New Zealand Energy Corp. (TSX VENTURE:NZ)(OTCQX:NZERF) ("NZEC" or the "Company")
has released the results of its third quarter ended September 30, 2013. Details
of the Company's financial results are described in the Unaudited Condensed
Consolidated Interim Financial Statements and Management's Discussion and
Analysis which, together with further details on each of the Company's projects,
will be available on the Company's website at www.newzealandenergy.com and on
SEDAR at www.sedar.com. All amounts are in Canadian dollars unless otherwise
stated.
HIGHLIGHTS
Financing
-- Closed oversubscribed private placement for gross proceeds of $16.1
million
Property Portfolio
-- Completed acquisition of strategic upstream and midstream assets in
Taranaki Basin
-- Acquired 50% interest in three petroleum mining licenses (totalling
23,049 acres) in main production fairway
-- Acquired 50% interest in full-cycle high-capacity production
facility and associated gathering and sales infrastructure
-- Entered into joint arrangement with L&M Energy to explore, develop
and operate the new petroleum mining licenses, production facility
and associated assets
-- Booked additional 1,072,350 boe (86% oil) of Proved + Probable
reserves with estimated before tax net present value (10% discount
rate) of $31.4 million(1)
-- Extended Alton Permit to September 2018
-- Received approval to defer commitments wells on Alton and Castlepoint
permits to 2014
-- Applied to extend Eltham Permit to September 2018 and convert a portion
of the property to a petroleum mining permit with an initial duration of
15 years
Production and Development
-- Field netback of $58.90/barrel of oil ("bbl") for Q3-2013
-- 60,694 bbl produced and 63,852 bbl sold during nine-month period,
generating pre-tax oil sales of $6.6 million
-- Announced 2013/2014 work program for Taranaki Basin, estimating 2,300
boe/d (82% oil) of production by year-end 2014 (net to NZEC) based on
successful completion of the planned work program
-- Commenced reactivation of oil production from six wells on TWN Licenses.
Production results will be announced once all six wells are in
production, which is anticipated to occur by the end of November 2013
FINANCIAL SNAPSHOT
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Nine Three Nine Three
months months months months
ended ended ended ended
September September September September
30, 2013 30, 2013 30, 2012 30, 2012
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Production 60,694 bbl 11,958 bbl 155,285 bbl 37,850 bbl(i)
Sales 63,852 bbl 14,648 bbl 154,533 bbl 38,565 bbl
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Price 107.63 $/bbl 108.84 $/bbl 107.33 $/bbl 100.93 $/bbl
Production costs 62.08 $/bbl 44.80 $/bbl 25.22 $/bbl 32.58 $/bbl
Royalties 4.98 $/bbl 5.14 $/bbl 4.98 $/bbl 4.77 $/bbl
Field netback 40.57 $/bbl 58.90 $/bbl 77.13 $/bbl 63.58 $/bbl
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Revenue $6,553,968 $1,519,010 $13,527,930 $3,708,254
Pre-production
recoveries - - - -
Total comprehensive
(loss) income ($3,339,589) $1,347,788 $98,313 ($2,018,634)
Net finance expense
(income) $66,794 $27,220 ($200,003) 41,377
(Loss) earnings per
share - basic and
diluted ($0.06) ($0.02) ($0.01) ($0.02)
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Current assets $6,403,134 $49,680,292
Total assets $105,313,813 $98,882,087
Total long-term
liabilities $11,094,916 $2,042,768
Total liabilities $12,749,253 $6,518,365
Shareholders' equity $92,564,560 $92,263,722
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Note: The abbreviation bbl means barrel or barrels of oil.
At the date of this MD&A, the Company had an estimated $6 million in working
capital.
Nine-month Operating Results
During the nine-month period ended September 30, 2013, the Company produced
60,694 barrels of oil and sold 63,852 barrels for total oil sales of $6,872,180
with an average oil sale price of $107.63 per barrel. Total recorded production
revenue, net of a 5% royalty payable to the New Zealand Government (an average
of $4.98 per barrel), was $6,553,968. Production costs during the nine-month
period ended September 30, 2013 totalled $3,964,141, or an average of $62.08 per
barrel, generating an average field netback of $40.57 per barrel during the
period. NZEC calculates the netback as the oil sale price less fixed and
variable production costs and a 5% royalty. The notable reduction in netback
during the nine-month period ended September 30, 2013, when compared to the same
period in 2012, is predominantly the result of decreased oil production,
considering the large proportion of fixed production cost. As previously
announced, the Company had shut in the Waitapu-2 well during May 2013 in order
to gather critical data for a Mt. Messenger reservoir study and to evaluate and
install artificial lift. In addition, the Company experienced lower production
from the Copper Moki wells as partial work-over activities were undertaken on
two of the three wells.
