Capital markets firm Canaccord Genuity Friday initiated coverage on New Zealand Energy (CVE:NZ) with a "Buy" recommendation and $4.50 target price.
New Zealand Energy is engaged in the exploration, development and production of petroleum and natural gas assets in New Zealand.
The company's property portfolio covers nearly two million acres of
conventional and unconventional prospects in the Taranaki Basin and East
Coast Basin of New Zealand’s North Island.
"New Zealand Energy
has just begun exploration on a large land base in the heart of the
Taranaki Basin," Canaccord Genuity analyst Frederick Kozak said in a
"The current inventory of exploration prospects will keep the company active for at 12-18 months.
3D seismic will further increase this exploration inventory and the
company has exposure to a large potential unconventional shale play on
the east coast of the country."
Kozak considers the oil and gas
explorer a "pure play on New Zealand" adding that the company operated
in a country with an attractive fiscal regime, a good tax rate and a
The fact that New Zealand is not
self-sufficient in crude oil consumption, results in a desire to have a
strong domestic oil and gas industry, the research report noted.
Zealand Energy has realized early success in the heart of the Taranaki
Basin, with the first two exploration prospects, Copper Moki 1 & 2
currently producing 1,300 barrels of oil equivalent daily. Two more
exploration wells are being tested while the company expects to drill
six more prospects in 2012.
Kozak believes that with working
capital of approximately $69 million, positive cash flow and two
Taranaki Basin blocks encompassing 160,000 acres of highly
underdeveloped land, plus exposure to a large potential unconventional
shale play "should give this company lots of running room for several
years to come."
Canaccord Genuity's estimate of risked value is
based on an active exploration program. The company has reservoir risk
associated with currently producing reservoirs, and exploration risk
associated with its drilling program.
New Zealand Energy is currently trading at $2.72 on Toronto's Venture exchange.