New Zealand Energy tumbled after announcing it does not expect to achieve its 3,000 boe/d target by the end of Q1/13.
Given its current production rate of 335 bbls/d and limited funds, the company has decided not to pursue higher-risk, higher-reward opportunities, opting instead to focus on its pending Origin asset blocks. While the Origin assets have numerous uphole completion opportunities, which will cost significantly less than regular exploration locations, Canaccord Oil & Gas Analyst Christopher Brown has concerns surrounding the company’s ability to fund the Origin acquisition, which is now projected to close in Q2/13.
The company’s working capital position, including a $5 million deposit relating to the transaction, is currently only $16.8 million. The Origin transaction will cost an additional $37 million and the company has stated it will seek alternatives for financing in 2013. On its pending Origin (TAWN) assets, the company has six wells it can move onto in Q2/Q3 which have recompletion opportunities in the upper sections of the wells. Brown estimates that recompletions would cost roughly $500,000-600,000/well, for a total capital cost of $3.0-3.6 million. Brown notes these
recompletions could potentially impact production immediately as there is infrastructure in place.
Next catalysts: i) Arakamu – NZ perforated and flow tested two zones in the Arakamu-1A well in the Moki formation, but was unable to demonstrate
recoverable hydrocarbons and has suspended the well, and ii) Wairere – NZ has cased the Wairere-1A well and will complete the well once completion activities are finished at the Arakamu-2 well.
–(Marketwire -May 31, 2012) -New Zealand Energy Corp. (TSX VENTURE:NZ)(OTCQX:NZERF) (“NZEC” or the “Company”) is pleased to announce that it has entered into a binding agreement (the “Origin Agreement”) withOrigin Energy Resources NZ (TAWN) Limited, a wholly-owned subsidiary ofOrigin Energy Limited (ASX:ORG) (collectively “Origin”) to acquire upstream and midstream assets (the “Acquisition”). These assets include four Petroleum Mining Licenses totaling 26,907 acres in the mainTaranaki Basin production fairway (the “Petroleum Licenses”) as well as theWaihapa Production Stationand associated gathering and sales infrastructure.
NZEC is also pleased to announce new oil discoveries in its Copper Moki-3 (“CM-3”) and Copper Moki-4 (“CM-4”) wells, with the expectation of initiating continuous production from CM-3 toward the end of Q2-2012. Continuous production from the Copper Moki-1 well (“CM-1”) along with the 16-day flow test from the Copper Moki-2 well (“CM-2”) generated positive cash flow of$4.5 millionduring Q1-2012 based on a realized netback averaging approximatelyUS$90per barrel of oil sold.
Four Petroleum Licenses in key production fairway provide significant exploration and production potential
Petroleum Licenses are permitted until 2016 and renewable without relinquishment thereafter
93 km2 of 3D seismic data with coverage over approximately 50% of the Petroleum Licenses and 585 km of 2D seismic data
Well log data from 27 wells, a number of which demonstrate multi-zone potential in NZEC’s target formations: Urenui, Mt. Messenger, Moki and Kapuni
16 established drill pads, most with existing oil and gas production infrastructure
Uphole completion opportunities in existing wells for Urenui, Mt. Messenger and Moki formations
Significant expansion to NZEC’s drilling inventory
Waihapa Production Stationprovides full spectrum midstream processing
Provides direct access to markets for NZEC production through oil and gas sales pipelines
Gathering capacity in place to service NZEC’s oil and gas production
Includes facilities for gas processing, liquefied petroleum gas (“LPG”) recovery, oil processing and water disposal with associated gathering and oil and gas sales pipelines
NZEC will own the only open-access midstream production facility in theTaranaki Basin, providing cash flow potential through agreements with third-party producers
Copper Moki Oil Discoveries
CM-3 confirms third consecutive Mt. Messenger discovery, yielding 510 barrels of oil per day (“bbl/d”) and 320 thousand cubic feet of natural gas per day1 (“mcf/d”)
CM-3 confirmed reservoir potential in the Moki formation
CM-4 oil discovery in the Urenui formation, production test underway
1 Natural gas and associated natural gas liquids are currently being flared until the Company completes a pipeline to theWaihapa Production Station, with the pipeline on schedule for tie-in by the end of Q2-2012.