The Company undertook a number of reservoir and production tests during the
period with the objective of optimizing oil production, and these tests added to
production costs. During the nine-month period ended September 30, 2013, fixed
production costs represented approximately 88% of total production costs.
Installation of the Copper Moki surface facilities was completed in May and, as
expected, this resulted in a reduction in production costs for the Copper Moki
site since June 2013. Although shutting in the Waitapu-2 well in May 2013
reduced some of the fixed operating costs, the Company continued to incur costs
on that site. However, the field netback improved significantly for the quarter
ended September 30, 2013 compared to the quarter ended June 30, 2013, as
outlined in Three-month Operating Results.
Three-month Operating Results
During the three-month period ended September 30, 2013, the Company produced
11,958 barrels of oil and sold 14,648 barrels for total oil sales of $1,594,302,
with an average oil sale price of $108.84 per barrel. Total recorded production
revenue, net of a 5% royalty payable to the New Zealand Government (an average
of $5.14 per barrel), was $1,519,010. Production costs during the three-month
period ended September 30, 2013 totalled $656,264, or an average of $44.80 per
barrel, generating an average field netback of $58.90 per barrel during the
period.
As discussed in Nine-month Operating Results, reduced production following the
shut-in of Waitapu-2 and work-overs on the Copper Moki-1 and Copper Moki-3 wells
greatly impacted the nine-month netback results. A significant reduction in
production costs on the Copper Moki site in the third quarter resulted in a
marked increase in the netback results reported for the three months ended
September 30, 2013, with the netback improving from $22.46/bbl during the
quarter ended June 30, 2013 to $58.90/bbl during the quarter ended September 30,
2013.
RECENT DEVELOPMENTS
Subsequent to the period end, NZEC completed a strategic acquisition, assumed
joint control of the acquired assets and commenced the work required to
reactivate oil production in six wells drilled by the previous operator; booked
additional reserves and resources related to the acquisition; closed an
oversubscribed private placement for gross proceeds of $16.1 million; and made a
number of changes to its New Zealand senior management team.
Acquisition of Interest in Upstream and Midstream Assets
On October 28, 2013, the Company closed the acquisition of strategic upstream
and midstream assets (the "Acquisition") from Origin Energy Resources NZ (TAWN)
Limited ("Origin"). The Acquisition was originally announced on May 31, 2012 and
is described in more detail in Note 2 to the Condensed Consolidated Interim
Financial Statements for the quarter ended September 30, 2013. NZEC now owns,
through its wholly-owned subsidiaries, a 50% interest in the Tariki, Waihapa and
Ngaere PMLs ("TWN Licenses") in the main Taranaki Basin production fairway, as
well as a 50% interest in the Waihapa Production Station and associated
gathering and sales infrastructure (collectively, "TWN Assets"). NZEC and L&M
acquired the assets jointly and formed a 50/50 joint arrangement ("TWN Joint
Arrangement") to explore and develop the TWN Licenses and operate the TWN
Assets, with NZEC as the operator. NZEC and L&M formed the TWN Limited
Partnership to operate the TWN Assets, with NZEC as the operator. The TWN
Limited Partnership also operates the Ahuroa Gas Storage Facility, owned by
Contact Energy Limited ("Contact"), a subsidiary of Origin. Contact pays TWN
Limited Partnership a monthly operating fee of NZ$201,000.
The purchase price for the Acquisition was $33.7 million in cash, with $30
million payable to Origin and $3.7 million (NZ$4.25 million) payable to Contact.
The Company paid a $5 million deposit to Origin for the Acquisition in June 2012
and a further $1 million deposit in August 2013. The remaining $27.7 million was
paid on closing, of which $18.25 million was contributed by L&M and $9.45
million was contributed by NZEC. The TWN Joint Arrangement will also pay Origin
a 9% net revenue royalty on all future hydrocarbon production from the TWN
Licenses, and can reduce the royalty at any time by as much as 4% by paying
Origin $4.25 million per percentage point. The TWN Licenses are also subject to
a "grandfathered" NZPAM 10% net revenue royalty.
The Company took joint control of the TWN Licenses and TWN Assets on October 28,
2013, and immediately commenced the work required to reactivate oil production
from six existing wells that had been drilled by a previous operator and
produced oil from the Tikorangi Formation. The reactivation activities are
proceeding as expected. Results will be released once all six wells have
commenced production, which is anticipated to occur by the end of November 2013.
