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 low-cost high-reward exploration and production opportunities 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.
The Company’s near-term objective is to increase production and cash flow while reducing exploration expenses. To achieve this objective, NZEC is focused on production and exploration opportunities on its newly acquired petroleum mining licenses. In October 2013 the Company completed an acquisition of assets from Origin Energy that included three new petroleum licenses that are central to a network of oil and gas gathering pipelines and the full-cycle Waihapa Production Station. The Tariki, Waihapa and Ngaere petroleum licenses (collectively the "TWN Licenses") have a history of production, with 27 wells drilled by previous operators and more than 23 million barrels of oil produced historically from the Tikorangi formation. NZEC's review of seismic and well log data, which was corroborated independently by Deloitte LLP, identified remaining oil reserves that could be accessed from existing wells. Immediately upon closing the acquisition, NZEC commenced the work required to reactivate oil production in six wells using an existing gas lift system. NZEC is also 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.
Next steps on the TWN Licenses include installing high volume pumps on producing wells to increase daily production, and re-entering a number of existing wells to recomplete in the shallower Mt. Messenger formation. 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. The Company also plans to drill a Mt. Messenger well on the Alton Permit in 2014, and hopes to drill new Tikorangi and Mt. Messenger targets on the TWN Licenses in 2014, prioritizing targets that can be accessed from existing drill pads with surface infrastructure. NZEC's ability to drill new wells is contingent on its financial capacity. The Company focused on increasing production and cash flow, and is considering a number of options to increase its financial capacity.
On the East Coast Basin, NZEC is actively looking for a strategic partner to share in exploration and development of the unconventional shales. The Company hopes to drill its first East Coast exploration well in 2014. NZEC forms strategic partnerships to advance its permits as appropriate, and has partnered with L&M Energy to advance the TWN Licenses (50/50) and Alton Permit (65/35), with New Zealand Oil & Gas to advance the Manaia Permit (60/40) and with Westech Energy New Zealand to advance the Wairoa Permit (80/20).
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.