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New Zealand Energy's Revenues Rise As Production Grows

New Zealand Energy Corp. (CVE:NZ)(OTCQX:NZERF) said Monday it recorded almost $1 million in revenue in 2011, as the oil and natural gas company achieved production in December from Copper Moki-1, its first discovery well in the Taranaki Basin.

The company's two permits in Taranaki are offset by a number of producing wells and recent successful discoveries, with New Zealand Energy achieving "very encouraging" early results from its first two wells, a recent report from Stonecap Securities said.

Since December 10, 2011, the company produced 11,623 barrels of oil and sold 9,567 barrels for total revenues of $1.02 million, or $106.83 per barrel sold.

Total recorded gross production revenue was $974,517 after accounting for royalties of $47,492, or $4.96 per barrel sold. No revenues or royalties were seen in the prior year period.

Production costs were $23.44 per barrel, while price amounted to $106.83 per barrel.

During the start-up and testing for Copper Moki-1, New Zealand Energy said it incurred various one-off costs to commission the well, resulting in a netback of $78.43 per barrel for the initial production period to year-end 2011.

However, the company noted that first quarter 2012 netback numbers are in excess of $90 per barrel.

New Zealand Energy controls two permits covering 169,949 net acres in the Taranaki Basin. The company also holds large land positions in the East Coast Basin of North Island, and although under-explored, these basins hold large conventional and non-conventional oil potential.

At the start of this month, the company achieved continuous production from its Copper Moki-2 well, currently producing from natural reservoir pressure out of the Mt. Messenger formation at an average rate of 581 barrels of oil per day and 1,530 thousand cubic feet of natural gas per day (Mcf/d) through a 24/64th inch choke.

The company has drilled five exploration wells in the Taranaki Basin, one on the Alton Permit, and four from the Copper Moki pad on the Eltham Permit. The Alton Permit is adjacent to Eltham and covers around 119,203 acres, with the company increasing its potential interest in the permit to 65 percent in February.

With Copper Moki-1 and Copper Moki-2 now in production, Copper Moki-3 and Copper Moki-4 are slated to be completed and tested in the second quarter.

The Copper Moki-3 well encountered 12 metres of net pay in the Mt. Messenger formation in early April, and 15 metres of net pay in the Moki formation.

Meanwhile, Copper Moki-4 reached target depth of 2,125 metres earlier this month, and after testing, New Zealand Energy decided to perforate and test both the Urenui and Mt. Messenger formations after completion operations at Copper Moki-3.

The oil and gas producer also released Monday the results of its 2011 year-end reserve and resource estimation, prepared by Deloitte & Touche.

The estimate was confined to the company's 100 percent working interest Eltham Permit and was based on the reservoir and production data from the Copper Moki-1 well, with a December 31, 2011 cut-off.

As of that date, the report said the company held total proved and probable reserves of 221.8 thousand gross remaining barrels of light and medium oil, and 361.1 million gross remaining cubic feet of natural gas (MMcf). Possible reserves amounted to 95.4 thousand barrels of oil, and 208.9 million cubic feet of natural gas.

The net present value of future net revenue before tax for total proved, probable and possible reserves came in at 18,895.6 million, at a discount rate of five percent per year.

The company said it expects to commission a reserve and resource update in the near term to include exploration and production data from three more wells on the Copper Moki pad that were drilled in 2012.

Last week, New Zealand Energy entered into a drilling agreement with Ensign International Energy Services to drill three exploration wells, with the option for up to five additional wells, in the second half of the year.

The Taranaki Basin is situated on the west coast of the North Island and is currently New Zealand's only oil and gas producing basin, producing approximately 130,000 barrels of oil equivalent per day from 18 fields.

Production rates from the company's discovery well have averaged 424 barrels per day and 1,058 Mcf/d since starting continuous production in December. It has produced more than 67,000 barrels of oil since it was first tested in August 2011.

New Zealand Energy said natural gas and associated natural gas liquids are being flared until it completes a 2.6-kilometre pipeline that will deliver natural gas from the Copper Moki site to a gas production facility, with the pipeline scheduled to be completed by the end of the quarter.

The company is targeting year-end production of 3,000 barrels of oil equivalent per day. It has also identified six prospects on 3D seismic similar to Copper Moki, and has found 12 leads on 2D seismic that will be further defined, it said.

The oil and gas entity is completing a 100-square kilometre 3D seismic program over the northern region of the Eltham and Alton permits, and plans to initiate the 30-day data acquisition process in early May.

Looking to its other properties, the East Coast Basin of New Zealand's North Island hosts two prospective shale formations, the Waipawa and Whangai, which are the source of more than 300 oil and gas seeps. In February, the company reached target depth of 1,441 metres in its Ranui-2 well on its Ranui Permit in the East Coast Basin, collecting open hole log data and coring the Whangai shale formation across three intervals.

The company's technical team plans to shoot around 70 line kilometres of 2D seismic in the second half of the year to improve its understanding of the East Coast Basin properties, New Zealand Energy said.

For the year that ended December 31, 2011, total expenses came in at $7.5 million, down by 27 percent from the prior year. Net loss narrowed by 36 percent to $6.57 million, or eight cents per basic and diluted share.

On a quarterly basis, the company earned one cent per share in the fourth quarter, versus a four cent loss in the previous third quarter.

In late March, the company took step to boost its balance sheet, closing a $63.48 million bought deal financing, through a syndicate of underwriters led by Canaccord Genuity corp.