TWN Reserves and Resources
Concurrent with closing of the Acquisition, NZEC booked reserves and resources
related to the TWN Licenses.(1)The TWN reserves and resources are in addition to
the Company's existing reserves attributable to its Eltham Permit, and to the
resources attributable to its Eltham, Alton, Castlepoint, Ranui and pending East
Cape permits. NZEC's 50% share of Proved and Probable Reserves (2P Reserves)
attributable to the TWN Licences is estimated to have a before tax net present
value of $31.4 million (10% discount rate). NZEC's 50% share of 2P Reserves is
estimated at 926,350 barrels of oil, 723.9 million cubic feet of natural gas and
25,350 barrels of natural gas liquids, collectively 1,072,350 boe). NZEC's share
of Contingent Resources is estimated at 580,000 boe, with Prospective Resources
estimated at 11,706,000 boe. Additional information regarding the Company's
reserves and resources is available in the Company's Form 51-101F1 Statement of
Reserves Data dated April 22, 2013 and in the Company's Interim Statement of
Reserves and Resources dated October 28, 2013, both of which are filed on SEDAR
at www.sedar.com.
Private Placement
On October 28, 2013, the Company closed a $16.1 million non-brokered private
placement, raising $1.1 million more than the original objective of $15 million.
Of the funds raised, $8.2 million was earmarked for financing costs and general
working capital while the remainder was used to finance the Acquisition.
The Company issued 48.9 million subscription receipts ("Subscription Receipts")
at a price of $0.33 per Subscription Receipt. The Subscription Receipts were
convertible into units (the "Units") consisting of one common share (a "Share")
and one-half of one non-transferable share purchase warrant (each whole warrant
referred to as a "Warrant") of the Company. Each Warrant will entitle the holder
to acquire one Share at a price of $0.45 with an expiry date of October 28,
2014.
NZEC filed a short form prospectus with the applicable regulatory authorities in
each of the provinces of Canada where Subscription Receipts were sold. On
November 21, 2013, following final receipt for the prospectus by the applicable
regulatory authorities, each Subscription Receipt converted into one Unit and
the Shares and the Shares underlying the Warrants became free-trading. In
relation to the private placement, NZEC paid $1 million in finder's fees and
issued three million finder's special warrants, which converted into finder's
warrants on November 21, 2013. Each finder's warrant entitles the finder to
acquire one Share at an exercise price of $0.33 with an expiry date of October
28, 2014. The Shares underlying the finder's warrants will be free-trading on
exercise of the finder's warrants.
Changes to Senior Management
The Company has made a number of changes to its New Zealand leadership team.
With the Acquisition complete and well reactivations proceeding as planned, NZEC
is set to significantly increase its exploration and production activities.
Clarifying roles and responsibilities in New Zealand has refocused and
streamlined the team.
New Zealand Leadership Team
-- Chris Bush - New Zealand Country Manager
-- Gerrie van der Westhuizen - Interim Chief Financial Officer
-- Mike Oakes - General Manager Operations
-- Bruce McIntyre - Director and Acting General Manager Exploration
-- Ian Brown - General Manager Development & Corporate Affairs
-- Susan Baas - Legal Counsel
Chris Bush was appointed New Zealand Country Manager in October 2012. Chris is
an experienced oil and gas professional with more than 30 years of experience in
both upstream and downstream sectors. Prior to joining NZEC he was employed by
Origin Energy as New Zealand Country Manager/Director. As NZEC's New Zealand
Country Manager, Chris leads the New Zealand team in all relevant activities,
including delivery of the work programs and budgets, as well as health and
safety performance.
Gerrie van der Westhuizen joined NZEC in November 2012 as Vice President Finance
and was appointed Interim Chief Financial Officer in October 2013. Gerrie is a
Chartered Accountant with considerable experience in the resource industry. As
Interim Chief Financial Officer, Gerrie is responsible for all aspects of the
Company's financial management and reporting. Gerrie is supported by a New
Zealand based accounting team and Newton Cockerill, who was appointed Financial
Controller in October 2013.
Mike Oakes joined NZEC in August 2012 as General Manager Midstream Operations.
In his new role as General Manager Operations, Mike will oversee all of NZEC's
exploration and production activities and operation of the Waihapa Production
Station. Mike has worked in the oil and gas industry for 33 years overseeing
design, commissioning and start up, staffing and operation of both onshore and
offshore oil and gas fields and production facilities. Most recently Mike worked
for Origin Energy in New Zealand as Operations Manager, Asset Manager and
Operational Excellence Advisor.
