New Zealand Energy (NZEC) (CVE:NZ) Monday said that continuous production has begun at its Copper Moki-3 well on its 100 per cent-owned Eltham permit in the Taranaki Basin of New Zealand's North Island.
The company also noted that its Copper Moki gas pipeline is complete
and tied in to the Waihapa Production Station, with the operator
finalizing arrangements to receive the gas.
NZEC said it expects to begin generating cash flow from its natural gas production this month.
The Waihapa Production Station will give NZEC strategic control over
gathering, processing and sales infrastructure in the Taranaki Basin.
The company expects to be able to quickly bring on its own near-term
production additions, and also sees business opportunities for
processing oil and gas from third-party producers in the region.
In an update on production activities, the New Zealand-focused oil
and natural gas producer said that its Copper Moki-1 and Copper Moki-2
wells continue to flow from natural reservoir pressure, with a total of
more than 132,000 barrels of oil produced to date.
Average production in June from Copper Moki-1 and Copper Moki-2 was approximately 688 barrels of oil equivalent per day.
NZEC said that Copper Moki-3 flowed 7,456 barrels of oil and 4,765
thousand cubic feet (mcf) of natural gas during production testing, and
began continuous production on July 2.
The well is producing from natural reservoir pressure out of the Mt.
Messenger formation at an average rate of 242 barrels of oil per day
(bbl/d) and 135 mcf per day through a 20/64 inch choke.
NZEC stressed that natural gas and associated liquids will be flared
until the well can be tied in to the company’s natural gas pipeline.
The company also completed production testing of Copper Moki-4, its
first Urenui formation well. The well is producing 29 degrees API oil,
with a higher pour point than Mt. Messenger oil, New Zealand Energy
said, and with characteristics similar to Urenui oil being produced from
third-party wells in the immediate area.
The well is being shut in while well test analyses and economic
evaluation of artificial lift systems required are completed. At that
juncture, NZEC will make a production decision for Copper Moki-4, it
NZEC’s property portfolio collectively covers two million acres of
conventional and unconventional prospects in the Taranaki Basin and East
Coast Basin of New Zealand's North Island.
At the end of May, NZEC announced a strategic acquisition in the
Taranaki Basin, including four Petroleum Mining Licenses and the Waihapa
Production Station, purchased from Origin Energy's (ASX:ORG) New
The company is paying C$42 million in cash and a five per cent gross
overriding royalty, with the deal expected to close in October,
contingent on approvals closing conditions including government
NZEC also announced its first-quarter earnings, with positive cash flow of $4.5 million generated from two producing wells.
With a cash position of $61 million, post-acquisition, NZEC said at
the time that it will remain fully funded to complete its previously
announced 2012 capital program, and reiterated its forecasted exit
production rate of 3,000 barrels of oil equivalent per day.
In the spring, the company also completed data acquisition of a 100
square-kilometre 3D seismic survey across the Eltham and Alton permits.
Information gained from exploration and seismic interpretation will
guide the oil and gas company's future strategy for both exploration and
acquisition in the Taranaki Basin.
NZEC has drilled five exploration wells in the Taranaki Basin, one on
the Alton permit, and four from the Copper Moki pad on the Eltham
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 per cent back 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 the first quarter, based on a realized
netback averaging approximately US$90 per barrel of oil sold.
During the period that 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.
Looking ahead, NZEC said it has an eight-well drill program planned to begin in early August.