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Thursday, 25 April 2013
New Zealand Energy says plans underway to boost production, cash flow
New Zealand Energy Corp. (CVE:NZ)(OTCQX:NZERF) has unveiled its full year 2012 results, substantially narrowing its losses and increasing its revenue, while also releasing the results of its year-end reserve and resource estimation and saying it is focused on optimizing production and cash flow.
Shares in the Vancouver-based company rose more than 13 per cent this morning, or by 5.5 cents, to 47 cents, stretching its gains this week to more than 38 per cent.
For the year that ended December 31, the company posted revenue of $16.48 million on production of four wells, compared to $0.97 million a year earlier, when the company had only one well in production.
Total comprehensive losses narrowed to $1.24 million, or 3 cents per share, compared to $6.66 million, or 8 cents per share.
In 2012, it produced 162,444 barrels of oil from its wells in the Taranaki Basin of New Zealand, compared to 11,623 barrels in 2011. It also sold 162,077 barrels for total oil sales of $17.3 million last year, or $106.71 per barrel.
Average annual field netback was $70.08 per barrel of oil sold, compared to $78.43 in 2011, as a result of lower field netback in the fourth quarter due to lower oil production at its Copper Moki wells in the Taranaki Basin tied to well declines. The company also saw higher fixed production costs in the fourth quarter, and lower average realized prices.
Still, the company Thursday told investors that it yielded positive cash flow from petroleum operations of $13.8 million during 2012, including pre-production recoveries, up from $1.7 million in 2011.
Late in February, the junior oil and gas company withdrew its 3,000 barrels of oil equivalent per day (boe/d) outlook for the end of the first quarter on declining flow rates from producing wells, while also announcing the decision to delay further drilling to focus on the completion of its acquisition from Origin Energy.
The company's plans are to focus in the near-term on lower-cost exploration and production opportunities that are close to infrastructure. Indeed, the acquisition from Origin, which is expected to close in the second quarter of this year, includes the Waihapa Production Station, and associated gathering and sales infrastructure, as well as four petroleum licenses in the main Taranaki Basin production fairway.
In a statement Thursday, the company said it believes that the declines in production it saw following the installation of artificial lift may not have been due to reservoir conditions, but rather may be related to mechanical issues, including "possible wax build-up down-hole". As a result, management has hired firms to investigate the cause of the declines, and look for solutions to help optimize output.
"Such remedies may include stimulation of well flow by means of condensate washes, modifying pumping mechanisms or other forms of reservoir stimulation," the company said in the release. "Following a condensate wash of one well during the past five days, production from the wells increased to a rate of 369 bbl/day as of the date of this report."
The Canadian junior is aiming to optimize production and cash flow, with the company's technical and engineering teams continuing to investigate options to boost recovery and performance of existing wells.
The company's four wells at Taranaki, consisting of 3 Copper Moki wells and the Waitapu-2 well, are producing light oil that is trucked to the Shell-operated Omata tank farm and sold at Brent pricing.
New Zealand Energy has also completed a natural gas pipeline from the Copper Moki site to the Waihapa Production Station, and is considering laying 1.3 kilometres of natural gas pipeline to tie-in Waitapu-2 to the station, though the company is not yet generating cash flow from its natural gas production.
In its statement, the company said it has undertaken a "comprehensive review" of its reprocessed 3D seismic data and recent well results, with the goal of re-starting drilling operations early in the third quarter of this year.
Once the acquisition with Origin is closed, the junior oil and gas play said it plans to reactivate six wells in the Tikorangi formation using an established gas lift system, and has also found that six previously drilled wells on the petroleum licenses have "uphole completion potential".
"Recompletion of these wells would be significantly less expensive and faster than drilling new wells, and economic discoveries could be quickly tied in to the Waihapa Production Station using existing oil and gas gathering pipelines," New Zealand Energy said in the statement today.
In the reserve and resource report also released today - prepared by Deloitte - the company increased 2P reserves by 151 per cent compared to year-end 2011, with an undiscounted pre-tax value estimated at $27.5 million. Proved and probable reserves at year end 2012 stood at 708,000 barrels of oil equivalent.
Aside from the Taranaki Basin holdings, New Zealand Energy also holds permits in the East Coast Basin. In 2012, the company said it increased exploration permit holdings by 249,326 acres, or 12.5 per cent.
Its total property portfolio collectively covers about 2.25 million acres of conventional and unconventional prospects in the Taranaki Basin and East Coast Basin of New Zealand's North Island.
As of April 19, the company had $11.3 million in estimated net working capital, and said Thursday it is considering a number of options to boost its financial capacity.