Bruce McIntyre, in addition to his role as Director of NZEC (which he has
performed since January 2011), has been appointed to the role of Acting General
Manager Exploration. Bruce is a professional geologist with more than 30 years
of oil and gas experience. As Acting General Manager Exploration Bruce will
oversee the Company's technical activities, working with the Wellington-based
technical team to de-risk drill targets and expand the Company's drilling
inventory, manage permitting and reporting activities, and identify new
opportunities in New Zealand's petroleum basins.
Ian Brown, Chief Operating Officer of the Company since March 2011, has assumed
the role of General Manager Development & Corporate Affairs. Ian is a chartered
professional engineer with more than 25 years of geological consulting
experience in New Zealand. In his new role, Ian will be responsible for
community engagement and government relations, compliance with environmental
regulations, and overseeing the resource consent and land access agreement
process. Ian is also responsible for implementing the Company's East Coast
strategy and is actively seeking strategic partners to fund exploration and
development of NZEC's East Coast Basin permits.
Susan Baas joined NZEC in February 2013 as Legal Counsel and has since been
appointed an officer of the Company. Susan has both a Bachelor and Master of Law
and initially worked as a solicitor in private practice in New Zealand for five
years. In 2004 Susan moved into an in-house corporate law position, taking on
progressively senior roles with Contact Energy until joining NZEC in 2013. As
Legal Counsel, Susan will provide legal support, oversee corporate governance
and regulatory compliance, and assist with commercial negotiations and contract
drafting and administration.
The Company has also appointed Dan MacDonald as Drilling Manager, commencing
November 25, 2013. Dan is a mechanical engineer with an MBA and more than 30
years of oil and gas drilling experience. Reporting to the General Manager
Operations, Dan will be responsible for all drilling and completion work,
including design, approvals and implementation of the drilling program.
Cliff Butchko, General Manager Upstream Operations, and Celeste Curran, Vice
President Corporate and Legal Affairs, will both be leaving NZEC at the end of
December to pursue new opportunities.
PROPERTY REVIEW
Taranaki Basin
The Taranaki Basin is situated on the west coast of the North Island and is
currently New Zealand's only oil and gas producing basin, with total production
of approximately 130,000 barrels of oil equivalent per day ("boe/d") from 18
fields. Within the Taranaki Basin, NZEC holds a 100% interest in the Eltham
Permit, a 65% interest in the Alton Permit in joint arrangement with L&M, a 60%
interest in the Manaia Permit in joint arrangement with NZOG, and a 50% interest
in the TWN Licenses and the TWN Assets in joint arrangement with L&M. The Eltham
Permit covers approximately 93,166 acres (377 km2) of which approximately 31,877
acres (129 km2) are offshore in shallow water. The Company has lodged an
application to convert 18.73 km2 of the Eltham Permit into a PMP, as outlined in
Application for Eltham Petroleum Mining Permit, and to extend the Eltham Permit
for another five years to allow for continued exploration. In November 2013,
NZEC extended the Alton Permit for a second five-year term, and was required to
relinquish 50% of the permit as part of the extension. The new Alton Permit
covers approximately 59,565 onshore acres (241 km2). The Manaia Permit covers
approximately 27,426 onshore acres (111 km2) and was granted to NZEC and NZOG in
December 2012 as part of the annual New Zealand block offer for exploration
permits. The TWN Licenses cover approximately 23,049 onshore acres (93 km2).
Production
TWN Licenses
Following closing of the Acquisition, the Company immediately proceeded with the
work required to reactivate oil production in six wells, drilled by the previous
operator. The Company has entered each of the wells by wireline to ensure that
the tubing is clear and has installed well head meters to allow the Company to
monitor oil and gas production rates on a well-by-well basis. The Company has
commenced reactivation of production in a number of wells using an existing gas
lift system. The reactivations are proceeding as planned. Information regarding
the Company's oil and gas production rates will be released once all six wells
have commenced production, which is expected to occur by the end of November
2013.
Eltham Permit
At the date of this MD&A, two of the Company's four commercially producing wells
are in active production. The Waitapu-2 well is currently shut-in awaiting
further work-over to complete the installation of artificial lift, with the
expectation that production will resume before year-end 2013. During the
quarter, the Company also temporarily shut-in its Copper Moki-1 well to replace
rods, while the Copper Moki-3 well is currently undergoing maintenance on its
down-hole pump. The Eltham Permit wells produce light approx. 41 API oil from
the Mt. Messenger formation. Oil is trucked to the Shell-operated Omata tank
farm and sold at Brent pricing. Cumulatively to October 28, 2013, the Company
has produced approximately 271,671 barrels of oil from its Eltham Permit wells,
with cumulative pre-tax oil sales of approximately $29.2 million, including
sales from oil produced during testing. The Company is not yet generating cash
flows from extracted gas, since the rich gas being produced from NZEC's Copper
Moki wells requires blending to meet the specifications required to sell the gas
in New Zealand. NZEC intends to blend its Copper Moki natural gas with gas
produced from the reactivated TWN License wells, and anticipates that the
blended gas will meet the required specifications for sale, allowing NZEC to
begin generating cash flows from its natural gas and associated natural gas
liquids production before year-end 2013.
