New Zealand Energy Corp. (TSX VENTURE:NZ) ("NZEC" or the
"Company"), an oil and natural gas company that is exploring,
developing and producing petroleum prospects in New Zealand, has
released the results of its third quarter ended September 30, 2011.
Details of the Company's financial results are described in the
Unaudited Consolidated Financial Statements and Management's
Discussion and Analysis which, together with further details on
each of the Company's projects, are available on the Company's
website at www.newzealandenergy.com and on SEDAR at www.sedar.com.
All amounts are in Canadian dollars unless otherwise stated.
HIGHLIGHTS
-- Completed extended production test of Copper Moki-1 well at a restricted
rate through a 20/64th choke, averaging 521 barrels of oil and 508 mcf
of natural gas per day
-- Copper Moki-1 to commence permanent production in early December;
installing surface facilities for up to 1,000 barrels of oil per day
-- Commencing drilling of Copper Moki-2 well by year-end, followed by
Copper Moki-3
-- Initiating 100-km2 3D seismic survey to hi-grade existing prospects on
Eltham and Alton Permits
-- Assessing results of drill core from Waipawa Shale in Castlepoint Permit
test
-- Re-drilling and deepening Ranui-1 well in December to further evaluate
Whangai Shale
-- Positive working capital of $18.7 million at September 30, 2011; current
cash on hand exceeds $17 million
TARANAKI BASIN UPDATE
NZEC is on track to meet its objective of commencing permanent
production by year-end 2011. NZEC has completed an extended
production flow test of its Copper Moki-1 discovery well and
expects to bring the well on-stream in early December. Final
reservoir analysis and production plans will be completed following
recovery of the pressure recorders in the next few days. In August
Copper Moki-1 flowed 1,100 barrels per day of 41.8 API(1) oil and
855 mcf(2) of natural gas per day over a two-day period. NZEC
designed an extended production test at a restricted rate to
evaluate the reservoir under constant operating conditions. The
well flowed 6,228 barrels of oil over 12 days with average
production of 521 barrels of oil and 508 mcf of natural gas per day
on a 20/64th inch choke, and was subsequently shut-in for pressure
build up. This equates to a 975 standard cubic feet (scf) per
barrel gas to oil ratio. NZEC expects to bring the well on-stream
at production levels similar to the extended test, but is
installing surface facilities to accommodate well production of up
to 1,000 barrels of oil per day to allow for well production
optimization.
Produced oil is trucked to the Shell-operated Omata Tank Farm,
approximately 45 km north of the Copper Moki well site, and sold to
Shell as per an off-take agreement. NZEC is also evaluating options
to market its natural gas production, given the close proximity of
open-access gas pipelines and significant in-country demand for
natural gas.
Achieving production at Copper Moki-1 will bring cash flow to
the Company and transition NZEC from an exploration-stage company
to an oil and gas producer. The oil is sweet and high quality and
sells at a premium to the Brent reference price. The Company
estimates netbacks in excess of US$60 per barrel.
NZEC is finalizing its multi-well drilling contract for Copper
Moki-2 and Copper Moki-3, delineation wells for the Copper Moki
pool, and expects to start drilling by year-end. The Copper Moki-2
well will be drilled directionally from the same pad as the Copper
Moki-1 well to target both the Urenui and Mt. Messenger formations.
NZEC will continue to produce Copper Moki-1 as drilling proceeds.
The Copper Moki-3 well will be drilled approximately 1.3 km south
of the Copper Moki-1 site and will target multi-zone potential in
the Mt. Messenger, Urenui and Moki formations. The Copper Moki-1
well was completed in three sands over an interval of 12.2 metres
within the Mt. Messenger formation. The Copper Moki-2 and Copper
Moki-3 targets were identified using 3D seismic and are analogous
to the Mt. Messenger Formation in Copper Moki-1.
NZEC's exploration strategy is to use its large database of 2D
and 3D seismic to prioritize prospects that have a well-defined
lower-risk Mt. Messenger target and provide multi-zone potential
from the Urenui, Mt. Messenger, Moki and Kapuni formations.
NZEC is building an inventory of drill-ready targets in the
Taranaki Basin and plans to execute a 3D seismic-defined
exploration strategy in 2012. Using the Company's extensive
technical database, NZEC has identified a number of features
similar to Copper Moki-1 on 3D seismic. NZEC's in-country team is
initiating the resource consent and surface access approval process
for the 3D targets to prepare for continued advancement of multiple
prospects in 2012. NZEC has also identified additional targets on
2D seismic and has initiated the steps required for a 3D seismic
program in 2012 that will cover 100-km2 of the northern region of
the Eltham and Alton permits, to more accurately define drilling
targets and significantly reduce exploration risk. NZEC anticipates
drilling two to three wells on each of its Taranaki Basin prospects
with the potential to recover up to one million barrels of oil per
well, based on analogue production in the Taranaki Basin.
