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NZ O&G July 2017 Wrap

By Neil Ritchie

Energy analysts and industry insiders are waiting for the imminent announcement by Royal Dutch Shell on the sale of its remaining New Zealand assets that could command a total sale price of $NZ1 billion or more.

Companies rumoured to be interested in some Shell New Zealand assets range from large listed multinational corporations such as Austrian giant OMV and Canada’s Vermilion Energy to smaller private New Zealand firms like Greymouth Petroleum.

OMV, which already has a 26 percent stake in the near-shore Pohokura gas-condensate field and a 10 percent interest in the more southern offshore Maui gas-condensate field, is big enough to acquire more equity in either or both fields.

“OMV may want more of Pohokura, which is maybe in the middle of its economic life, and even Maui, which is nearing the end of its life; OMV certainly has the financial and technical capabilities to do so on its own,” said one industry source.

“The same is true regarding Vermilion – it is also big enough and capable enough to enter the New Zealand oil and gas sector through acquiring some Shell assets,” he added.

And Greymouth Petroleum, the second largest energy company in New Zealand behind Todd Energy, is also rumoured to be interested in some of Shell NZ’s assets – probably in conjunction with some investment firms. 

 “Even Greymouth Petroleum may be interested in some Shell New Zealand assets, though it is too small to acquire them on its own and will need the help of such corporations as KKR,” said a second commentator, referring to global investment firm KKR that manages investments in multiple assets, including energy, infrastructure, real estate, and hedge funds.

Different sources say some listed Australian companies, such as Adelaide-based oil and gas explorer Beach Energy (formerly Beach Petroleum), are also interested in some of Shell NZ’s portfolio.

 Shell main remaining New Zealand assets – after the sale earlier this year of its half share in the onshore Taranaki Kapuni gas-condensate field – are its 48 percent stake in and operatorship of Pohokura and its majority, 83.75 percent, stake in the Maui. Other Shell Kiwi assets include associated tank farm and infrastructure, as well as its remaining exploration/prospecting interests, which include a major stake (60 percent) in and operatorship of a Great South Basin licence and an interest (37.5 percent) in a New Caledonia Basins permit.

While OMV is a familiar face in the Kiwi energy industry, having been here for several years, Vermilion will be a new player if it successfully bids for some Shell assets.

Vermilion is headquartered in Calgary, Alberta, the energy province of Canada, and has been operating for more than two decades. It is an international oil and gas producer involved in exploration, production, development, acquisition, and the optimisation of producing properties in North America, Europe and Australia.

Across the Tasman it owns and operates the offshore Wandoo field on the Northwest Shelf of Western Australia where production is from 18 well bores and five lateral sidetrack wells involving two production platforms,.

It is further understood Royal Dutch Shell and its adviser, JPMorgan Chase & Co, have already asked for indicative bids and that they hope announce the successful bidder soon, certainly before the end of 2017.

“Some of these interested parties may say ‘we want this asset but not that’. However, they could be swayed by Shell offering them the right asset at the right price. This will leave Shell clear to exit New Zealand, said one source.

Meanwhile, listed company New Zealand Oil & Gas has finalised its buy back into the offshore Taranaki Kupe gas-condensate field at a lower price than it sold its former larger stake to Genesis Energy. NZOG is paying $NZ35 million for Mitsui Corporation’s four percent stake, while earlier this year selling its 15 percent stake to Genesis Energy for $NZ168 million.

These transaction prices indicate Genesis values Kupe at about $NZ1.1 billion, while NZOG's deal with Mitsui puts an $NZ875 million value on the field. Aussie listed company Origin Energy owns half of and operates Kupe through subsidiary Lattice Energy Resources, while Genesis now holds a 46 percent stake.

Canadian listed junior TAG Oil has had a mixed fiscal year ending March 31, 2017 – improving operating netbacks, though average net daily production and revenue both decreased.

Operating netback increased by 10 percent for the latest fiscal year, from $C22.61 per barrel of oil equivalent (boe) to $C24.88 per boe, while average net daily production decreased by 13 percent from 1386 barrels of oil per day (boepd) to 1200 boepd. Revenue decreased by six percent from $C24.8 million to $C23.3 million.

But total gross proven plus probable (2P) reserves increased, with total 2P reserves at March 31 estimated at 4.1 million barrels of oil equivalent (mmboe), with 92 percent of that being oil), compared with 3.6 mmboe (93% oil) at March 31, 2016. This reflects the company's 100 percent interest inPMP 38156 (Cheal), 70 percent interest in PEP 54877 (Cheal East) and 100 percent interest in PMP 53803 (Sidewinder).

The Cheal-E5 well is now back in production and TAG has plans to bring the Cheal-E2 and E6 wells back on-line in the near term.

The company has also been growing its production and reserves base through exploration drilling in the Taranaki Basin, with the recently drilled successful Cheal-E8 well and TAG is due to spud the Cheal-D1 well in the northern portion of the same permitas the Cheal-E8 well during July.

With Cheal-D1, TAG is targeting an additional potential producing Miocene-aged zone, with the main target being the Mount Messenger formations and the secondary target being the Urenui zone.

At March 31, the company had $C21.6 million in cash and cash equivalents and $C25.9 million in working capital, with no debt.

TAG chief executive Toby Pierce recently said his company had also managed to complete some strategic acquisitions during the latest fiscal year and continued to assess other acquisition and farm-in opportunities in New Zealand and Australia. “TAG has weathered another year of the low oil price environment by focusing on our core Taranaki producing assets and making opportunistic acquisitions of distressed assets to position the Company for when prices improve.”

And it is known fellow listed Canadian junior New Zealand Energy Corp has left the Top Town complex in central New Plymouth and staff are now located in a formerly vacant Greymouth Petroleum building in Bell Block.

Lastly, atrio of independent commissioners has given permission for the construction of Taranaki's first wind farm. If it decides to go ahead, Tararua Wind Power now has the necessary resource consents to build a $325 million, 48-turbine wind farm on the coast between Waverley and Patea within the next 10 years.