New Zealand Energy Corp. (NZEC) provided an update on its activities in the Taranaki and East Coast Basins on New Zealand's North Island. NZEC has placed its discovery well on a long-term production test and expects to achieve commercial production in 4Q-2011.
Taranaki Basin Update
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, producing ~130,000 boe/day from 18 fields. Within the Taranaki Basin, NZEC holds and is the operator of two permits covering 152,066 net acres. NZEC completed its previously announced Copper Moki-1 discovery well in August 2011. The well flowed 1,100 barrels of 41.8 API1 oil per day along with 855 mcf2 of natural gas per day from the Mt. Messenger Formation over a 48-hour production test through a 28/64th inch choke.
The Copper Moki-1 well has been placed on a long-term production test at a restricted rate of approximately 500 barrels of oil per day and 500 mcf per day of natural gas. The well has been flowing for six days through a 20/64th inch choke. The well will be produced until it has recovered between 5,000 and 6,000 barrels of oil and will then be shut-in for a three-week pressure build-up. The production test and subsequent build-up will allow NZEC to determine the optimal production rate for the well when it is placed on permanent production later in 4Q-2011. Oil is being trucked and sold to the Shell-operated Omata Tank Farm, which is approximately 45 km north of the Copper Moki well site. The oil is sweet and high quality and fetches a premium to the Brent reference price3.
Resource consent and surface access approvals are underway for the Copper Moki-2 and Copper Moki-3 wells, which NZEC expects to drill in December 2011. The Copper Moki-2 well will be drilled directionally from the same pad as the Copper Moki-1 well to target both the Urenui and Mt. Messenger formations. The Copper Moki-3 well will be drilled approximately 1.3 km south of the Copper Moki-1 site and will target multi-zone potential in the Mt. Messenger, Urenui and Moki formations. The Copper Moki-2 and Copper Moki-3 targets were identified using 3D seismic and are analogous to the Mt. Messenger Formation in Copper Moki-1.
NZEC has identified at least 6 features similar to Copper Moki-1 on 3D seismic and another 12 have been identified with the Company's extensive 2D seismic database. NZEC is planning a 100-km2 3D seismic program, which will cover the northern region of the Eltham and Alton permits, to more accurately define drilling targets and significantly reduce drilling risk. The 3D seismic survey will also further define the Horoi, Maata and Morea features identified on the Alton Permit and define additional exploration targets for 2012.
NZEC's exploration strategy is to prioritize wells that have a well-defined, lower-risk Mt. Messenger target coupled with deeper exploration targets such as the Moki Formation and the Kapuni Group.
East Coast Basin Update
The East Coast Basin of New Zealand's North Island hosts two highly prospective shale formations, the Waipawa and Whangai, which are the source of more than 300 oil and gas seeps. NZEC has two granted permits and one pending permit in the East Coast Basin, covering more than 1.8 million acres.
NZEC has completed the coring of two test holes on its 100% working interest Castlepoint Permit. The Orui (125 meters total depth) and Te Mai (195 meters total depth) test holes were cored in the Waipawa Shale. The cores are being analyzed to determine the production potential of the Waipawa Shale, with results expected by year-end.
NZEC has a rig commitment to re-drill the Ranui-1 well, located on its 100% working interest Ranui Permit. The Ranui-1 well was drilled in 2008 by the previous owner and encountered 224 meters of prospective Whangai Shale before reaching total depth of 1,134 meters, but did not penetrate the base of the Whangai Shale. NZEC's Ranui-2 test well will core the Whangai Shale across several intervals to determine the production potential of the Whangai Shale, and will drill though the base of the Whangai Shale and into the underlying conventional reservoir sands.
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