Application for Eltham Petroleum Mining Permit
During the quarter ended June 30, 2013, the Company lodged an application with
NZPAM to convert 4,628 acres (18.73 km2) on the Eltham Permit into a PMP with an
initial duration of 15 years. The land included in the PMP application comprises
the Copper Moki field and surrounding acreage with petroleum discoveries. Once
the request has been reviewed and approved, NZEC will relinquish 50% of the
remainder of the Eltham Permit (which will have been reduced by the area
converted to a PMP) as part of the Company's application to extend the permit
for its second five-year term to September 23, 2018.
Alton Permit Extended
On November 6, 2013, the Company announced receipt of approval to extend the
Alton Permit for a second five-year term to September 23, 2018. Concurrent with
the extension, the Company and L&M relinquished 50% of the Alton Permit. The new
permit area comprises 59,565 acres (241 km2). The Company and L&M also received
an extension to the obligation to drill a commitment well on the Alton Permit.
The new work program requires the Company to drill two exploration wells,
process 20 km2 of 3D seismic and 20 km of 2D seismic, and complete a number of
technical studies and reports. The Company plans to drill the first commitment
well (the Horoi well) targeting the Mt. Messenger formation in late February
2014.
East Coast Basin
The East Coast Basin of New Zealand's North Island hosts two prospective oil
shale formations, the Waipawa and Whangai, which are the source of more than 300
oil and gas seeps. Within the East Coast Basin, NZEC holds a 100% interest in
the Castlepoint Permit, which covers approximately 551,042 onshore acres (2,230
km2), and a 100% interest in the Ranui Permit, which covers approximately
223,087 onshore acres (903 km2) and is adjacent to the Castlepoint Permit. NZEC
is considering relinquishing the Ranui Permit but has not yet made a definitive
decision in this regard. On September 3, 2010, NZEC applied to the Minister of
Energy to obtain a 100% interest in the East Cape Permit. The application is
uncontested and the Company expects the East Cape Permit to be granted to NZEC
upon completion of NZPAM's review of the application. The East Cape Permit
covers approximately 1,067,495 onshore acres (4,320 km2) on the northeast tip of
the North Island. In addition, NZEC has entered into a binding agreement with
Westech to acquire 80% ownership and become operator of the Wairoa Permit, which
covers approximately 267,862 onshore acres (1,084 km2) south of the East Cape
Permit. Preliminary approval of transfer of ownership was obtained from NZPAM on
December 20, 2012 and formation of a joint arrangement with Westech is subject
to final NZPAM approval.
The Company has completed the coring of two test holes on the Castlepoint
Permit. The Orui (125 metres total depth) and Te Mai (195 metres total depth)
collected core data across the Waipawa and Whangai shales. NZEC also completed a
test hole on the Ranui Permit. Ranui-2 was drilled to 1,440 metres, coring the
Whangai shale across several intervals. In Q2-2012, NZEC completed 70 line km of
2D seismic data across the Castlepoint and Ranui permits to further its
technical understanding of the area and identify targets for exploration.
The Wairoa Permit has been actively explored for many years, with extensive 2D
seismic data across the permit and log data from more than 15 wells drilled on
the property. Historical exploration focused on the conventional Miocene sands.
NZEC's technical team has identified conventional opportunities as well as
potential in the unconventional oil shales that underlie the property. NZEC's
team knows the property well and provided extensive consulting services (through
the consulting company Ian R Brown Associates) to previous permit holders.
During Q1-2013 the Company completed a 50 km 2D seismic program on the property,
the results of which are currently being processed and reviewed and will help to
identify exploration targets on the permit.
OUTLOOK
Completing the acquisition of the TWN Licenses and TWN Assets has been
transformative for NZEC, resulting in a fully integrated upstream/midstream
company with the cash flow, infrastructure and inventory to support long-term
growth.
Taranaki Basin
Closing the Acquisition, which has added a full-cycle production facility to the
Company's infrastructure, will allow NZEC to optimize the development of all of
its Taranaki Basin permits. As NZEC continues to explore the Eltham and Alton
permits, the Company will focus on drill targets that are close to the Waihapa
Production Station and associated pipelines, allowing for rapid and cost
effective tie-in of both oil and gas production.
