New Zealand Energy Corp. ("NZEC" or the "Company") (TSX-V:NZ, OTCQX:NZERF) today provided an update on the Company's exploration and production activities in the Taranaki Basin of New Zealand's North Island.
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Message from the Chief Executive Officer
I would like to take the opportunity to update our shareholders on NZEC's current exploration, production and acquisition activities, successes and challenges to date, and plans for the coming year.
NZEC has drilled ten wells on its Eltham Permit in the Taranaki Basin, with five oil discoveries and results pending from two Mt. Messenger wells. NZEC is currently producing approximately 335 barrels of oil per day ("bbl/d"). While pending wells could result in additional production and cash flow, the Company's assessment is that flow rates from the new wells will not be adequate to achieve anticipated targets and NZEC's previous production guidance is therefore withdrawn.
NZEC's current net working capital position (including deposits) is estimated at CAD$16.8 million (unaudited). Ongoing overhead, operations and acquisitions may be funded by a combination of cash flow generated through production, credit facilities, joint ventures, commercial arrangements or other financing alternatives.
The Company's objective is to increase near-term 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.
Commercial oil discoveries on NZEC's properties and those of its peers have confirmed the prospectivity of the Mt. Messenger formation, which remains NZEC's primary exploration target in the near term. Mt. Messenger leads continue to be refined as the Company interprets its new Rotokare 3D seismic survey (100 km2 across the Eltham and Alton permits) and 3D seismic surveys on the petroleum licenses. NZEC's technical team has also identified a number of leads in the deeper Moki, Tikorangi and Kapuni formations. Discoveries by other companies have demonstrated significant flow rates and long-term production from reservoirs in these deeper formations. NZEC will continue to advance these leads to drillable targets and will move these targets higher on the Company's priority list as warranted.
In just two short years NZEC has established the foundation to build a significant oil and gas company. NZEC holds the largest onshore exploration land package on New Zealand's north island, with conventional opportunities in the country's main Taranaki Basin production fairway and both conventional and unconventional potential in the untapped East Coast "new frontier" of New Zealand's oil shales. The Company has forged strong relationships with local communities and its iwi partners. NZEC's reputation as a company committed to social and environmental responsibility will be integral to its success as the Company expands exploration activities into new communities. This reputation also helped recruit an experienced team with both New Zealand and Western Canadian sedimentary basins expertise, and NZEC continues to engage industry experts to ensure the capacity and expertise to support the Company's exploration activities and growth plans.
To secure its plans for long-term growth, NZEC has entered into strategic acquisitions and partnerships with New Zealand Oil & Gas, Westech Energy New Zealand, L&M Energy and Origin that have brought new exploration opportunities in both the East Coast and Taranaki basins and an agreement to acquire a full- cycle production facility. NZEC has proved its geological model with oil discoveries at three different sites and is producing high-quality light oil that sells at Brent pricing.
The Company's near-term plans are focused on growing production and cash flow in the Taranaki Basin, with exploration in the East Coast Basin providing additional long-term opportunities to NZEC's shareholders. Although the oil shale formations have yet to be proven with an exploration well, the considerable hydrocarbon potential and scale of the East Coast will be tested this year. Six exploration wells are planned for 2013, of which two will be drilled by NZEC (Ranui and Castlepoint). NZEC holds the largest exploration portfolio in the East Coast Basin, with more than two million acres (including permits pending) from which to explore and unlock the potential of these substantial oil shale formations.
NZEC believes the assets that the Company plans to acquire from Origin bring multiple opportunities to grow near-term oil and gas production and cash flow, with longer-term upside from the Company's substantial exploration portfolio. With a backdrop of decreasing netbacks for North American oil companies, NZEC's ability to sell its oil at Brent pricing should continue to differentiate the Company from its peers. Indeed, exploring and operating in New Zealand brings a number of competitive advantages to NZEC, with New Zealand's favourable royalty and tax structure, a proactive government approach to oil and gas development, a proven hydrocarbon system with multi-zone potential and established infrastructure with in-country demand for both oil and natural gas production. I look forward to sharing the Company's successes with our shareholders and community partners as our exploration and development plans unfold in 2013.
