In October 2012, NZEC and its wholly-owned subsidiary, NZEC Wairoa Limited, entered into a binding agreement with Westech Energy New Zealand ("Westech"), a wholly-owned subsidiary of Energy Corporation of America, to acquire 80% ownership and become the operator of the Wairoa permit. Wairoa covers 267,862 acres (1,084 square kilometres) in the East Coast Basin. The Company has identified its preferred drill location on the Wairoa permit and has initiated the community engagement and technical assessments required to obtain land access consents and permits, with the expectation of drilling one exploration well in 2014.
Unlike other areas of the East Coast Basin, the Wairoa permit has been actively explored for many years, with significant 2D seismic data across the permit and log data from more than 15 wells drilled on the property. Historical exploration focused on the conventional miocene sands. NZEC's technical team sees conventional opportunities as well as potential in the unconventional oil shales that underlie the property. NZEC's team knows the property well and provided extensive consulting services (through the consulting company Ian R Brown Associates) to previous permit holders, assisting with seismic acquisition and interpretation, wellsite geology and regional prospectivity evaluation. In addition, NZEC's team assisted with permitting and land access agreements and worked extensively with local district council, local service providers, land owners and iwi groups, allowing the team to establish an excellent relationship with local communities.
In consideration for the transfer of the 80% interest, NZEC assumed 100% responsibility for the permit and completion of the related work program and paid Westech US$725,000. Upon completion of the related work program, Westech will credit US$225,000 to NZEC and all future expenditures for the permit will be funded 80% by NZEC and 20% by Westech. The work program requires NZEC to complete various technical studies, reinterpret existing seismic data, shoot and interpret additional 2D seismic, and drill two exploration wells by March 2016. NZEC has the option to withdraw from the joint venture after drilling the first exploration well, in which case it would transfer ownership and operatorship of the permit back to Westech.
NZEC is actively looking for a farm-in partner to fund exploration of Wairoa and NZEC's other East Coast permits.