New Zealand Energy Corp. (CVE:NZ)(OTCQX:NZERF) said Tuesday it has initiated an extended production test of its Copper Moki-2 well, and started drilling Copper Moki-3, its third well in the Taranaki Basin of New Zealand's North Island.
The company also said today that it has entered into a farm-in agreement with L&M Energy, under which it will earn an additional 15 percent in the Alton Permit, increasing its interest to 65 percent.
The Alton Permit covers 119,200 acres in the Taranaki Basin of New Zealand's North Island, with an estimated resource base of 760 million barrels and prospective recoverable resources of 69 million barrels of oil. New Zealand Energy, which is the operator of the permit, can earn the additional 15 percent by funding the collection and processing of 3D seismic data over roughly 50 square kilometres of the permit.
Earning the additional stake will increase New Zealand Energy's prospective recoverable resource base in the Taranaki Basin to 77 million barrels of oil and boost its net Taranaki Basin acreage to 169,949 acres, representing a 16 percent and 12 percent increase, respectively.
At the Copper Moki-2 (CM-2) well, it is producing 42.0 degrees of API oil, and is currently flowing at a rate of 1,000 barrels of oil per day, and 820 thousand cubic feet (mcf) of natural gas per day.
In the last five days, CM-2 has produced 5,318 barrels of oil and 4,158 mcf of natural gas. The well is tied in to the production facilities of the Copper Moki-1 well, with produced oil trucked to the Shell-operated Omata Tank Farm, located around 45 kilometres north of the Copper Moki site.
The company said the oil sells at a premium to Brent and earns a "top-tier operating netback" of approximately US$90 per barrel. New Zealand Energy calculates the netback as the oil sale price less fixed and variable operating costs and a five percent royalty.
The oil and gas producer said it has also advanced its plans to build a natural gas pipeline, and once this is completed, it expects to begin marketing its natural gas production.
The CM-2 well was drilled to a total depth of 2,080 metres, encountering approximately 12 metres of net pay in the Mt. Messenger Formation, a thick sequence of turbidite sandstones in New Zealand's Taranaki Basin. The company also collected logs from the shallower Urenui Formation while drilling CM-2, with analysis showing potential for oil and gas production.
New Zealand Energy said it is considering opportunities to drill a well later this year to target the Urenui Formation.
The company has also started drilling CM-3, with the expectation of releasing well results by the end of March. This well will be the company's first to target the deeper Moki formation, and it expects to collect information from both the Urenui and Mt. Messenger formations as CM-3 drilling proceeds.
Once the CM-3 drilling is completed, the oil and gas company anticipates the start of drilling at the Copper-Moki-4 well from the same drilling pad.
Meanwhile, CM-1 has continued to flow, and has been flowing from natural reservoir pressure since December 2011, producing more than 44,000 barrels of oil since the first August test last year.
CM-1 production has averaged 500 barrels of 41.8 degrees API oil per day and 860 mcf of natural gas per day since December 10, 2011, and has produced an average of 434 barrels of oil per day and 1,045 mcf of natural gas per day over the last 30 days of production.
New Zealand Energy is an oil and natural gas company focused on the production, development and exploration of petroleum and natural gas assets in New Zealand.
Its 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.