Upon closing of the acquisition of assets from Origin, NZEC plans to reactivate six wells in the Tikorangi formation using an established gas lift system, and has also determined that six previously drilled wells on the Petroleum Licenses have uphole completion potential. Recompletion of these wells would be significantly less expensive and faster than drilling new wells, and economic discoveries could be quickly tied in to the Waihapa Production Station using existing oil and gas gathering pipelines. Both the reactivations and uphole completions could bring near-term, low-cost production and cash flow to the Company.
NZEC's technical team has also identified five high-priority Mt. Messenger targets in the southwest corner of the Petroleum Licenses. NZEC has completed permitting for a new site called Waipapa (Oru Rd) and will shortly begin construction of the drill pad to ensure the Company can move quickly to access these targets once the acquisition has closed.
Longer-term exploration plans on the Petroleum Licenses include accessing Mt. Messenger targets from existing drill pads, many of which have gathering pipelines in place, that offer lower-cost exploration potential and can be tied-in to the Waihapa Production Station on an expedited basis. NZEC is advancing a number of new commercial opportunities to use the Waihapa Production Station to its full potential and maximize facility revenues, while ensuring that NZEC's gas and associated natural gas liquids production can be efficiently delivered to market.
Commercial oil discoveries on NZEC's properties and those of its peers have confirmed the prospectivity of the Mt. Messenger formation, which remains NZEC's primary exploration target in the near term. Mt. Messenger leads continue to be refined as the Company interprets its propriety database of 3D seismic. NZEC's technical team has also identified a number of leads in the deeper Moki, Tikorangi and Kapuni formations on both the Petroleum Licenses and its Eltham and Alton permits. Discoveries by other companies have demonstrated significant flow rates and long-term production from reservoirs in these deeper formations. NZEC will continue to advance these leads to drillable prospects and will move these targets higher on the Company's priority list as warranted.
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. These three stratigraphic test wells have advanced NZEC's understanding of the Waipawa and Whangai formations. A review of the geochemical and physical properties of the two shale packages, coupled with information from existing seismic data and the newly completed 70 km 2D seismic survey, is focusing NZEC's exploration strategy for the East Coast shales. NZEC plans to drill one exploration well on both the Ranui and Castlepoint permits in 2013 and has initiated the community engagement and technical assessments required to obtain land access consents and permits for the drill locations.
NZEC has commenced a 50 km 2D seismic survey on the Wairoa Permit, and 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 upon completion of NZPAM's review of the application.
RESULTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2012
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