomed NZOG onto the register as a significant shareholder.
I have met with the Chairman of NZOG and, while I believe that NZOG sees the current share price as considerably undervaluing Cue, I remain unclear as to NZOG’s future intentions with respect to the Company.
Cue sells most of its crude oil production at a price tied to the price of Brent crude oil – one of the world’s key oil price benchmarks. Since early September 2014 the price of Brent crude has declined from approximately $100 a barrel to the current price of less than $50 a barrel – a decline of more than 50 percent in the space of about 5 months.
However, in the quarter to Dec. 31, 2014, approximately 70 percent of Cue’s revenue and production on a barrel of oil equivalent basis was derived from gas. Gas production from the Oyong and Wortel fields in Indonesia is priced in U.S. dollars and is insulated from oil price movement as it is not indexed to the price of oil.
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