The New Zealand-focused oil and gas producer said the deal was signed through its own subsidiary, NZEC Wairoa Limited.
Under the terms, New Zealand Energy will be able to acquire 80 per cent of Petroleum Exploration Permit 38346, and become the operator. The permit covers 267,862 acres in the East Coast Basin of New Zealand's North Island.
In exchange for the majority ownership stake, New Zealand Energy will immediately assume 100 per cent responsibility for the permit, as well as completion of the related work program, and will pay Westech US$725,000.
Once the work program is wrapped up, Westech will refund the company US$225,000, and all future expenses for the permit will be funded 80 per cent by New Zealand Energy and 20 per cent by Westech.
New Zealand Energy said the deal, and the formation of the joint venture, as well as proposed changes to the work program, are contingent on approval from New Zealand Petroleum & Minerals.
"With PEP 38346 in our portfolio, NZEC will hold more than 2 million net acres (including pending permits) in the East Coast Basin from which to unlock the potential of New Zealand's oil shale formations," said New Zealand Energy's CEO, John Proust,
Ian Brown, the company's COO, added: "This is a property that NZEC's technical team knows well from previous consulting work in the area, and we have an excellent relationship with the local community.
"NZEC looks forward to working with Westech to advance this exciting exploration opportunity."
The proposed work program at the permit requires New Zealand to complete various technical studies, reinterpret existing seismic data, shoot and interpret additional 2D seismic, and drill two exploration wells by March 2016.
The company has the option to withdraw from the venture after drilling the first exploration well, in which case it would transfer the ownership, as well as the operator role, back to Westech.
Late last month, the New Zealand-focused energy company started the completion of its fifth well in the Taranaki Basin of New Zealand, achieving the targeted depth of Waitapu-1.
The company said it evaluated open hole logs of the well, and has started casing, with completion to follow. The newly-established Waitapu site sits approximately 1.3 kilometres south of the company's Copper Moki site in the Taranaki Basin, where it has three producing wells.
New Zealand Energy's property portfolio covers nearly two million acres of prospects in the Taranaki Basin and East Coast Basin of New Zealand's North Island.
A large chunk of its properties are located in the Taranaki Basin, which is situated on the west coast of the North Island and is currently the country's only oil and gas producing basin, producing roughly 130,000 barrels of oil per day from 18 fields.
The company generated positive cash flow from production in the second quarter of $5.4 million, resulting from netbacks of U.S. $78.12 per barrel. Its aim is to drill eight additional conventional wells and increase production to 3,000 barrels of oil equivalent per day by year-end 2012.