TSX-V: NZ     C$ 0.02 +0.00 +0% Volume: 5,000 August 20, 2019

News-and-Events
News & Events

New Zealand Energy Announces Third Quarter Results and Operational Update

November 28, 2014

November 28, 2014 – Vancouver, British Columbia – New Zealand Energy Corp. (“NZEC” or the “Company”) (TSX-V:NZ, OTCQX: NZERF) has released the results of its third quarter ended September 30, 2014. Details of the Company’s financial results are described in the Unaudited Consolidated Interim Financial Statements and Management’s Discussion and Analysis which, together with further details on the Company’s operational activities, are available on the Company’s website at www.newzealandenergy.com and on SEDAR at www.sedar.com. All amounts are in Canadian dollars unless otherwise stated.

HIGHLIGHTS

  • Continued improvement to netback, achieving $71.04 per barrel of oil (“bbl”) in Q3-2014, compared to $65.30/bbl in Q2-2014, $62.33/bbl in Q1-2014 and $58.90/bbl during the comparative three-month period in 2013
  • 18,689 bbl produced and 16,497 bbl sold during Q3-2014 (Q3-2013: 11,958 bbl and 14,648 bbl, respectively)
  • Oil sales recorded during nine-month period ended September 30, 2014 of $6,298,345 (2013: $6,872,180)
  • Generated approximately $2.3 million of third-party revenue year-to-date (net to NZEC) through 50% interest in the Waihapa Production Station (2013: $Nil)
  • Secured a NZ$5 million working capital facility from joint arrangement partner
  • Commenced work to advance Waihapa-2 jet pump installation, which is expected to be completed in the first week of December with production to resume soon after
  • Received an extension to November 22, 2015 for drilling a commitment well on the Alton Permit
  • Expiry date of 24,452,178 private placement warrants extended from October 28, 2014 to October 28, 2015
  • Vancouver Office to be closed and management agreement terminated effective December 31, 2014, as part of the Company’s ongoing effort to reduce operating overheads

FINANCIAL SNAPSHOT

    Nine months     Three months     Nine months     Three months  
    ended     ended     ended     ended  
    September 30,     September 30,     September 30,     September 30,  
    2014     2014     2013     2013  

Production

  57,436 bbl     18,689 bbl     60,694 bbl     11,958 bbl  

Sales

  54,517 bbl     16,497 bbl     63,852 bbl     14,648 bbl  

Price

  115.53 $/bbl     108.35 $/bbl     107.63 $/bbl     108.84 $/bbl  

Production costs

  38.96 $/bbl     27.83 $/bbl     62.08 $/bbl     44.80 $/bbl  

Royalties

  10.50 $/bbl     9.48 $/bbl     4.98 $/bbl     5.14 $/bbl  

Field netback

  66.08 $/bbl     71.04 $/bbl     40.57 $/bbl     58.90 $/bbl  

Revenue

$ 11,500,722   $ 2,104,561   $ 6,553,968   $ 1,519,010  

Pre-production recoveries

$ Nil   $ Nil   $ Nil   $ Nil  

Total comprehensive (loss) income

  ($13,704,362 )   ($8,540,759 )   ($3,339,589 ) $ 1,347,788  

Net finance expense

$ 224,275   $ 72,318   $ 66,794   $ 27,220  

Loss per share – basic and diluted

  ($0.08 )   ($0.01 )   ($0.06 )   ($0.02 )

Current assets

$ 5,682,843         $ 6,403,134        

Total assets

$ 98,459,282         $ 105,313,813        

Total long-term liabilities

$ 7,793,085         $ 11,094,916        

Total liabilities

$ 10,109,911         $ 12,749,253        

Shareholders' equity

$ 88,349,371         $ 92,564,560        
                         

Note: The abbreviation bbl means barrel or barrels of oil.

As at November 26, 2014, the Company had an estimated $1.3 million in working capital (excluding materials and supplies of approximately NZ$1.9 million).

