New Zealand Energy Corp (NZEC) (CVE:NZ) (OTCQX:NZERF) is an oil and gas company that is exploring and developing both conventional and unconventional prospects in the Taranaki and East Coast basins of New Zealand's North Island. The company has raised $12.3 million via two private placements, and then raised an additional $21.9 million in an IPO that culminated with a listing on the Toronto Venture Exchange at the beginning of August 2011.
The company's conventional hydrocarbon targets are located within New Zealand's Taranaki Basin. NZEC is the operator of the Eltham and Alton Permits that cover 152,066 acres on the west coast of the North Island. The Taranaki Basin has a proven history of hydrocarbon production and is currently producing from 18 fields at the rate of 55,000 barrels of oil, and 460 million cubic feet of natural gas per day. Approximately 18,000 barrels of that daily production are recovered from permits that are in the immediate vicinity of Eltham and Alton.
NZEC drilled and completed its first well in the Taranaki Basin in August with Copper Moki-1. The well targeted the Mount Messenger formation and flow tested over two days at a rate of 1,100 barrels of 41.8 API oil per day and 855,000 cubic feet of natural gas per day on a 28/64th inch choke. An extended production test over 12 days on a 20/64th inch choke produced an average of 521 barrels of oil and 508,000 cubic feet of natural gas per day.
The company allowed pressure to build up and commenced production on December 10, 2011. The well commenced free flowing on an 18/64th inch choke at an initial rate of 580 barrels of oil and 970,000 cubic feet of natural gas per day, and has leveled out at a rate of 550 barrels of oil and 685,000 cubic feet of natural gas per day.
The well site has newly installed surface facilities that can handle production of up to 1,000 barrels of oil per day. Oil is trucked to the Omata Tank Farm that is 45 kilometers north of the well site, where the oil is sold to Shell. Copper Moki-1 is producing a sweet and high quality oil providing near-term operating netbacks that should exceed US$90 per barrel.
NZEC is planning to set up larger and more permanent oil storage facilities that will be capable of handling additional production from new wells in the Copper Moki area, and is also evaluating options to market natural gas production via a nearby open access gas pipeline. New Zealand is a significant net importer of oil and has a strong in-country appetite for both oil and natural gas.
The company has an extensive database of New Zealand exploration data, and in the Taranaki Basin, has identified 12 targets on 2D seismic and six targets on 3D seismic. Each well site has the potential to hold up to 1 million barrels of oil, and hosts multiple formations that can be evaluated at little additional capital cost.
The company has started drilling Copper Moki-2, and expects to start drilling Copper Moki-3 in Q1-2012 from the same pad as Copper Moki-1. Copper Moki-2 will target both the Urenui and Mount Messenger formations. Copper Moki-3 will be spudded as soon as the second well is completed and will target multi zone potential in the Mount Messenger, Urenui and Moki formations.
AJM Petroleum Consultants has identified 33 prospects within the Eltham and Alton Permits that hold conceptual potential for 730 million barrels of net undiscovered petroleum initially in place or "OOIP" and 66.6 million barrels of net prospective resources at an assumed 9% recovery rate.
NZEC is also pursuing unconventional hydrocarbon sources within three permits that cover more than 1.8 million acres along the East Coast Basin. These permits contain two shale packages, the Waipawa and Whangai, that host over 300 known oil and gas seeps and are analogous to shale formations in the United States that are producing prolific volumes of oil and natural gas, with newly developed horizontal drilling and fracking techniques.
AJM Petroleum Consultants has identified conceptual potential on these permits for 22.3 billion barrels of OOIP and 478 million boe of unconventional prospective resource, and 126 million boe of conventional prospective resource, at an assumed 2% recovery rate.
The company has already completed two core holes on its Castlepoint Permit to evaluate the Waipawa shales, which compare favorably with the Bakken shales found in North Dakota and surrounding states and provinces. While NZEC is still collecting data about the permeability and other characteristics of the two shale packages, AJM Petroleum Consultants has estimated the Waipawa shale thickness at 10 - 70 meters while the Whangai has an estimated thickness of 300 - 600 meters.
In contrast, the Bakken shales carry a thickness of 10 - 50 meters.
NZEC's Ranui-1 well was drilled in 2008 by the previous owner and encountered the Whangai shale at a shallow depth of 910 meters. NZEC has started to re-drill this well already, with the objective of drilling to the bottom of the Whangai shale package and collecting additional core data.
Data from the two Castlepoint core wells and the Ranui well will be used to complete an extensive evaluation of the shale formations and their production potential. The company will also shoot 50 kilometers of 2D seismic at Castlepoint and reprocess existing seismic data for Ranui-1 to determine further development plans around that location.
The board of New Zealand Energy is headed by John A. Greig, who serves as chairman and has a long track recorded of funding and developing undervalued geological assets. John G. Proust serves as chief operating officer and director, and has a proven resume in building companies from grass roots to advanced development on a global basis.
Bruce G. McIntyre, president of the company, has more than 30 years of experience as an oil and gas geologist, and has established and run a number of oil and gas companies. The company also has a highly skilled technical team in New Zealand, led by Dr. Ian Brown who serves as chief operating officer and is also a professional geological engineer.
Insiders control 40 percent of the fully diluted shares and should provide strong operational control and direction.