New Zealand Energy Corp aims to breathe new life into three oil and gas licences in Taranaki, part of the "Tawn" licences which have been dormant for the past year.
Canada-based NZEC is paying Origin Energy C$33.5 million (NZ$41.2m) for three oil and gas licences in Taranaki with reserves of more than 2 million barrels, indicating the production potential for the fields.
The deal includes the Waihapa oil and gas production station, but the price is C$8.5m less than a deal first announced last year.
The licences are for the Tariki, Waihapa and Ngaere licences, long known as the Tawn licences, but the NZEC deal excludes the Ahuroa licence (the ‘a' in Tawn), which will go to Contact Energy. Origin holds a 53 per cent stake in Contact Energy.
NZEC said buying the licences and the high capacity production station was a "once in a lifetime opportunity" to set it up for long-term growth.
"And we jumped at it," NZEC communications vice-president Rhylin Bailie said in Vancouver. The TWN (Tawn) licences had "great exploration and production potential", she said.
NZEC said an independent report showed the net present value of proved and probable reserves in the licences was C$62.9m. Collectively the oil, gas and gas liquids is equal to about 2.14m barrels of oil. Contingent resources could add another 1.1m barrels and prospective resources at the field could be 23.5m barrels.
NZEC said it planned to restart six wells at the field, in a much cheaper, faster route to lifting production than drilling new wells, with many more wells down the track. The deal will see NZEC's proved and probable reserves jump more than 300 per cent to a net present value of $85.5m.
At present NZEC produces only 225 barrels of oil a day from just four wells in Taranaki, with a fifth pending. It also plans to drill two exploration wells on the East Coast targeting shale formations, one at Castlepoint and one at Ranui.
Once it takes over the TWN licences, NZEC said it would reactivate a "gas lift system", using gas to help lift oil from six existing wells and restart oil and gas production from the Tikorangi formation.
Six existing wells could also produce from the shallower Moki, Mt Messenger and Urenui formations. Doing that would be much less expensive and faster than drilling new wells.
NZEC would not say yet how much it expected to produce from the licences.
Longer term NZEC aims to explore Mt Messenger formations from 16 existing drill pads, which would also be lower cost and could be tied in to the Waihapa production station quickly.
Under the new deal NZEC will pay a higher 9 per cent royalty to Australian seller Origin Energy, rather than the 5 per cent initially agreed in a deal first announced last May.
The older TWN licences pay a 10 per cent royalty to the Crown, rather than the 20 per cent under the current regime.