RECENT DEVELOPMENTS

During the quarter ended September 30, 2014, the Company continued with further steps to right-size the organization and reduce overhead, including a deferral of 33% of the then CEO’s monthly cash compensation. The Company also secured a working capital facility (the “Facility”) with New Dawn Energy (“New Dawn”, the parent company of L&M) for up to NZ$5 million. The Company may draw down the Facility to fund its share of expenditures and equipment required to advance the TWN Licences and TWN Assets, and for other working capital purposes as agreed to by New Dawn. The Facility, to the extent drawn down, will bear interest at 12% per annum with a maturity date of March 31, 2015, or as extended by agreement. Interest is payable monthly, or may be capitalized with New Dawn’s consent, while NZEC may prepay all or part of the Facility at any point without penalty. NZEC’s obligations under the Facility are secured against the Company’s 50% interest in the TWN Limited Partnership, the legal owner of the TWN Assets, and the Company’s 50% interest in NZEC Ngaere Limited, the general partner of the TWN Limited Partnership. Security to the Facility does not extend to any of the Company’s oil and gas or exploration properties.

 

On November 24, 2014, the Company announced that in an effort to further reduce costs and rightsize the business, the Company will close its Vancouver, Canada office on December 31, 2014. The Company’s Board of Directors also resolved to terminate the management agreement between the Company and J. Proust and Associates, effective December 31, 2014. J. Proust and Associates has been providing a number of management services to NZEC, including accounting support and corporate secretary, investor relations and financial reporting and analysis services. All of these services will be absorbed by the Company’s New Zealand-based staff, or outsourced as required.

Also on November 24, the Company announced that David Robinson, previously CEO of the New Zealand Business, has assumed the position of CEO of NZEC with immediate effect. John Proust, founder, CEO and a director of the Company until November 23, 2014, will continue on the Board of Directors as a non-executive director.

During October 2014, the Company and L&M obtained an extension to November 22, 2015 for drilling of the Horoi commitment well on the Alton Permit.

PROPERTY REVIEW & OUTLOOK

Taranaki Basin

The Taranaki Basin is situated on the west coast of New Zealand’s North Island and is currently the country’s only oil and gas producing basin, with total production of approximately 130,000 barrels of oil equivalent per day (“boe/d”) from 18 fields. Within the Taranaki Basin, NZEC holds a 100% interest in the Copper Moki Permit, a 100% interest in the Eltham Permit, a 65% interest in the Alton Permit with L&M, and a 50% interest in the TWN Licenses and the TWN Assets with L&M. NZEC’s net Taranaki acreage totals 97,630 acres (395 km2), of which approximately 6,055 acres is offshore.

 

NZEC has advanced or reactivated 12 wells to production: four on the Copper Moki Permit and eight on the TWN Licenses. In early November 2014, however, the Company decided to permanently shut-in and plug the Toko-2B well on the TWN Licenses, giving the Company net 11 wells capable of producing oil. The Company is currently focused on optimizing production from existing wells. In addition, NZEC has an extensive portfolio of 3D seismic drill targets on its Taranaki permits, and is actively seeking funding and farm-in partners with the intention that the partner would fund the drilling of high-priority targets in return for an interest in the permits.

 

The Company’s ability to continue as a going concern is dependent upon its ability to fund near-term development activities with the expectation of generating positive cash flow from operations. The Company’s ability to fund these development activities, the success of these development activities, or whether sufficiently profitable operations will be attained from these development activities, cannot be assured.

The Company continues to pursue a number of options to increase its financial capacity, including increasing cash flow from oil production, disposal of interests in fixed assets, credit facilities, joint arrangements, commercial arrangements or other financing alternatives, in order to meet all required and planned capital expenditures for the next 12 months.