First Quarter Financial Results
54,677 bbl produced and 49,486 bbl sold, representing a 170% and 172% increase over Q4-2011, respectively
Generated positive cash flow of$4.5 millionfrom production, resulting from netbacks of approximatelyUS$90/bbl
Reduced production costs by approximately 5% to$22.25/bbl from$23.44/bbl in Q4-2011
Closed a$63.5 millionbought deal financing inMarch 2012in which 21.2 million shares were issued at$3.00per share
Strong balance sheet with$70.4 millionof working capital as atMarch 31, 2012
“With 170,649 acres of Petroleum Exploration Permits and 26,907 acres of Petroleum Licenses, NZEC will control a significant portion of the exploration fairway in theTaranaki Basin,” saidBruce McIntyre, President and Director of NZEC. “We believe that the Petroleum Licenses are highly prospective across multiple formations, offering exploration, uphole completion and production potential from existing wells and the ability to rapidly drill new wells. Along with the prospects on our existing permits, NZEC’s technical team has identified a number of Urenui, Mt. Messenger and Moki leads on the Petroleum Licenses, significantly increasing NZEC’s drilling inventory in theTaranaki Basin.”
“These acquisitions increase NZEC’s presence inNew Zealandfrom both an exploration and infrastructure perspective,” said John Proust, Chief Executive Officer and Director of NZEC. “Controlling a central oil and gas production facility in theTaranaki Basinprovides NZEC with the strategic opportunity and capacity to independently process production, at reduced operating costs, as well as generate cash flow through third-party processing agreements. This transaction is consistent with NZEC’s business strategy of adding value for shareholders through acquisition and development.”
The purchase price for the Acquisition comprisesCDN$42 millionin cash (plus adjustments) and a 5% gross overriding royalty on the Petroleum Licenses, payable to Origin. The Company will be using funds previously allocated for acquisitions, working capital on hand and cash flow from production to complete the Acquisition. With a current cash position of$61 million, post-acquisition NZEC will remain fully funded to complete its previously announced 2012 capital program and reiterates its forecasted exit rate of 3,000 barrels of oil equivalent per day (“boe/d”).
Closing of the Acquisition is targeted forOctober 2012and contingent on receiving government approvals, Origin completing the current recommissioning of the TAWN LPG extraction facility, Origin and/or NZEC entering into an agreement withContact Energy(“Contact”) regarding the use and development of Origin’s Ahuroa gas storage facility, and standard TSX Venture Exchange approvals.
NOTE : This is part of the release – see the company website for the full release . Four analysts have a ” buy ” recommendation on the stock.
New Zealand Energy Announces 2011 Year-End and Fourth Quarter Results and 2011 Year-End Reserves Estimate
---------------------------------------------------------------------------- For the year ended For the year ended December 31, 2011 December 31, 2010 $ $ ---------------------------------------------------------------------------- Production 11,623 bbl Nil Sales 9,567 bbl Nil ---------------------------------------------------------------------------- Price 106.83 $/bbl Nil Production costs 23.44 $/bbl Nil Royalties 4.96 $/bbl Nil Net revenue 78.43 $/bbl Nil ---------------------------------------------------------------------------- Revenue $ 974,517 $ Nil Total comprehensive loss (6,655,829) (10,338,136) Interest income 119,583 Nil Loss per share - basic and diluted (0.08) (0.24) Current assets 19,293,345 6,229,650 Total assets 31,152,804 6,301,322 Total liabilities 1,383,376 371,958 Shareholders' equity $ 29,769,428 $ 5,929,364 ----------------------------------------------------------------------------
OnApril 24, 2012, NZEC entered into a drilling agreement withEnsign International Energy Services Pty Ltd(“Ensign”) pursuant to which Ensign has committed to drill three exploration wells for NZEC, with the option for up to five additional wells, in the second half of 2012.
OnApril 1, 2012, NZEC commenced continuous production from its Copper Moki-2 well. Copper Moki-2 flowed 14,825 barrels of oil and 15,352 thousand cubic feet (“Mcf”) of natural gas(1) during a 16-day flow test in February and was subsequently shut-in for pressure build-up before commencing production in April. The well is currently producing from natural reservoir pressure out of the Mt. Messenger formation at an average rate of 581 barrels of oil per day (“bbl/d”) and 1,530 Mcf of natural gas(1) per day (“Mcf/d”) through a 24/64th inch choke.
NZEC has drilled five exploration wells in theTaranaki Basin, one on the Alton Permit and four from the Copper Moki pad on the Eltham Permit. Copper Moki-1 and Copper Moki-2 are currently in production. Copper Moki-3 and Copper Moki-4 will be completed and tested in Q2-2012.
NZEC’s Copper Moki-1 well has been flowing from natural reservoir pressure sinceDecember 10, 2011and has produced more than 67,000 barrels of oil since it was first tested inAugust 2011. Production rates have averaged 424 bbl/d and 1,058 Mcf/d(1) since commencing continuous production inDecember 2011. Over the last 30 production days, Copper Moki-1 has produced at an average rate of 309 bbl/d and 1,205 Mcf/d(1) through a 24/64th inch choke.
