Terms of the Acquisition
The final purchase price for the Acquisition comprises $33.5 million in cash ($30 million payable to Origin and $3.5 million payable to Contact). NZEC paid a $5 million deposit to Origin for the Acquisition in June 2012. The remaining $28.5 million will be payable upon closing of the Acquisition. The Company is considering a number of options to increase its financial capacity to carry out the Acquisition and other anticipated activities. In addition, NZEC will pay Origin a 9% net revenue royalty. The Company can reduce the Origin Royalty at any time by as much as 4% by paying Origin $4.25 million per percentage point. The TWN Licences are also subject to a "grandfathered" New Zealand Petroleum & Minerals 10% net revenue royalty. The royalty regime allows for the deduction of specified portions of operating costs when calculating royalties payable.
Other than the 9% royalty, Origin has relinquished all rights to the TWN Licences and the Waihapa Production Station, and to production from existing and future wells in all formations.
As one of the conditions of the transaction, NZEC has entered into an agreement with Contact regarding Contact's Ahuroa Gas Storage Facility ("AGS") located in the Contact-owned permit adjacent to the TWN Licences and the Waihapa Production Station. Contact, owned 53.1% by Origin, is one of New Zealand's leading energy generators and retailers, providing electricity, natural gas and LPG to customers in New Zealand. NZEC will transfer ownership of the Ahuroa Licence (3,857 acres, 15.6 km2) to Contact upon closing of the transaction. NZEC's technical review of the Ahuroa Licence did not identify significant accessible prospectivity. In exchange for transfer of the Ahuroa Licence to Contact, NZEC will receive a compressor capable of handling 10 MMcf/d of natural gas. NZEC will act as operator of AGS, for which Contact will pay NZEC a monthly operating fee of NZ$200,000.
Two final conditions are required to close the Acquisition: deposit of the remaining $28.5 million of the purchase price into an escrow account, and government approval. The New Zealand Government has voiced its approval for the transaction. NZEC will proceed to lodge the SPA and other agreements with the New Zealand Government for final approval. The TSX Venture Exchange has provided conditional approval for the transaction.
TWN Mining Licences
Upon closing of the Acquisition and after transferring the Ahuroa Permit to Contact, NZEC will own the Tariki, Waihapa and Ngaere Licences ("TWN Licences") in the main production fairway of the Taranaki Basin, contiguous with the northern border of NZEC's existing Eltham and Alton permits (Figure 1). Totalling 23,049 acres (93.3 km2), the TWN Licences offer multi-zone potential from the Urenui, Mt. Messenger, Moki, Kapuni and Tikorangi formations and will bring NZEC's Taranaki Basin acreage to 210,153 acres (850.5 km2). The TWN Licences are permitted and renewable without relinquishment, subject to government approval. Included are 16 established drill pads with gathering systems in place, which will allow for timely tie-in to the Waihapa Production Station upon exploration and completion success.
The Acquisition includes 3D seismic data covering approximately 50% of the TWN Licences as well as 585 km of 2D seismic data. NZEC has access to extensive information from 27 previously drilled wells, offering the necessary well control to expedite exploration cycle time and reduce drilling risk. NZEC's review to date of the 3D seismic and well log data has identified exploration leads in all of the formations, significantly expanding NZEC's drilling inventory in the Taranaki Basin.
Most Popular Stories
- SpaceX's Satellite Launch Is 'Game-Changer'
- Reid Confident Congress to Pass Immigration Bill
- Maui Visitor Killed in Shark Attack
- Donors Abandon GOP Over Gun Stance
- Mexico: 'Extremely Dangerous' Radioactive Material Stolen
- CEOs More Optimistic About Economy, Hiring
- Climate Change Early Warning System Urged
- Private Sector Employment Surges by 215,000 Jobs
- Calif. Likes Christie, Says Tea Party's a Drag
- Newtown 911 Tapes Being Released Today