New Zealand Oil & Gas Reports $7.9 Million Profit

New Zealand Oil & Gas Limited generated a net surplus of $7.9 million for the year ended June 30, 2004. Cash sales of two permit interests for $17.5 million, contributed $13.3 million to the result. Exploration costs of $3.8 million were written off.

Ngatoro field revenue in the 8 month period to disposal last February, was $1.1 million ($4.3 m in the prior full year).

Some exploration well costs (Tuihu and Pukeko) were charged against profits - the Pukeko-1 well drilled in May 2004 encountered extensive oil shows, however the reservoir quality was not of sufficient quality to be commercial. Costs of the Amokura oil discovery well were capitalised.

The company is now focussing on development of the Kupe gas/oil field and the Pike River coking coal mine as substantial sources of revenue. NZOG holds 15% of Kupe, which is being progressed to a formal development decision in June 2005. Since June 30, 2004 the Pateke well also intersected oil in the Kapuni F Sand approximately 4 kilometers from Amokura and a third well, Kiwi-1, is under way.

The size of the Pateke-Amokura and associated discoveries will be determined once post-drill studies have been completed. At this stage, NZOG considers the outlook is favourable for the fields to be developed, with a target of first oil production within 24 months.