(1) American Petroleum Institute
(2) Thousand cubic feet
EAST COAST BASIN UPDATE
On its East Coast Basin properties, NZEC is expanding its
knowledge of the extensive shale packages that are the source of
more than 300 oil and gas seeps. NZEC is on track to re-drill and
deepen the Ranui-1 well in late December. Originally drilled by the
previous permit holder in 2008, Ranui-1 encountered 224 metres of
prospective Whangai Shale before reaching total depth of 1,134
metres, but did not penetrate the base of the Whangai Shale. NZEC's
Ranui-2 core well will core the Whangai Shale across several
intervals and will drill though the base of the Whangai Shale and
into the underlying conventional reservoir sands.
NZEC is also interpreting the results of two test holes that
cored the Waipawa Shale formation on NZEC's Castlepoint Permit. The
information obtained from the Ranui and Castlepoint core holes will
help determine the potential of the Whangai and Waipawa Shale
formations and focus NZEC's exploration strategy for 2012.
NZEC looks forward to reporting additional results as
exploration, development and production activities continue to
advance its portfolio of properties.
FINANCIAL SNAPSHOT
----------------------------------------------------------------------------
For the For the
nine months ended financial period ended
September 30, 2011 December 31, 2010
$ $
----------------------------------------------------------------------------
Revenue - -
Net loss and comprehensive
loss (6,931,816) (10,338,136)
Interest income 54,262 -
Loss per share - basic and
diluted (0.08) (0.24)
Current assets 23,673,029 6,229,650
Total assets 33,566,611 6,301,322
Total liabilities 5,122,691 371,958
Shareholders' equity 28,443,920 5,929,364
----------------------------------------------------------------------------
Working capital 18,699,022 5,857,692
----------------------------------------------------------------------------
PETROLEUM PROPERTY ACTIVITIES, OPERATIONS AND CAPITAL
EXPENDITURES FOR NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2011
Taranaki Basin
During the nine-month period ended September 30, 2011, the
Corporation incurred $4,784,160 in capitalized exploration and
development costs relating to the Eltham Permit. Of the costs
incurred during the period, $110,131 related to asset retirement
costs, $353,172 was recorded for consulting services and $4,443,971
for well development. As a result of funding and drilling the
Copper Moki-1 discovery well, reprocessing 438 km of 2D seismic
data and carrying out a number of other technical studies to the
satisfaction of the Ministry of Energy, the Corporation earned a
100% interest in the Eltham Permit which was assigned to NZEC on
March 3, 2011. Total expenditures incurred as of September 30, 2011
relating to the Eltham Permit amounted to $4,792,428.
As of September 30, 2011, the Corporation paid $2,140,203 for
the acquisition of the Alton Permit pursuant to the Alton Agreement
and incurred $33,098 in asset retirement costs relating to the
Alton Permit due to the drilling of the Talon-1 well. Well
development costs of $2,519,750 were initially capitalized in
relation to the drilling of the Talon-1 well but were then written
off as the Corporation does not believe that these costs will
generate future economic benefits due to the geological assessment
of the well results.
East Coast Basin
During the nine-month period ended September 30, 2011, the
Corporation incurred $327,276 in capitalized exploration costs on
the Castlepoint Permit. Total expenditures incurred as of September
30, 2011 relating to the Castlepoint Permit amounted to
$379,229.
In February 2011, the Corporation entered into the Ranui
Assignment Agreement with Discovery Geo, pursuant to which
Discovery Geo agreed to assign to NZEC its 100% interest in the
Ranui Permit. Upon satisfaction of the conditions of assignment,
NZEC paid Discovery Geo US$1,000,000 and issued 1,000,000 common
shares to Discovery Geo. As of September 30, 2011, the Corporation
had incurred $2,164,136 in capitalized acquisition costs relating
to the Ranui Permit.
During the nine-month period ended September 30, 2011, the
Corporation did not capitalize any exploration or acquisition costs
relating to the East Cape Permit.