Production and Processing Revenue

Total corporate production during the first nine months of 2014 averaged 215 bbl/d net to NZEC. Total corporate production during the third quarter averaged 202 bbl/d in July, 205 bbl/d in August and 205 bbl/d in September. Production in October averaged 214bbl/d with 184 bbl/d in November, for an average of 200 bbl/d net to NZEC. Production fluctuations month to month are largely the result of optimization efforts on the TWN Licenses. The TWN wells are now operating on a rest and recovery mode rotation, which is intended to optimize production by allowing the hydrocarbons more time to migrate to the well bore, which then yield flush production.

The Company and L&M continue to identify opportunities to generate revenue from the Waihapa Production Station and associated infrastructure. Third-party revenue from the Waihapa Production Station since closing the TWN Acquisition totals approximately $2.3 million net to NZEC.

Production from the three Copper Moki Permit wells that are in production has remained stable during the first nine months of the year. The fourth well, Copper Moki-3, has been shut-in since early March and will remain shut-in until a revised artificial lifting system has been evaluated to deal with the sand accumulation in this highly deviated well.

TWN Licenses

NZEC and L&M formed the 50/50 TWN Joint Arrangement (“TWN JA”), with NZEC as the operator, to explore and develop the TWN Licenses and operate the Waihapa Production Station and associated infrastructure. As at November 26, 2014, the TWN JA had advanced eight wells to production on the TWN Licenses for a total of 66,462 bbl produced since closing of the TWN Acquisition (33,231 bbl net to NZEC), with cumulative pre-tax oil sales net to NZEC of approximately $3.5 million. All of the wells produce light ~41oAPI oil that is delivered by pipeline to the Waihapa Production Station and then piped to the Shell-operated Omata tank farm in New Plymouth, where it is sold at Brent pricing less standard Shell costs.

In an effort to optimize production, in April 2014 the TWNJA installed a high-volume lift (“ESP”) on the Toko-2B well. Toko-2B was chosen as the first well for ESP installation because the well had a high oil cut of approximately 20%, but had to be shut-in every few days to allow the Company to unload a water column that would build up in the well. The TWN JA expected that an ESP would allow the well to be produced continuously and would maximize oil recovery. The well did not reach the anticipated production levels and consequently the TWN JA shut-in the well in early November. The TWN JA is evaluating the possibility of relocating the ESP to another of the previously reactivated Tikorangi wells. The TWN JA also has a second ESP in inventory that could be installed at a later date. Technical information obtained from Toko-2B, along with down-hole surveys that have been completed in the other reactivated wells, has greatly enhanced the TWN JA’s understanding of the TWN License reservoirs and will assist in planning additional optimization activities at other TWN wells.

A number of wells on the TWN Licenses, with previous production from the Tikorangi Formation, have uphole completion potential in the shallower Mt. Messenger Formation. The TWN JA recompleted one well uphole in the Mt.Messenger Formation (Waihapa-2) and achieved production from that well in April 2014. This successful recompletion confirmed that production can be achieved from an uphole reservoir. After just eight days of production, however, sand was drawn into the pump and the well was shut-in pending installation of a different artificial lift system. The TWN JA determined that jet pump is the appropriate lift for this well, since jet pump would enable any unconsolidated sand around the well bore to be produced to surface, thus reducing the potential to sand up the well. Following a detailed design by an independent engineering firm, in October 2014 the TWN JA recompleted the well with dual packers to segregate the upper and lower Mt.Messenger zones and installed the down-hole equipment required for jet-pump operation. This will allow the zones to be tested both separately and collectively, providing production flexibility and allowing the TWNJA to gain valuable information about both Mt.Messenger zones. The TWN JA commenced construction of surface facilities in late October and is on track to complete the work in the first week of December; the Waihapa-2 well is expected to resume production soon after.

The TWN JA has identified four additional production opportunities in existing wells on the TWN Licenses, along with numerous new 3D drill targets in the Mt. Messenger, Moki, Tikorangi and Kapuni formations. The Company’s ability to drill new exploration wells is contingent on its financial capacity, as discussed above.

