New Zealand Energy (CVE:NZ) Thursday acquired a number of Taranaki Basin assets from Origin Energy's (ASX:ORG) regional unit as it announced new oil discoveries in its Copper Moki-3 (CM-3) and Copper Moki-4 (CM-4) wells.
The oil and natural gas company also announced first-quarter earnings and said it expects starting production from CM-3 toward the end of the second quarter.
"These acquisitions increase New Zealand Energy's presence in New Zealand from both an exploration and infrastructure perspective," said New Zealand Energy's CEO John Proust.
"Controlling a central oil and gas production facility in the Taranaki Basin provides the company with the strategic opportunity and capacity to independently process production, at reduced operating costs, as well as generate cash flow through third-party processing agreements.
"This transaction is consistent with the company's business strategy of adding value for shareholders through acquisition and development."
The company is focused on the production, development and exploration of oil and natural gas prospects in New Zealand, off the coast of the nation's North Island in the Taranaki Basin.
New Zealand Energy's agreement with Origin Energy Resources sees the company acquire four petroleum mining licenses totaling 26,907 acres in the main Taranaki Basin production fairway, as well as the Waihapa Production Station and associated gathering and sales infrastructure.
The company is paying C$42 million in cash and a 5 percent gross overriding royalty, with the deal expected to close in October 2012, contingent on government approvals.
New Zealand Energy will be using funds previously allocated for acquisitions, working capital on hand, and cash flow from production to complete the acquisition.
With a current cash position of $61 million, post-acquisition, New Zealand Energy will remain fully funded to complete its previously announced 2012 capital program, it said, and reiterated its forecasted exit production rate of 3,000 barrels of oil equivalent per day.
New Zealand Energy's president Bruce McIntyre added: "With 170,649 acres of petroleum exploration permits and 26,907 acres of petroleum licenses, the company will control a significant portion of the exploration fairway in the Taranaki Basin.
"We believe that the petroleum licenses are highly prospective across multiple formations, offering exploration, uphole completion and production potential from existing wells and the ability to rapidly drill new wells.
"Along with the prospects on our existing permits, the company's technical team has identified a number of Urenui, Mt. Messenger and Moki leads on the Petroleum Licenses, significantly increasing the company's drilling inventory in the Taranaki Basin."
New Zealand Energy said it has completed an initial production test of CM-3, its third existing production well in the Taranaki Basin. CM-3 flowed through a 24/64-inch choke for seven days, producing 3,570 barrels of 40 degrees API oil and 2,239 million cubic feet of gas at an average rate of 510 barrels per day, and 320 million cubic feet per day.
The company has also started production testing of CM-4. The well is producing 29 degrees API oil, with a higher pour point than Mt. Messenger oil, the company said, and with characteristics similar to Urenui oil being produced from third-party wells in the immediate area.
The company said it will continue to evaluate the well to determine the appropriate artificial lift system to unlock the potential of the Urenui formation in CM-4.
With the completion of the four Copper Moki wells, New Zealand Energy said it has gained "tremendous" insight into the Moki, Mt. Messenger and Urenui formations.
The company has also completed data acquisition of a 100 square-kilometre 3D seismic survey across the Eltham and Alton permits. Information gained from exploration to date and seismic interpretation will guide the oil and gas company's future strategy for both exploration and acquisition in the Taranaki Basin.
New Zealand Energy 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.
Continuous production from the Copper Moki-1 well, along with the 16-day flow test from the Copper Moki-2 well, generated positive cash flow of $4.5 million during first quarter of 2012, based on a realized netback averaging approximately US$90 per barrel of oil sold.
During the period that ended ended March 31, the company produced 39,852 barrels and sold 34,659 barrels for total revenues of $4.1 million or $117.94 per barrel.
Total comprehensive loss for the period was $1.9 million, or nil per share.
Aside from its interests in the Taranaki Basin, New Zealand Energy 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.