New Zealand Oil & Gas is holding back cash to strengthen its war chest, ahead of a possible $US100 million investment.
The exploration company lost $75.9 million in the year to the end of June, significantly more than the $3.9 million it lost a year earlier, due to a $99 million writedown of its investment in Pike River Coal.
Normalised profit was $30.6 million, more than double what it reported a year earlier.
As well as the producing Kupe and Tui fields in New Zealand, the company has been expanding its exploration horizons to Indonesia and Tunisia.
Chief executive David Salisbury says the company could make a significant new investment in the next six months and discussions are relatively advanced.
Mr Salisbury says the deal is outside New Zealand, that he is quite optimistic about it and that the total investment would be about $US100 million which reflects the capital intensive nature of the industry.
New Zealand Oil & Gas had net cash reserves of about $86 million at the end of the financial year, and Mr Salisbury says given the size of the potential new acquisition, the company's decided it's better to hold that back than return it to shareholders.
He says over the last few years the company has had the experience of seeking debt funding whilst trying to pursue new deals, but it's been extraordinarily difficult in the financial markets.
Mr Salisbury says also given the current state of the equity markets there is a low level of confidence in the ability of anyone to raise new equity to fund the growth.
Mr Salisbury says there's been some encouraging technical work from its Kaupokonui prospect in offshore Taranaki, which has just been renamed Kakapo.
Mr Salisbury says the company's trying to secure a rig from overseas so an exploratory well, worth about $US15 million, can be drilled this summer.
He says Kakapo could be a relatively large source of oil, potentially containing more than 200 million barrels.