During February 2014, the TWN JA entered into an agreement with a gas marketing counterparty to transport gas along a section of the TAW gas pipeline for a term of four years with a five-year right of renewal. The arrangement is expected to generate between NZ$250,000 and NZ$1 million revenue per year (net to NZEC). First gas commenced flowing on May 5, 2014, with initial revenue earned being applied as the TWN JA’s contribution to the capital cost originally incurred by the counterparty. The TWN JA fulfilled its capital contribution at the end of August 2014, from which point forward the TWN JA has been receiving the proceeds from the revenue associated with this arrangement. Total revenue to date arising from this arrangement amounted to approximately $395,000 with the TWN JA’s contribution to capital cost totalling $234,000.

Eltham Permit and Copper Moki Permit

To date the Company has drilled ten exploration wells on its 100%-owned Eltham and Copper Moki permits. Four have been advanced to production. As at November 26, 2014, the Company has produced approximately 287,190 bbl from its Copper Moki Permit wells (including oil produced during testing), with cumulative pre-tax oil sales from inception of approximately $30.7 million. All of the Copper Moki Permit wells produce light ~41oAPI oil from the Mt. Messenger Formation. Oil is trucked to the Shell-operated Omata tank farm in New Plymouth and sold at Brent pricing less standard Shell costs. Production from the Copper Moki wells has been stable year to date, with virtually no decline in production rates during the first nine months of 2014.

Of the ten wells drilled, only one well (Wairere-1) failed to encounter hydrocarbons and was immediately sidetracked. One well (Copper Moki-4) made an oil discovery in the Urenui Formation and was shut-in pending additional economic analysis and evaluation of artificial lift options. Wairere-1A was drilled to the Mt. Messenger Formation and encountered hydrocarbon shows, with completion pending. Arakamu-2 made an oil discovery in the Mt.Messenger Formation and was shut-in pending evaluation of artificial lift options. Waitapu-1 is shut-in pending further testing or sidetrack to an alternate target and Arakamu-1A, a Moki Formation well, is suspended pending further evaluation. The Company continues to assess these opportunities as new reservoir data becomes available from the Company’s activities on the TWN Licenses. NZEC is actively seeking farm-in partnerships to allow the Company to accelerate exploration of additional high-priority drill targets on the Eltham Permit.

Alton Permit

The Company has identified a drill target in the Mt. Messenger Formation and has received all necessary resource and land access consents required to drill the well. However, certain conditions associated with the consents prompted the Company to lodge an appeal for mediation. In order to allow time for the appeal and mediation, the Company and L&M have been granted an extension to November 22, 2015 to drill the commitment well. NZEC is actively seeking farm-in partnerships to allow the Company to accelerate exploration of additional drill targets on the Alton Permit.

East Coast Basin

The East Coast Basin of New Zealand’s North Island hosts two prospective oil shale formations, the Waipawa and Whangai, which are believed to be the source of more than 300 oil and gas seeps. Within the East Coast Basin, NZEC holds a 100% interest in the East Cape Permit which covers approximately 1,048,406 onshore acres (4,243 km2) on the northeast tip of the North Island. The Company anticipates completing fieldwork and geochemical studies on the East Cape Permit in 2014. NZEC is actively seeking a farm-in partner to fund additional exploration and development in return for an interest in the East Cape Permit.

The Company announced on June 23, 2014 that it had relinquished its interests in the Castlepoint and Wairoa permits in the East Coast Basin, reducing its work program commitments by $13.9 million for 2014 and $54.3 million over the life of the relinquished permits. The work previously undertaken by the Company on these permits has yielded significant technical information and insight into the Waipawa Black Shale, which will guide the Company’s exploration strategy on the East Cape Permit. In addition, NZEC’s community engagement activities have allowed the Company to build strong relationships with regulators, landowners and iwi communities in the East Coast Basin.