RESULTS OF OPERATIONS FOR THREE-MONTH PERIOD ENDED SEPTEMBER 30,
2011
Period Expenses
During the three-month period ended September 30, 2011, the
Corporation incurred total expenses of $3,826,072. A stock-based
compensation of $663,997 was recorded during the period for the
fair value of stock options granted. The Corporation recorded a
resource property write-off of $2,526,773 for the Talon-1 well as
the Corporation does not believe that the costs will generate
future economic benefits due to the geological assessment of the
well results. The Corporation reclassified $286,805 in prior period
professional fees relating to share issuance costs resulting in a
credit balance as at period end. The Corporation reclassified
$28,427 in prior period consulting fees relating to resource
property development costs which also resulted in an ending credit
balance. Management fees were in line with the consulting
agreements entered into with J. Proust & Associates Ltd.
("JPA") and Wexford Energy Ltd ("Wexford") as detailed in the
related party transactions recorded during the period. Travel and
promotion materially related to travel costs associated with
marketing of the Offering. On February 21, 2011, the Corporation
entered into an asset purchase agreement ("IRBA Agreement") with
Ian R. Brown Associates Limited ("IRBA") pursuant to which the
Corporation acquired certain assets and agreed to offer employment
to certain IRBA employees. As a result of the IRBA Agreement, the
Corporation began incurring office and general costs for a larger
office in Wellington, along with the additional salary and wages of
its in-country staff. The remaining general and administrative
costs were reflective of the Corporation's current stage of
development.
Interest Income
The Corporation earned $27,586 of interest income on its excess
cash and cash equivalent balances held during the three-month
period ended September 30, 2011.
Net Loss and Funds from Operations
The Corporation generated net loss of $3,798,486 ($0.04 per
share) for the period ended September 30, 2011.
On behalf of the Board of Directors
John Proust, Chief Executive Officer and Director
ABOUT NEW ZEALAND ENERGY CORP.
NZEC is an oil and natural gas company engaged in the
exploration, development and production of petroleum and natural
gas assets in New Zealand. NZEC's property portfolio collectively
covers nearly two million acres of conventional and unconventional
prospects in the Taranaki Basin and East Coast Basin of New
Zealand's North Island. The Company's management team has extensive
experience exploring and developing oil and natural gas fields in
New Zealand and Canada, and takes a multi-disciplinary approach to
value creation with a track record of successful discoveries. NZEC
plans to add shareholder value by executing a technically
disciplined exploration and development program focused on the
onshore and offshore oil and natural gas resources in the
politically and fiscally stable country of New Zealand.
Forward-looking Statements
This news release contains certain forward-looking information
and forward-looking statements within the meaning of applicable
securities legislation (collectively "forward-looking statements").
The use of any of the words "initiate", "will be", "will", "plan",
"expect" and similar expressions are intended to identify
forward-looking statements. These statements involve known and
unknown risks, uncertainties and other factors that may cause
actual results or events to differ materially from those
anticipated in such forward-looking statements, including without
limitation, the speculative nature of exploration, appraisal and
development of oil and natural gas properties; uncertainties
associated with estimating oil and natural gas resources; changes
in the cost of operations, including cots of extracting and
delivering oil and natural gas to market, that affect potential
profitability of oil and natural gas exploration; operating hazards
and risks inherent in oil and natural gas operations; volatility in
market prices for oil and natural gas; market conditions that
prevent the Company from raising the funds necessary for
exploration and development on acceptable terms or at all; global
financial market events that cause significant volatility in
commodity prices; unexpected costs or liabilities for environmental
matters; competition for, among other things, capital, acquisitions
of resources, skilled personnel, and access to equipment and
services required for exploration, development and production;
changes in exchange rates, laws of New Zealand or laws of Canada
affecting foreign trade, taxation and investment; failure to
realize the anticipated benefits of acquisitions; and other factors
discussed under "Risk Factors" in NZEC's Prospectus dated July 19,
2011. NZEC believes the expectations reflected in those
forward-looking statements are reasonable, but no assurance can be
given that these expectations will prove to be correct. Such
forward-looking statements included in this news release should not
be unduly relied upon. These statements speak only as of the date
of this news release and NZEC does not undertake to update any
forward-looking statements that are contained in this news release,
except in accordance with applicable securities laws. In addition,
this news release may contain forward-looking statements attributed
to third-party industry sources.
Neither the TSX Venture Exchange nor its Regulation Services
Provider (as such term is defined in the policies of the TSX
Venture Exchange) accepts responsibility for the adequacy or
accuracy of this release.
Contacts: New Zealand Energy Corp. Rhylin Bailie Vice President,
Communications & Investor Relations Toll-free: 1-855-601-2010
New Zealand Energy Corp. Bruce McIntyre President & Director
Toll-free:
1-855-601-2010info@newzealandenergy.comwww.newzealandenergy.com
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