The Company anticipates that the TWN wells will initially produce oil at higher
rates as a result of flush production, and then flow rates will gradually
decline to stabilized rates. Based on data collected using well meters, the
Company will identify the two best-performing wells and will install high-volume
electric submersible pumps ("ESPs") to further increase production. The ESPs
will be installed once flow rates have stabilized, with the expectation of
installing the first ESPs in Q1-2014.
The Company announced its initial development plans for the TWN Licenses and
other permits in the Taranaki Basin on August 6, 2013. As outlined in the
Company's Taranaki Basin development program, NZEC anticipates that successful
execution of the work program planned for 2013 and 2014 will result in NZEC
producing 2,300 boe/d (82% oil) by year-end 2014, based on the Company's working
interest in its various permits. This forecast reflects management's mid-case
production assumptions, as outlined in Forward-looking Information at the end of
this document. The Company continues to refine these plans as production and
development work proceeds on the TWN Licenses and in order to reflect:
-- A closing date for the Acquisition of October 28, 2013
-- Installing the first Tikorangi high-volume lift in Q1-2014
-- Drilling the Horoi well on the Alton Permit in Q1-2014
Development and operating costs are to be funded initially by existing working
capital and cash flows from production. However, in order to carry out all of
the planned development activities, the Company is considering a number of
options to increase its financial capacity. These options include increasing
cash flow from oil production, additional joint arrangements, commercial
arrangements or other financing alternatives.
East Coast Basin
The Company is actively seeking a joint venture partner for its East Coast
permits, to participate in and help fund exploration and development in the East
Coast Basin.
NZEC has drilled two stratigraphic holes on its 100% working interest
Castlepoint Permit and one stratigraphic hole on its 100% working interest Ranui
Permit. NZEC has received approval from NZPAM to extend the deadline for
drilling an exploration well on the Castlepoint Permit to May 2014. The Company
has identified its preferred drill location and continues to work towards
obtaining the requisite consents and land access agreements. The Company has met
regularly with local communities to discuss its exploration plans. The Company
is currently considering its plans for the Ranui Permit, including possible
relinquishment of the permit.
NZEC completed a 50-km 2D seismic survey on the Wairoa Permit in Q2-2013 and is
currently processing the data. The Company will finalize its exploration plans
for the permit after reviewing all of the seismic and well log data.
The Company's application for the East Cape Permit is uncontested and NZEC
expects the permit to be granted before year-end 2013, at which time the Company
will begin planning its exploration plans for the permit.
SUMMARY OF QUARTERLY RESULTS
----------------------------------------------------------------------------
2013-Q3 2013-Q2 2013-Q1 2012-Q4
$ $ $ $
----------------------------------------------------------------------------
Total assets 105,313,813 127,318,182 129,545,992 116,059,939
Exploration and
evaluation assets 55,859,632 52,357,470 49,610,922 37,379,726
Property, plant and
equipment 26,621,043 26,135,651 25,793,089 23,867,758
Working capital 4,748,797 9,517,742 17,533,636 28,293,845
Revenues 1,519,010 2,109,700 2,925,258 2,948,041
Accumulated deficit (27,292,947) (24,616,053) (22,386,089) (19,992,243)
Total comprehensive
income (loss) 1,347,788 (6,000,775) 1,313,397 (1,333,805)
Basic (loss)
earnings per share (0.02) (0.02) (0.02) (0.02)
Diluted (loss)
earnings per share (0.02) (0.02) (0.02) (0.02)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
2012-Q3 2012-Q2 2012-Q1 2011-Q4
$ $ $ $
----------------------------------------------------------------------------
Total assets 98,882,087 98,814,102 96,979,923 31,152,804
Exploration and
evaluation assets 26,377,188 25,373,718 12,103,712 6,052,699
Property, plant and
equipment 16,293,123 8,674,152 8,150,802 5,509,511
Working capital 45,204,695 53,844,035 70,401,191 18,030,398
Revenues 3,708,254 5,910,993 3,908,683 974,517
Accumulated deficit (17,804,045) (15,613,594) (16,548,180) (16,911,070)
Total comprehensive
income (loss) (2,018,634) 1,317,915 799,032 (1,258,314)
Basic (loss)
earnings per share (0.02) 0.01 0.00 0.01
Diluted (loss)
earnings per share (0.02) 0.01 0.00 0.01
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On behalf of the Board of Directors
"John Proust"
Chief Executive Officer & Director
About New Zealand Energy Corp.
