New Zealand Energy Corp. (CVE:NZ)(OTCQX:NZERF) has almost doubled its oil reserves estimate for its wells on the Eltham Permit in the Taranaki Basin of New Zealand.
The oil and gas producer announced Wednesday an updated reserve and resource estimate based on a report prepared by Deloitte & Touche, which also saw a 172 per cent increase in proved + probable + possible (3P) natural gas reserves.
The pre-tax net present value of 3P reserves at a 10 per cent discount rate also rose by 64 per cent to $28.4 million, the company said.
Light and medium oil 3P reserves rose to 625.6 thousand barrels of oil, while natural gas 3P reserves increased to 1,551.2 million cubic feet of natural gas.
Natural gas liquids 3P reserves totaled 100.8 thousand barrels of oil, with barrels of oil equivalent 3P reserves up at 985 thousand barrels of oil equivalent.
New Zealand Energy commissioned Deloitte to prepare the interim NI 51-101 compliant estimate to include data from wells that started continuous production this year.
The report was confined to the company's 100 per cent working interest Eltham Permit, and based on reservoir and production info from its three Copper Moki wells, effective September 30.
The company said that no reserves will be assigned to the Copper Moki-4 well until it shows commercial production rates.
New Zealand Energy is now installing artificial lift systems, or pump jacks, on all three of its producing Copper Moki wells, which Deloitte has forecasted will increase production rates under the proved undeveloped case.
An updated reserve estimate, coinciding with the company's financial year-end of December 31, will include data from artificial lift production rates.
The junior oil and gas producer also noted that Deloitte has reviewed the seismic mapping and agrees that "this data is likely indicative of the higher permeability regions targeted by the wells but is not conclusive relative to the total extent of the reservoirs."
In the independent report, fixed and variable operating costs for the Copper Moki wells were estimated based on December 2011 to August 2012 lease operating statements. The wells are currently using temporary facilities, and as a result, operating costs are higher than anticipated for the future, New Zealand Energy said.
In addition, capital required to install the artificial lift systems on the wells was also included. The company said that future capital will be spent on installing heating and separating facilities and continuing to produce tanks until enough production exists in the field to justify building a pipeline. The estimated $1.9 million cost for additional site facilities is expected to be incurred in November, with fixed operating costs anticipated to decline by more than 75 per cent beginning with the first quarter of 2013, after these operations are complete.
Earlier this month, Vancouver-based New Zealand Energy said it had produced more than 175,000 barrels of oil from its three Copper Moki wells so far, generating total revenue of over US$19 million.
Once the installation of the pumping jacks is finished, raw natural gas from all three wells at Copper Moki will be delivered through the company's existing gas pipeline to the Waihapa Production Station.
Arrangements are being finalized with various third parties to provide continuous supply to the plant, at which point the company can start sales of its natural gas and liquid petroleum gas.
New Zealand Energy is also in the midst of an eight well drilling program at Taranaki, which is now expected to wrap up in the first quarter of next year.
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