New Zealand Energy Corp (CVE:NZ) received initial coverage from Stonecap Securities, which handed out an "outperform" rating and a one-year target price of $3.75 - up considerably from the current price of $2.91 per share.
The New Zealand-focused oil and gas producer is seen by Stonecap to represent "steady growth with low risk".
analyst Aminul Haque said immediate production and cashflow is expected
from the Taranaki Basin in New Zealand's North Island.
company's two permits in Taranaki are offset by a number of producing
wells and recent successful discoveries, the research report said, with
New Zealand Energy achieving "very encouraging" early results from its
first two wells.
The oil and gas company plans to complete or drill eight more well through the remainder of the year.
this month, the company said its Copper Moki-2 well in the Taranaki
Basin was then producing out of the Mt. Messenger formation roughly 700
barrels of oil per day (bbl/d), and around 850 thousand cubic feet of
natural gas per day(mcf/d).
It also said that its Copper Moki-3
well encountered 12 metres of net pay in the Mt. Messenger formation and
15 metres of net pay in the Moki formation. The company said it planned
to complete and flow test both formations.
New Zealand Energy
controls two permits covering 169,949 net acres in the Taranaki Basin.
It achieved production in December 2011 from Copper Moki-1, its first
discovery well in the Taranaki Basin that has produced more than 62,000
barrels of oil to date since it was first tested last August.
company also holds large land positions in the East Coast Basin of
North Island, said Stonecap, and although under-explored, these basins
hold "large conventional and non-conventional oil potential."
report also noted that New Zealand is an OECD (Organisation for
Economic Co-operation and Development) country, with a "stable democracy
and an advanced legal system."
"It has an attractive and
predictable regulatory and royalty environment that makes it compelling
for oil and gas investment," Stonecap continued.
also has a growing internal market for oil and gas, with an "excellent"
infrastructure and distribution system, Stonecap's Haque said.
"Increasing dependence on imports guarantees a favorable environment for domestic producers."
capital markets firm's target price for New Zealand Energy is based on
its estimate of the value of risked resources, a resource estimate by an
independent reserve engineer and the oil and gas company's recent
The $3.75 target price implies a 12-month return of 29 per cent.
concluded: "NZEC is well positioned to continue its early success and
increase production with the help of an extensive exploration program.
"The company also has significant cash resources to scale up its exploration program."
the company, which closed a $63.4 million bought deal financing in late
March, plans on drilling nine wells and completing two seismic programs
Company production from the Mt. Messenger formation
earlier this month stood at 1,000 barrels of oil per day and 2,050
mcf/d, with an additional 341 barrels oil equivalent per day of natural
gas plus associated liquids to be tied in by the end of the second
The oil and gas company's exploration strategy is to
prioritize wells identified on 3D seismic that have well-defined,
lower-risk Mt. Messenger targets, coupled with additional exploration
potential from the Urenui, Moki or Kapuni formations.
Taranaki Basin is currently New Zealand's only oil and gas producing
basin, generating around 130,000 barrels of oil equivalent per day from
New Zealand Energy is targeting production of 3,000
barrels of oil equivalent per day by year-end, and also said that its
Copper Moki-4 has been drilled to the target depth of 2,125 metres.
company's peers in the New Zealand-focused exploration and production
space include TAG Oil (TSE:TAO) and KEA Petroleum (LON:KEA), which only
recently drilled its first successful well on a Taranaki permit,