NZEC is an oil and natural gas company engaged in the production, development
and exploration of petroleum and natural gas assets in New Zealand. NZEC's
property portfolio collectively covers approximately 2.25 million acres
(including permits and acquisitions pending) of conventional and unconventional
prospects in the Taranaki Basin and East Coast Basin of New Zealand's North
Island. The Company's management team has extensive experience exploring and
developing oil and natural gas fields in New Zealand and Canada. NZEC plans to
add shareholder value by executing a technically disciplined exploration and
development program focused on the onshore and offshore oil and natural gas
resources in the politically and fiscally stable country of New Zealand. NZEC is
listed on the TSX Venture Exchange under the symbol "NZ" and on the OTCQX
International under the symbol "NZERF". More information is available at
www.newzealandenergy.com or by emailing info@newzealandenergy.com.
Neither the TSX Venture Exchange nor its Regulation Services Provider (as such
term is defined in the policies of the TSX Venture Exchange) accepts
responsibility for the adequacy or accuracy of this release.
Forward-looking Information
This document contains certain forward-looking information and forward-looking
statements within the meaning of applicable securities legislation (collectively
"forward-looking statements"). The use of any of the words "will", "intend",
"objective", "become", "transforming", "potential", "continuing", "pursue",
"subject to", "look forward", "unlocking" and similar expressions are intended
to identify forward-looking statements. These statements involve known and
unknown risks, uncertainties and other factors that may cause actual results or
events to differ materially from those anticipated in such forward-looking
statements. Such forward-looking statements should not be unduly relied upon.
The Company believes the expectations reflected in those forward-looking
statements are reasonable, but no assurance can be given that these expectations
will prove to be correct. This document contains forward-looking statements and
assumptions pertaining to the following: business strategy, strength and focus;
the granting of regulatory approvals; the timing for receipt of regulatory
approvals; geological and engineering estimates relating to the resource
potential of the properties; the estimated quantity and quality of the Company's
oil and natural gas resources; supply and demand for oil and natural gas and the
Company's ability to market crude oil and natural gas; expectations regarding
the Company's ability to continually add to reserves and resources through
acquisitions and development; the Company's ability to obtain qualified staff
and equipment in a timely and cost-efficient manner; the Company's ability to
raise capital on appropriate terms, or at all; the ability of the Company's
subsidiaries to obtain mining permits and access rights in respect of land and
resource and environmental consents; the recoverability of the Company's crude
oil, natural gas reserves and resources; and future capital expenditures to be
made by the Company.
Actual results could differ materially from those anticipated in these
forward-looking statements as a result of the risk factors set forth below and
elsewhere in the document, such as the speculative nature of exploration,
appraisal and development of oil and natural gas properties; uncertainties
associated with estimating oil and natural gas resources; changes in the cost of
operations, including costs of extracting and delivering oil and natural gas to
market, that affect potential profitability of oil and natural gas exploration;
operating hazards and risks inherent in oil and natural gas operations;
volatility in market prices for oil and natural gas; market conditions that
prevent the Company from raising the funds necessary for exploration and
development on acceptable terms or at all; global financial market events that
cause significant volatility in commodity prices; unexpected costs or
liabilities for environmental matters; competition for, among other things,
capital, acquisitions of resources, skilled personnel, and access to equipment
and services required for exploration, development and production; changes in
exchange rates, laws of New Zealand or laws of Canada affecting foreign trade,
taxation and investment; failure to realize the anticipated benefits of
acquisitions; and other factors. Readers are cautioned that the foregoing list
of factors is not exhaustive. Statements relating to "reserves and resources"
are deemed to be forward-looking statements, as they involve the implied
assessment, based on certain estimates and assumptions, that the resources
described can be profitably produced in the future. This document includes
references to management's forecasts of future development, production and cash
flows from such operations. The major assumptions applied by management include
the following:
Tikorangi Reactivations (Gas Lift / High Volume Lift)
Reserves (unrisked @ 100% working
interest) 150,000 bbl/well - 448,000 bbl/well
Working interest 50%
Probability of success 100%
IP rate 49 boe/day - 365 boe/day(ii)
Decline 2% - 0.5% per month
Mt. Messenger - Uphole Completion in Existing Tikorangi Wells
EUR (unrisked @ 100% working
interest) 123,000 bbl/well(i)
Working interest 50%
Probability of success 100%
IP rate 365 boe/day(ii)
Decline 3% - 9% per month
Mt. Messenger Development (incl.
