The stock price rebounded this morning with the news release :
an operational update on production and exploration activities on its 100%-owned Eltham Permit in theTaranaki Basin ofNew Zealand’sNorth Island.
-- Current production is 1,000 barrels of oil per day ("bbl/d") from the Mt. Messenger formation, with an additional 341 barrels of oil equivalent per day ("boe/d") of natural gas plus associated liquids to be tied in by the end of Q2-2012(1) -- Management reiterates guidance of 3,000 boe/d production by year end -- Copper Moki-1 well ("CM-1") has produced more than 62,000 barrels of oil to date -- Copper Moki-2 well ("CM-2") is currently producing approx. 700 bbl/d and approx. 850 thousand cubic feet of natural gas per day ("mcf/d")(1) -- Copper Moki-3 well ("CM-3") encountered 12 metres of net pay in the Mt. Messenger formation and 15 metres of net pay in the Moki formation; NZEC plans to complete and flow test both formations -- Copper Moki-4 ("CM-4") has been drilled to target depth of 2,125 metres -- 100 km2 3D seismic survey underway across the Eltham and Alton permits
Copper Moki Production Update
CM-1 has been flowing from natural reservoir pressure sinceDecember 10, 2011and has produced more than 62,000 barrels of oil since it was first tested inAugust 2011. Production rates have averaged 452 bbl/d and 1,052 mcf/d(1) since commencing continuous production inDecember 2011. Over the last 30 days, CM-1 has produced at an average rate of 377 bbl/d and 1,410 mcf/d(1) through a 24/64th inch choke.
CM-2 flowed 14,825 barrels of oil and 15,352 mcf of natural gas(1) during a 16-day flow test in February and was subsequently shut-in for pressure build-up. NZEC initiated continuous production from CM-2 onApril 1, 2012. The well is currently producing from natural reservoir pressure out of the Mt. Messenger formation at an average rate of 700 bbl/d and 850 mcf/d(1) through a 22/64th inch choke. The CM-2 well encountered 12 metres of net pay in the Mt. Messenger formation, which is comparable to CM-1.
Current Companyproduction is approx. 1,000 bbl/d and approx. 2,050 mcf/d(1), exclusively from CM-1 and CM-2. The wells are producing 41.8 degrees oil that is trucked to the Shell-operated Omata tank farm and sold at Brent pricing, resulting in a field netback of approx.US$90/barrel. Natural gas and associated natural gas liquids are currently being flared until the Company completes a 2.6-km pipeline and associated production and sales agreements, with the pipeline scheduled for completion by the end of Q2-2012. NZEC has chosen to choke back its production wells to conserve the value of its natural gas and associated natural gas liquids.
(1) Natural gas and associated natural gas liquids are currently being flared until the Company completes a 2.6-km pipeline and associated production and sales agreements, with the pipeline scheduled for completion by the end of Q2-2012.
CM-3 reached target depth at 3,167 metres in mid-March and is the Company’s first well drilled through to NZEC’s deeper exploration target, the Moki formation. After evaluation, the Company identified 12 metres of net pay within the Mt. Messenger formation and 15 metres of net pay within the Moki formation.
NZEC commenced drilling CM-4 onMarch 28, 2012from the Copper Moki pad, targeting both the Urenui and Mt. Messenger formations. NZEC reached target depth of 2,125 metres onApril 10, 2012, and is currently evaluating open hole logs.
The Company elected not to evaluate CM-3 with the drilling rig in order to exercise the option under the rig contract to drill CM-4 within the allotted period of time. A service rig is available and is expected to commence completion of CM-3 within the next two weeks, once the drill rig on CM-4 is removed. Since CM-3 is NZEC’s first well to be drilled to the Moki formation, the Company plans to thoroughly evaluate the characteristics of the formation in order to guide its exploration strategy for future Moki targets. Upon perforation, NZEC’s technical team will determine if the formation flows naturally. If further stimulation is required, additional time will be needed to allow for a comprehensive evaluation of the Moki formation. Once the Moki formation is fully evaluated the Company will determine whether the Mt. Messenger formation will be tested in CM-3 or evaluated through an additional well.
NZEC reiterates corporate production guidance of 3,000 boe/d by year-end 2012.
The Company had previously allocated funds to drill six Mt. Messenger exploration wells in theTaranaki Basinin the second half of 2012. NZEC will provide additional details regarding its 2012 capital program for both theTaranaki Basinand theEast Coast Basin, including plans to accelerate its exploration activities, with the release of the Company’s Q4-2011 financial statements at the end of April.
The Taranaki Basinoffers multi-zone potential and NZEC’s exploration strategy is to prioritize wells identified on 3D seismic that have well-defined, lower-risk Mt. Messenger targets coupled with additional exploration potential from the Urenui, Moki or Kapuni formations. The Company is completing a 100-km2 3D seismic survey toward the north end of its Taranaki permits that will further define existing targets and reduce drilling risk while potentially identifying new exploration targets and expanding NZEC’s inventory of drill-ready locations.
The Taranaki Basinis currentlyNew Zealand’sonly oil and gas producing basin, producing approximately 130,000 boe/d from 18 fields. Within theTaranaki Basin, NZEC holds and is the operator of two permits covering 169,949 net acres(2). The permits are on trend with numerous oil and gas producing fields, some of which have been producing for decades, including the Kapuni gas field producing from the deeper Kapuni formation, the Waihapa/Ngaere oil field producing from the Kapuni and Tikorangi formations, and the Cheal oil field producing from the Urenui and Mt. Messenger formations.
AND from another Board :
I called John Proust (CEO) today. Here’s what he had to say:
1) The contract for the next drilling rig was being finalized today
2) NZE has applied for permits for six more drilling pads (up to 24 wells)
3) Pipe and other necessary materials for the next wells are ordered
4) Substantial flow from the Moki Formation up the CM-3 well would be a “game changer for the Company”, as currently there are no reserves figured for this formation, and, there is a huge amount of Moki Formation under NZE permitted land
5) NZE has high hopes for the Kapuni Formation. John said that NZE has a larger Kapuni formation than Shell Oil. He said the Shell Kapuni has mostly gas, he said we’ll have to wait and see what’s in the NZE Kapuni. Slide 15 of this presentation shows the formation leads on NZE’s Taranaki permits:http://www.newzealandenergy.com/Theme/NewZealandEnergy/files/doc_presentations/NZECPresentation-April2012.pdf
6) I asked if NZE was working towards increasing their WI in the Alton permit. He said he “prefers to have a 100% WI in all of NZE’s permits”. He said that partner L&M is a small company which is backed by an affluent individual.
7) The end of April update will contain a lot of information