New Zealand Energy Corp. (CVE:NZ)(OTCQX:NZERF) says it has made its sixth oil discovery in the Taranaki Basin, showing what the company called a strong inflow of oil, gas and water.
The junior oil and gas producer started testing the Arakamu-2 well in the middle of last month, and swab tested two intervals for a total of 13 days.
The well showed "strong inflow of oil, gas and water with the oil cut increasing, averaging more than 20% over the last three days of swab testing," the company said in its statement on Wednesday.
Indeed, Arakamu-2 has produced a total of 407 barrels of 42° API oil so far, with the well currently shut-in pending the installation of artificial lift, as the well is producing both oil and water.
The well was drilled to a measured depth of 2,380 metres and encountered roughly18 metres of net pay over two separate intervals in the Mt. Messenger Formation, the company said.
"We are pleased to announce a successful outcome at the Arakamu-2 well, with a new oil discovery that will add to NZEC's production and cash flow," said the company in the release, citing president and CEO, John Proust.
"While this well has certainly posed more than its share of challenges, every well that we drill provides additional information and well control that will help guide future exploration in the Taranaki Basin."
Perforation of the upper interval "demonstrated good inflow", New Zealand Energy noted Wednesday, but sand entered the wellbore, causing the tubing string and perforating gun to become stuck. Following extensive workover operations, the tubing string and perforating gun were successfully recovered, it added.
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. The acquisition from Origin includes the Waihapa Production Station, and associated gathering and sales infrastructure, as well as four petroleum licenses in the main Taranaki Basin production fairway.
Last week, in a step forward, New Zealand Energy announced that it received approval from New Zealand's Overseas Investment Office to obtain the Waihapa Production Station site, putting it one step closer to completing its acquisition of assets from Origin Energy. It expects to meet all conditions in order to conclude the transaction in the second quarter of this year.
Currently, the company’s property portfolio collectively covers roughly 2.27 million acres, including pending permits, of conventional and unconventional prospects in the Taranaki Basin and East Coast Basin of New Zealand's North Island.
The Canadian junior is considering a number of options to increase its financial capacity, including increasing cash flow from oil production, credit facilities, joint ventures, commercial arrangements or other financing alternatives.
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