Horoi)
EUR (unrisked @ 100% working
interest) 502,000 bbl/well
Working interest 50% - 65%
Probability of success 35% - 40%
IP rate 420 boe/day - 511 boe/day(ii)
Decline 2% per month
Tikorangi New Wells
EUR (unrisked @ 100% working
interest) 561,000 bbl/well(iii)
Working interest 50%
Probability of success 50%
IP rate 1824 boe/day(ii)
Decline 5% - 12% per month
Kapuni New Wells
EUR (unrisked @ 100% working
interest) 7.97 Bcf
Working interest 25%
Probability of success 60%
IP rate 1,013 boe/day(ii)
Decline 1% per month
(i) EUR = Estimated Ultimate Recovery (management derived)
(ii) IP rate = Estimated initial production rate
(ii) Deloitte LLP has ascribed 2P reserves (100% basis) of 410,300 bbl of
oil to one Tikorangi New well
The forward-looking statements contained in the document are expressly qualified
by this cautionary statement. These statements speak only as of the date of this
document and the Company does not undertake to update any forward-looking
statements that are contained in this document, except in accordance with
applicable securities laws.
Cautionary Note Regarding Reserve and Resource Estimates
The oil and gas reserves calculations and income projections were estimated in
accordance with the Canadian Oil and Gas Evaluation Handbook ("COGEH") and
National Instrument 51-101 ("NI 51-101"). The term barrels of oil equivalent
("boe") may be misleading, particularly if used in isolation. A boe conversion
ratio of six Mcf: one bbl was used by NZEC. This conversion ratio is based on an
energy equivalency conversion method primarily applicable at the burner tip and
does not represent a value equivalency at the wellhead. Reserves are estimated
remaining quantities of oil and natural gas and related substances anticipated
to be recoverable from known accumulations, as of a given date, based on: the
analysis of drilling, geological, geophysical, and engineering data; the use of
established technology; and specified economic conditions, which are generally
accepted as being reasonable. Reserves are classified according to the degree of
certainty associated with the estimates. Proved Reserves are those reserves that
can be estimated with a high degree of certainty to be recoverable. It is likely
that the actual remaining quantities recovered will exceed the estimated proved
reserves. Probable Reserves are those additional reserves that are less certain
to be recovered than proved reserves. It is equally likely that the actual
remaining quantities recovered will be greater or less than the sum of the
estimated proved plus probable reserves. Possible Reserves are those additional
reserves that are less certain to be recovered than probable reserves. There is
a 10% probability that the actual remaining quantities recovered will exceed the
sum of the estimated proved plus probable plus possible reserves.
Revenue projections presented are based in part on forecasts of market prices,
current exchange rates, inflation, market demand and government policy which are
subject to uncertainties and may in future differ materially from the forecasts
above. Present values of future net revenues do not necessarily represent the
fair market value of the reserves evaluated. The report also contains
forward-looking statements including expectations of future production and
capital expenditures. Information concerning reserves may also be deemed to be
forward looking as estimates imply that the reserves described can be profitably
produced in the future. These statements are based on current expectations that
involve a number of risks and uncertainties, which could cause the actual
results to differ from those anticipated. Contingent resources are those
quantities of oil and gas estimated on a given date to be potentially
recoverable from known accumulations using established technology or technology
under development, but which are not currently considered to be commercially
recoverable due to one or more contingencies. Contingencies may include factors
such as economic, legal, environmental, political and regulatory matters, or a
lack of markets. Prospective resources are those quantities of oil and gas
estimated on a given date to be potentially recoverable from undiscovered
accumulations. The resources reported are estimates only and there is no
certainty that any portion of the reported resources will be discovered and
that, if discovered, it will be economically viable or technically feasible to
produce.
-----------------------------------------
(1) Reserve and resource estimates for the TWN Licences prepared by
Deloitte LLP, with an effective date of April 30, 2013. See Cautionary
Note Regarding Reserve and Resource Estimates, NZEC's Form 51-101F1
Report and NZEC's Interim Statement of Reserves and Resources. Barrels
of oil equivalent (boe) is calculated using a conversion rate of 6 Mcf
: 1 bbl and may be misleading, particularly if used in isolation. The
boe conversion ratio is based on an energy equivalency conversion
method primarily applicable at the burner tip and does not represent a
value equivalency at the wellhead.
FOR FURTHER INFORMATION PLEASE CONTACT:
New Zealand Energy Contacts
North American toll-free: 1-855-630-8997
John Proust - Chief Executive Officer & Director
Bruce McIntyre - Executive Director
Rhylin Bailie - Vice President Communications
& Investor Relations
New Zealand: 64-6-757-4470
Chris Bush - New Zealand Country Manager
New Zealand Energy Corp.
Email: info@newzealandenergy.com
Website: www.newzealandenergy.com
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