Copper Moki-1 has been producing since December 10, 2011, Copper Moki-2 since April 1, 2012 and Copper Moki-3 since July 2, 2012. All three wells produce approx. 41 degrees API oil from the Mt. Messenger formation and flowed from natural reservoir pressure until October 2012, when NZEC installed artificial lift (pump jacks) to stabilize production rates.
Waitapu-2 commenced production on December 20, 2012 and was shut-in in May 2013 as described above. The well produces approx. 40 degrees API oil from the Mt. Messenger formation and flowed from natural reservoir pressure until shut-in. Installation of artificial lift is currently underway. In addition to installation of artificial lift, during the period the Company ran down-hole gauges into Waitapu-2 that measures the bottom hole temperature and pressure of the reservoir. These data were critical to the recently completed Mt. Messenger reservoir study (see below).
Production declines from the Copper Moki wells have been greater than expected and this prompted the Company to initiate an independent reservoir study through RPS Group PLC, a world leader in well evaluation. The study provided the Company with a better understanding of reservoir characteristics and declines, based on data from Waitapu-2, the three Copper Moki wells, and other Mt. Messenger wells in the region.
The RPS study concluded that declines are not related to wax buildup or mechanical issues. Information from the study and from a proprietary database merging five 3D seismic surveys has allowed the Company to refine its Mt. Messenger exploitation strategy, which includes:
-- Choosing optimally sized targets based on interpretation of the merged 3D dataset,-- Reducing costs by drilling multiple wells from each pad, and-- Prioritization of targets close to the Waihapa Production Station to expedite tie-in.
The Mt. Messenger formation remains an integral part of the Company's development plans, as described in the Outlook section. These development plans include the Horoi-1 well, which is expected to be drilled later this year on the Alton Permit.
Application for Eltham Petroleum Mining Permit
During the quarter ended June 30, 2013, the Company lodged an application for a petroleum mining permit that will have an initial duration of 15 years. This petroleum mining permit will cover 18.73 km2 within the area currently included under the Company's Eltham Permit and includes all sites on which the Company had previously drilled its ten exploration wells (i.e. the Copper Moki site, Waitapu site, Arakamu site, and the Wairere site). A successful application for the petroleum mining permit will extend the duration that the Company is able to operate within the area covered by the permit, and will also reduce the surface area within the existing Eltham Permit that will be subject to relinquishment in September 2013 when the Eltham Permit is due for extension.
East Coast Basin
The East Coast Basin of New Zealand's North Island hosts two prospective oil shale formations, the Waipawa and Whangai, which are the source of more than 300 oil and gas seeps. Within the East Coast Basin, NZEC holds a 100% interest in the Castlepoint Permit, which covers approximately 551,042 onshore acres (2,230 km2), and a 100% interest in the Ranui Permit, which covers approximately 223,087 onshore acres (903 km2) and is adjacent to the Castlepoint Permit. NZEC is considering relinquishing the Ranui Permit but has not yet made a definitive decision in this regard. On September 3, 2010, NZEC applied to the Minister of Energy to obtain a 100% interest in the East Cape Permit. The application is uncontested and the Company expects the East Cape Permit to be granted to NZEC upon completion of New Zealand Petroleum & Minerals' ("NZPAM") review of the application. The East Cape Permit covers approximately 1,067,495 onshore acres (4,320 km2) on the northeast tip of the North Island. In addition, NZEC has entered into a binding agreement with Westech to acquire 80% ownership and become operator of the Wairoa Permit, which covers approximately 267,862 onshore acres (1,084 km2) south of the East Cape Permit. Preliminary approval of transfer of ownership was obtained from NZPAM on December 20, 2012 and formation of a joint arrangement with Westech is subject to final NZPAM approval.