SUMMARY OF QUARTERLY RESULTS

    2014-Q3     2014-Q2     2014-Q1     2013-Q4  
    $     $     $     $  
                         
Total assets   98,459,282     107,513,101     124,788,600     116,782,687  
Exploration and evaluation assets   43,072,192     46,476,829     56,876,779     51,500,037  
Property, plant and equipment   48,815,452     53,409,032     54,786,347     49,169,997  
Working capital   3,366,017     3,652,514     5,299,434     6,878,152  
Revenues   2,104,561     3,091,139     6,320,949     4,108,911  
Accumulated deficit   (48,965,855 )   (47,287,210 )   (37,122,556 )   (35,099,834 )
Total comprehensive (loss) income   (8,540,759 )   (13,616,047 )   8,452,444     (5,963,723 )
Basic loss per share   (0.01 )   (0.06 )   (0.01 )   (0.06 )
Diluted loss per share   (0.01 )   (0.06 )   (0.01 )   (0.06 )
                         

 

    2013-Q3     2013-Q2     2013-Q1     2012-Q4  
    $     $     $     $  
                         
Total assets   105,313,813     127,318,182     129,545,992     116,059,939  
Exploration and evaluation assets   55,859,632     52,357,470     49,610,922     37,379,726  
Property, plant and equipment   26,621,043     26,135,651     25,793,089     23,867,758  
Working capital   4,748,797     9,517,742     17,533,636     28,293,845  
Revenues   1,519,010     2,109,700     2,925,258     2,948,041  
Accumulated deficit   (27,292,947 )   (24,616,053 )   (22,386,089 )   (19,992,243 )
Total comprehensive (loss) income   1,347,788     (6,000,775 )   1,313,397     (1,333,805 )
Basic loss per share   (0.02 )   (0.02 )   (0.02 )   (0.02 )
Diluted loss per share   (0.02 )   (0.02 )   (0.02 )   (0.02 )
                         

On behalf of the Board of Directors

“David Robinson”

Chief Executive Officer & 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 1.15 million acres 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 oil and gas exploration and operations experience in New Zealand. NZEC plans to execute a technically disciplined exploration and development program focused on the onshore and offshore oil and natural gas resources in the politically and fiscally stable country of New Zealand. 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 info@newzealandenergy.com.

New Zealand Energy Contacts

David Robinson, Chief Executive Officer + 6-46-757-4470

Rhylin Bailie, Investor Relations + 1-855-630-8997

Email: info@newzealandenergy.com

Website: www.newzealandenergy.com

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.

FORWARD-LOOKING INFORMATION

This document contains certain forward-looking information and forward-looking statements within the meaning of applicable securities legislation (collectively “forward-looking statements”). The use of the word “will”, “expect”, “intend”, “optimize”, “hopeful”, “will”, “should”, “would”, “could”, “plans”, 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, uncertainties with regard to realizing anticipated cost savings associated with closing the Vancouver office; uncertainties with regard to realizing anticipated benefits with regard to reorganizing the senior management team; the speculative nature of exploration, appraisal and development of oil and natural gas properties; uncertainties associated with estimating oil and natural gas reserves and 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 and production; the need to obtain various approvals before exploring and producing oil and natural gas resources; exploration hazards and risks inherent in oil and natural gas exploration; operating hazards and risks inherent in oil and natural gas operations; the Company’s ability to generate sufficient cash flow from production to fund future development activities; 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. Such forward-looking statements should not be unduly relied upon. The Company 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. Actual results could differ materially from those anticipated in these forward-looking statements. The forward-looking statements contained in the document are expressly qualified by this cautionary statement. These statements speak only as of the date of this document and the Company does not undertake to update any forward-looking statements that are contained in this document, except in accordance with applicable securities laws.

About New Zealand Energy Corp.

NZEC is a publicly-traded company (TSX-V:NZ) focused on the production and exploration of oil and natural gas prospects in New Zealand.

Investors & Analysts

Join Our Mailing List





Last Updated: 0.02 +0.00 +0% Volume: 5,000 August 20, 2019