The kiwi oil and gas industry is ready for lift off and investors can be part of the action thanks to 2 Canadian oil companies offering a large exposure to massive amounts of oil and gas in high impact conventional basins and in highly prospective multiple shale packages. The beauty about New Zealand is its extensive energy infrastructure, its political stability, its attractive fiscal regime and a unique opportunity to develop world-class hydrocarbon resources in multiple underexplored onshore and offshore sedimentary basins.
New Zealand produces about ~55,000 barrels of oil per day exclusively from the Taranaki Basin with current demand at ~150,000 bopd. Kiwi oil production is sold at Brent pricing which currently enjoys a premium to WTI. The country also enjoys a thriving natural gas market where gas currently sells for $6/mcf and prices are forecasted to reach $9/mcf on growing demand. Government data suggest large sedimentary basins that may host oil and gas cover about 20% of New Zealand’s territory, that’s more than 1 million square km.
The Taranaki Basin covers an area of about 330,000 km2 and is currently the only producing basin in New Zealand with 130,000 boed from 18 fields. Over 400 onshore and offshore exploration and production wells have been drilled since 1955. Taranaki holds proved oil reserves of 600 million barrels and proved gas reserves of 7 TCF discovered to date. This proven basin is still in its infancy thus it remains a fertile hunting ground for oil and gas discoveries. Our 2 Canadian oil companies have the following attributes in common:
- Experienced management
- Large land packages
- Highly prospective and underexplored properties
- Growing high-net-back oil and gas production
- Exclusive focus on New Zealand
- Positive working capital with no debt
New Zealand Energy nz.v $0.02 [+0.00]
In the Taranaki Basin, the company holds ~170,000 net acres prospective for 843MM barrels of Original Oil in Place (OOIP). NZ is currently producing about 1,000 boed from the first 2 conventional wells (no fracking involved) and plans to test 2 more in Q2-12 before drilling 6 additional conventional wells.
NZ also holds 1.8M net acres in the East Coast Basin with ~22.5 billion barrels of conventional and unconventional OOIP. The basin is prospective for 2 shale formations: Waipawa and Whangai. NZ’s first steps towards unlocking the shale potential is through analyzing well cores from 3 stratigraphic wells in the second half of 2012.
Tag Oil tao.to $0.62 [+0.03]
TAO enjoys 100% working interest in more than 1.7M net acres onshore plus 20% WI in a 77,000 acre offshore block. The company produces more than 6,000 boed from the Taranaki Basin where it holds more than 15,000 net acres. According to the company, vertical initial production rates vary between 200 and 2,000 barrels/day for oil (40° API) or 1,500 boed for gas which are multiple times higher than initial rates realized in Canada. Tag’s Cheal-5 well for example initially produced 1,870 boed (~91% oil) a rate which pays back the drill cost in 12 days!
On the East Coast Basin, Tag holds 1.7 million acres with undiscovered resource potential of more than 14 billion barrels of conventional and unconventional OOIP. The company has an aggressive East Coast Basin program starting with $100M in expenditures carried by JV partner Apache. The Whangai and Waipawa shale formations can potentially exhibit recovery factors similar to the Bakken in North Dakota. Phase 1 begins with spudding 4 deep vertical wells starting in Q2-2012 targeting tight oil which is expected to develop into a multi-well drilling program following success.
New Zealand is one of the last untapped oil and gas frontiers in the world. NZ and TAO offer investors a great opportunity to participate in the exploration and exploitation of 2 under-explored basins: the proven Taranaki Basin and the East Coast Basin with identified oil and gas seeps over millions of acres. The land base of both junior companies is what makes the size of the prize so big: Thousands of sections of land provide the potential for thousands of wells!
Disclaimer: the information presented above is only for informative purposes; it’s meant to serve as a starting point to carry your own due diligence. It is in no way an encouragement to buy or sell the aforementioned securities. If you find any errors in the data please do not hesitate to contact us.