In October 2012, NZEC announced that the Company and its wholly-owned subsidiary, NZEC Wairoa Limited, have 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 km2) in the East Coast Basin.
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 underly 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 has assumed 100% responsibility for the permit and completion of the related work program and will pay 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. Transfer of the 80% ownership and operatorship of the permit, formation of the joint venture, and proposed amendments to the work program are subject to approval by New Zealand Petroleum & Minerals. The proposed 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.