NZEC’s corporate strategy is to grow both the Company and shareholder value through the exploration, development and production of oil and natural gas resources in New Zealand. The Company has a two-prong exploration strategy with both conventional and unconventional opportunities. Near term the Company is focused on lower-risk exploration and production targets in the Taranaki Basin while advancing its technical understanding of the East Coast Basin oil shales. The Company is also paving the way for long-term growth by expanding its land package to bring new exploration opportunities, acquiring midstream infrastructure, and recruiting industry professionals to ensure the Company has the expertise to achieve its exploration and growth objectives.
NZEC achieved its objective of commencing commercial production by year-end 2011 at its Copper Moki-1 discovery well, and replicated that success with four more oil discoveries in 2012. Copper Moki-2 achieved continuous production in April 2012 followed by Copper Moki-3 in July 2012, with Waitapu-2 achieving production in November 2012 from a second site. The wells are producing light, high-quality 40 API oil from the Mt. Messenger formation, which is trucked just 45km to New Plymouth and sold at Brent pricing. In April 2013 the Company made a new Mt. Messenger oil discovery from a third site in its Arakamu-2 well, and intends to install artificial lift and advance that discovery to production in Q3-2013. In addition, NZEC's Wairere-1A will be completed and tested in Q3.
NZEC has also made an oil discovery in the shallower Urenui formation in its Copper Moki-4 well. The Urenui formation produces 29 API oil with a higher pour point temperature than Mt. Messenger oil. Copper Moki-4 is currently shut-in while the Company completes the economic and artificial lift analyses required to make a production decision for the well.
The Company’s near-term objective is to increase production and cash flow while reducing exploration expenses. To achieve this objective, NZEC is delaying the remaining two wells in its Eltham/Alton drill program to focus on commercial opportunities in the pending acquisition of assets from Origin Energy Resources NZ (TAWN) Limited (“Origin”). While this decision in no way diminishes the Company’s view of the prospectivity of the Eltham and Alton permits, NZEC intends to focus in the near-term on lower-cost opportunities that are close to infrastructure. The acquisition from Origin includes new petroleum licenses that are central to a network of oil and gas gathering pipelines and the full-cycle Waihapa Production Station. The Company is working diligently to conclude this complex transaction and expects closing to occur in Q2-2013. Upon closing, NZEC plans to reactivate six wells in the Tikorangi formation using an established gas lift system, and has also determined that six previously drilled wells on the petroleum licenses have uphole completion potential. Recompletion of these wells would be significantly less expensive and faster than drilling new wells, and successful discoveries could be quickly tied in to the Waihapa Production Station using existing oil and gas gathering pipelines. Both the reactivations and uphole completions could bring near-term, low-cost production and cash flow to the Company.
NZEC’s technical team has also identified five high-priority Mt. Messenger targets in the southwest corner of the petroleum licenses. NZEC has completed permitting for a new site called Waipapa (Oru Rd) and will shortly begin construction of the drill pad to ensure that the Company can move quickly to access these targets once the acquisition has closed. Longer-term exploration plans on the petroleum licenses include accessing Mt. Messenger targets from existing drill pads, many of which have gathering pipelines in place, that offer lower-cost exploration potential and can be tied-in to the Waihapa Production Station on an expedited basis. NZEC is advancing a number of new commercial opportunities to use the Waihapa Production Station to its full potential and maximize facility revenues, while ensuring that NZEC’s gas and associated natural gas liquids production can be efficiently delivered to market.
Mutually beneficial relationships form the cornerstone of NZEC's strategy for successful resource development. The Company is committed to open dialogue and engagement with its community partners, and hires locally as much as possible. In February 2012, NZEC entered into a cooperation agreement with Te Runanga o Ngati Ruanui, the iwi tribe located in South Taranaki. Under the terms of the agreement, TRoNRT will support NZEC's exploration, development and production activities within the Ngati Ruanui area and NZEC will contribute to positive cultural, economic and social outcomes for the development of Ngati Ruanui and its communities.