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Tuesday, 1 October 2013
Investors cheer as New Zealand Energy secures financing for Origin Energy acquisition
New Zealand Energy Corp. (CVE:NZ)(OTCQX:NZERF) has completed the financing for its long-awaited acquisition of upstream and midstream oil and gas assets from Origin Energy (ASX:ORG), with the company now only requiring the approval of the New Zealand government to wrap up the deal.
The Vancouver-based oil and gas junior, which has been strategizing to improve its operations, is working to close the acquisition of the Tariki, Waihapa and Ngaere (TWN) petroleum licenses from Origin Energy as a means to generate substantially higher cash flow and production. The $33.7 million acquisition, which includes the TWN licenses, as well as the Waihapa production station and associated infrastructure, has been underway since last year.
The consideration for the assets includes a $6 million deposit from New Zealand Energy, $7.9 million in subscription receipts, $1.5 million directly from the company, and $18.25 million from L&M Energy as part of a 50/50 split joint venture agreement recently signed to explore, develop and operate the TWN licenses.
The assets are being acquired jointly by New Zealand Energy and L&M, with the two parties to gain a total of 23,049 acres in the main Taranaki Basin production fairway, as well as the Waihapa station and other infrastructure.
New Zealand Energy is now awaiting the approval of the acquisition from the local government, which is the final hurdle prior to closing the deal, according to the Canadian junior's statement released Tuesday. Shares of the company were halted in advance of the news, and resumed trading shortly after, rising more than 10% to 37.5 cents.
Investors have been sitting tight for the company to finally complete the acquisition, which is expected to transform New Zealand Energy into a fully integrated upstream/midstream company, positioning it for increased production and cash flow, with the infrastructure and drilling inventory to support long-term growth.
The company already announced in August an "extensive post TWN acquisition work program" -- on which it will spend a total of $7.3 million this year -- that will be conducted once the deal closes, to be made up of reactivation and re-completion of existing wells, in addition to up to eight new wells, including four targeting deeper, high impact targets. The acquisition will no doubt add to its existing production portfolio in the Taranaki Basin, with the work program is forecast to give the company a 2014 exit production rate of 2,300 barrels of oil equivalent per day.
The Canadian junior oil and gas play already controls 2.2 million acres of exploration permits on New Zealand’s North island (including one permit pending), where it is producing oil from four wells.
With financing of the Origin acquisition now in place, the company said Tuesday it continues to fill orders for the private placement financing announced earlier this month, with the aim of raising up to an additional $7.1 million in general working capital. So far, it has closed $7.9 million, and issued 23.8 million subscription receipts.
The balance of the offering is comprised of up to 21.7 million subscription receipts at a price of $0.33 apiece, with each convertible into units consisting of one common share and one-half of a share purchase warrant. Each warrant entitles the holder to acquire one share for 45 cents, for a period of one year.
The company said the funds raised will be held in escrow and released after the acquisition of the TWN assets closes.