Total oil production from three wells on the Copper Moki site and one well on the Waitapu site has averaged approximately 335 bbl/d over the last two weeks. NZEC's technical and engineering teams continue to investigate options to enhance recovery and performance of the existing wells.
NZEC 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. The Moki sands were well developed with good porosity, and hydrocarbon shows on logs indicate that oil and gas had migrated through the sands, but the well did not encounter an oil reservoir. The Moki formation has yielded significant production offshore but has been only lightly tested in the onshore Taranaki Basin. NZEC will continue to refine Moki leads identified on 3D seismic and intends to drill additional Moki wells as part of its longer-term exploration programs.
Workover activities at the Arakamu-2 well are still underway. Well logs and fluid tests indicate that mobile volumes of oil and gas are present, and NZEC is working around the clock to advance this well to the testing phase.
NZEC has cased the Wairere-1A well and will complete the well once completion activities are finished at the Arakamu-2 well. The Wairere-1 well was drilled to target depth in the Mt. Messenger formation but did not encounter hydrocarbon-bearing sands. NZEC immediately sidetracked the well to a second target (Wairere-1A) and intersected sands in the Mt. Messenger formation with elevated hydrocarbon indications that will be tested with completion activities.
On behalf of the Board of Directors
John Proust, Chief Executive Officer and Director
About New Zealand Energy Corp.
NZEC is an oil and natural gas company engaged in the production, development and exploration of petroleum and natural gas assets in New Zealand. NZEC's property portfolio collectively covers approximately 2.27 million acres (including pending permits) of conventional and unconventional prospects in the Taranaki Basin and East Coast Basin of New Zealand's north island. The Company's management team has extensive experience exploring and developing oil and natural gas fields in New Zealand and Canada, and takes a multi-disciplinary approach to value creation with a track record of successful discoveries. NZEC is listed on the TSX Venture Exchange under the symbol "NZ" and on the OTCQX International under the symbol "NZERF". More information is available at www.newzealandenergy.com or by emailing email@example.com.
This news release contains certain forward-looking information and forward-looking statements within the meaning of applicable securities legislation (collectively "forward-looking statements"). The use of any of the words "could result in", "plans to", "intends to", "could", "will not be", "objective", "bringing", "pending", "will", "expects", "plans", "would be", "could be", "could", "begin", "can be", "advancing", "will continue to advance", "will be", "upside", "should continue", "look forward", "unfold", "intends", "underway", "will commence" and similar expressions are intended to identify forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements, including without limitation, the speculative nature of exploration, appraisal and development of oil and natural gas properties; uncertainties associated with estimating oil and natural gas resources; uncertainties in both daily and long-term production rates and resulting cash flow; volatility in market prices for oil and natural gas; changes in the cost of operations, including costs of extracting and delivering oil and natural gas to market, that affect potential profitability of oil and natural gas exploration; the need to obtain various approvals before exploring and producing oil and natural gas resources; uncertainty regarding timing to close the acquisition of assets from Origin, or the Company's ability to close the transaction at all; the need to obtain additional consents and approval before exploring or developing the petroleum licenses; uncertainty in the timing of receipt of permits and the Company's ability to extend the permits if required; exploration hazards and risks inherent in oil and natural gas exploration; operating hazards and risks inherent in oil and natural gas operations; market conditions that prevent the Company from raising the funds necessary for exploration and development on acceptable terms or at all; global financial market events that cause significant volatility in commodity prices; unexpected costs or liabilities for environmental matters; competition for, among other things, capital, acquisitions of resources, skilled personnel, and access to equipment and services required for exploration, development and production; changes in exchange rates, laws of New Zealand or laws of Canada affecting foreign trade, taxation and investment; failure to realize the anticipated benefits of acquisitions; and other factors as disclosed in documents released by NZEC as part of its continuous disclosure obligations. Information concerning reserves may also be deemed to be forward looking as estimates imply that the reserves described can be profitably produced in the future.
NZEC believes the expectations reflected in those forward-looking statements are reasonable, but no assurance can be given that these expectations will prove to be correct. Such forward-looking statements included in this news release should not be unduly relied upon. These statements speak only as of the date of this news release and NZEC does not undertake to update any forward- looking statements that are contained in this news release, except in accordance with applicable securities laws.
Neither the TSX Venture Exchange nor its Regulation Services Provider (as such term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.