Macquarie Research Update: Resignation of David Salisbury - CEO and MD
It is inappropriate to single out the CEO, as distinct from the NZOG Board of Directors, and attempt to crucify him in this forum. If concerns about Pike are an underlying issue for members of this forum, the simple question that may provide some direction regarding the burden of responsibility is: who were the NZOG representatives on the Pike River Board of Directors.
It simply doesn't help anyone, and adds nothing to a greater understanding of NZOG, and the wider issues facing NZOG, to wrongfully accuse people of matters for which they are either not responsible, or based on known information, it is not reasonable form the conclusions that have led to the accusations made in this forum.
My experience and involvement with NZOG over many years strongly suggests that NZOG is held in far higher regard than it was when Tony Radford was CEO/MD, with Gordon Ward as GM. I am sure that those well acquainted with NZOG have cause to thank David for installing a professional culture and professional processes within NZOG, and for perhaps interrogating and challenging some of the thoughts, decisions, and actions of the NZOG Board of Directors over recent years.
I think that it is highly commendable that David has given 6 months notice. A lot can happen in that time, and it shows whose interests David has at heart.
Attached is Mcquarie Equities current view of NZOG.
Macquarie Equities Research
Event
David Salisbury, CEO and MD of NZO, has resigned for personal reasons. His last day will be the 29 December 2011.
Impact
Highly regarded CEO will be a loss: Mr Salisbury was highly regarded in the industry and has led NZO through the most traumatic period of its existence. Following the success of the Tui field he has dealt with the GFC, extreme oil price movements and the Pike River Coal disaster. He has guided the business with care and conservatism, avoiding too many expensive mis-steps. The recent acquisition of acreage in Tunisia could herald the start of a successful secondary exploration opportunity for the company. Mr Salisbury has left for personal reasons and a desire to spend time with family before looking at other opportunities.
Hand over period looks good: Given the six month notice period we see limited risk to NZO in the short term. The business has good opportunities and is well capitalised, which should prove attractive to an incoming CEO. With no drilling planned over the next 6 months and plenty of projects to progress over the period (Kaupokonui, Tunisia, PRC) NZO will continue to move forward.
Pike River Coal still important: NZO has retained $45.6m of PRC debt on its balance sheet, worth 11.5cps. We do not include any value for PRC in our $1.21 target price, but consider there is potentially significant upside from the mine sale process, which is currently underway. Further information may be forthcoming in the next few months.
Action and recommendation
We remain comfortable with our Outperform recommendation and $1.21 target price for NZO. ·