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NZ O&G Wrap - September 2018

By Neil Ritchie

Besides the on-going programmes of the two largest unlisted companies in New Zealand – Todd Energy and Greymouth Petroleum – work is also progressing with preparations for drilling the onshore Taranaki Kohatukai-1 well.

Operator Australian listed AWE - and partners NZOG, together with NZOG’s new majority shareholder OG Oil & Gas, and Mitsui are scheduled to drill Kohatukai-1 during the next few months, with a rig contract already finalised.

Billion-dollar Monaco-based Ofer Global took a controlling 69.87 percent stake in NZOG for $84 million last December, with both companies later taking a 25 percent stake each in the Kohatukai permit.

And the well will be targeting two objectives -- the Matao and Mangahewa sands – in a prospect analogous to the nearby near-shore Pohokura gas condensate field. As well, this prospect is close to existing infrastructure and local gas markets.

NZOG has said in its June quarter report that it still looking for joint venture partners for its offshore Canterbury BasinClipper and Toroa prospects. NZOG has a 50 percent share in Clipper and has applied to take over all of Toroa, with the company looking for farm-in partners for both prospects. And the company believes that ‘a natural alignment exists in the timetable for (the exploration of) Toroa and Clipper.’

And the multinational company starts its new (June) financial year with $98 million in the bank after selling its stake in the offshore Taranaki Kupe gas-condensate field to fellow joint venture partner Genesis Energy for $168 million, making a $96 million gain.

Chief executive Andrew Jefferies has recently said that the Crown will not hinder NZOG (and any farm-in partners) should a commercial discovery be made in either of the Clipper and/or Toroa prospects.

And he adds that NZOG is entering ‘an exciting new growth phase’ because it is now backed by the global capability of its major shareholder, OG Oil & Gas, and has the $98.6 million in cash.

He has also said that NZOG sees ‘natural gas assets in many markets replacing higher-carbon fuel sources as the world undergoes a decades-long energy transformation.

Last December NZOG bought a 4% interest in the Kupe gas and oil fields and production station from Mitsui E&P Australia for $35million.

"Our investment in the producing Kupe gas field offshore Taranaki is small, but it is a reliable earner sufficient to cover our corporate overheads," he said.

Contact Energy is selling its ownership of Rockgas to Gas Services NZ Midco (GSNZ) - an associate of First Gas – for ‘a cash consideration’ of $260 million.

Rockgas has held Contact’s LPG operations as well as 50 percent of the issued shares in Rockgas Timaru and an 8.5 percent investment in Liquigas Ltd.

As part of the transaction, Contact will enter into an exclusive marketing alliance with GSNZ to be able to continue to offer LPG to mass market customers. In addition, Contact will enter into a services agreement to provide call centre and billing services for mass market LPG customers.

Contact has said that its strategy as to optimise the customer and generation businesses to deliver strong cash flows for distribution to shareholders. Rockgas purchases LPG from New Zealand producers – and, when necessary, imports LPG at prices linked to international commodity indices.

Rockgas supplies over 88,000 customers in both the North and South Islands.

And Contact has said the Rockgas business is markedly different to the generation of electricity at single sites and retailing of electricity, natural gas and broadband, which are distributed on networks not owned or controlled by Contact.

Meanwhile, two Canadian listed juniors -- TAG Oil and New Zealand Energy Corp – have recently released updates on their NZ operation.

TAG says it has been successful in securing a revolving credit facility of up to US$10,000,000 with a large New Zealand based lender, as well as increasing its revenue by 53 percent, along with a 67 percent increase in operating netbacks to C$44.16 per barrel of oil equivalent (boe).

And TAG has commenced a campaign involving multiple well workovers and water injector conversions. Also TAG is currently completing stage two of the Waitoriki work (PEP 57065) that includes 20 kilometres 2D seismic acquisition, 15 square kilometres of 3D seismic reprocessing and subsequent analysis. The 2D seismic acquisition will potentially define deeper permit prospectivity and future drilling locations, particularly across two Kapuni Group leads identified on recently reprocessed 3D seismic.

The previously shut-in Cheal-E4 well has been identified as a future water injector for the Cheal-E site waterflood project. Injection conversion has been completed and water injection commenced in August at the rate of 400 barrels of water per day and the conversion is expected to provide pressure support and sweep oil towards the Cheal-E1 well, potentially resulting in additional oil recovery and extending the Cheal-E site's life.

New Zealand Energy Corp has announced the latest quarterly financial and operating results. Cash provided by operating activities for the 2018 quarter was $241,278, compared with a loss of C$58,987 for the corresponding 2017 quarter. The profit for the 2018 quarter was C$742,146 up on the 2017 loss of C$562,449. And NZEC achieved average net daily for the quarter of 255 barrels of oil equivalent per day (boepd), with 93 percent of that bring oil,  compared to 145 boepd (83% oil) during the second quarter of 2017.

The Petroleum Exploration and Production Association of New Zealand (PEPANZ) has welcomed the Productivity Commission’s report into a low emissions economy but says the focus needs to be on lowering overall net carbon emissions rather than favouring certain energy sources.

"It also shows there are potentially very large costs to New Zealanders, which reinforces the need to carefully weigh up the costs and benefits of policies," PEPANZ chief executive Cameron Madgwick has said recently.

"The report warns that moving away from natural gas for the electricity system could see 'greatly increasing wholesale electricity prices'.

"However . . . not all fossil fuels are the same, and natural gas will have an important ongoing role replacing coal around the world . . . this is why the International Energy Agency predicts that natural gas will grow 45 percent by 2040 to become potentially the world’s largest single energy source,” adds Madgwick.

Lastly, there are still energy related job vacancies being advertised -- with services company SGS after more staff and MB Century wants a rig administrator to work at various drill sites around north Taranaki.