Copper Moki-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 Copper Moki-2 onApril 1, 2012. The well is currently producing from natural reservoir pressure out of the Mt. Messenger formation at an average rate of 581 bbl/d and 1,530 Mcf/d(1) through a 24/64th inch choke.
Natural gas and associated natural gas liquids are being flared until the Corporation completes a 2.6-km pipeline and associated production and sales agreements, with the pipeline scheduled for completion by the end of Q2-2012.
Copper Moki-3 reached target depth at 3,167 metres in mid-March and is the Corporation’s first well drilled through to NZEC’s deeper exploration target, the Moki formation. After evaluation, the Corporation identified 12 metres of net pay within the Mt. Messenger formation and 15 metres of net pay within the Moki formation. NZEC brought a service rig to site and commenced completion of Copper Moki-3 onApril 25, 2012.
Copper Moki-4 reached target depth of 2,125 metres onApril 10, 2012. After evaluation, the Corporation has decided to perforate and test both the Urenui and Mt. Messenger formations, and will commence completion activities after perforating the Moki formation in Copper Moki-3.
East Coast Basin
The East Coast BasinofNew Zealand’sNorth Islandhosts two highly prospective shale formations, the Waipawa and Whangai, which are the source of more than 300 oil and gas seeps. Within theEast Coast Basin, the following PEPs have been, or are in the process of being, acquired:
NZEC will complete and test Copper Moki-4 once the service rig has finished completion operations with respect to the Moki formation of Copper Moki-3. If successful, both wells will be tied into the existing production facilities at the Copper Moki pad.
NZEC will shortly begin construction of an approximately 2.6-km natural gas pipeline that will deliver natural gas from the Copper Moki site to a gas production facility. The pipeline is targeted for completion at the end of Q2-2012. NZEC is currently producing approximately 2,630 Mcf/d(1) of natural gas.
NZEC has identified six prospects on 3D seismic similar to Copper Moki, with the expectation of establishing one pad per prospect with two to four wells per pad. NZEC has also identified 12 leads on 2D seismic that will be further defined with the ongoing 3D seismic survey.
With a fully-funded treasury, NZEC is evaluating opportunities to accelerate its exploration program, including drilling additional wells which may target the deeper Tikorangi and Kapuni formations. While previous guidance was for six wells in theTaranaki Basin, NZEC has entered into a rig contract to drill up to eight wells in the second half of 2012. NZEC also has the ability to move quickly should the team identify a strategic acquisition, partnership or farm-in opportunity.
NZEC is completing a 100-km2 3D seismic program over the northern region of the Eltham andAltonpermits. Preparation for the seismic survey is nearly complete and NZEC intends to initiate the 30-day data acquisition process in early May. Following data acquisition, NZEC’s technical team will take approximately four months to process and interpret the data and integrate the information into its technical database. The 3D seismic survey will further define existing targets and reduce drilling risk while potentially identifying new exploration targets and expanding NZEC’s inventory locations for its 2013 exploration program.
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
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
The stock has dropped as the company tests the drill results – why ?? Dunno.
The company has posted a new presentation to its website. From the presentation, we learn that net proceeds of the offering will be used for:
i) Eltham Permit (100% owned) – $26 million – six wells drilled and cased, three wells completed, Provision for two additional production facilities and gas conservation;
ii) Alton Permit (65% owned) – ~$6.1 million – 3D seismic survey, two wells drilled and cased;
iii) Ranui Permit (100% owned) – $1.25 million – Technical and geological studies, including 2D seismic;
iv) Castlepoint Permit (100% owned) – $6.1 million – Technical and geological studies, including 2D seismic, 1 exploration well drilled, and
v) balance going to working capital. Prior to the closing of the equity offering,
NZ provided an update on its Copper
Moki-3 (CM-3) well. CM-3 was drilled through the Urenui and Mt. Messenger formations to the deeper Moki formation, with a measured depth of 3,167 metres and true vertical depth of 2,633 metres. NZ ran open hole logs and has completed casing to total depth. The company will be testing both the Moki and Mt. Messenger formations. NZ will perforate and test the Moki formation first and determine next steps for the well based on those results. Following perforation of CM-3 the rig will be repositioned on the same drill pad to spud CM-4, which will target the Urenui and Mt. Messenger formations.
NZ’s 2012 production exit rate guidance is currently 3,000 boe/d.
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