L&M Energy takes up licenses

JAMES WEIR
Last updated 12:54 31/07/2013

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L&M Energy is spending C$18.25 million (NZ$22.2m) to take a half share of the Tariki, Waihapa and Ngaere, TWN, licences in Taranaki, in a deal with New Zealand Energy Corp.

L&M Energy was recently taken private by its chairman Geoff Loudon in a takeover by his company New Dawn Energy.

Canada-based NZEC last month said it was paying Origin Energy C$33.5 million for the three TWN oil and gas licences in Taranaki with reserves of more than two million barrels, indicating the production potential for the fields.

New Zealand Energy Corp aimed to breathe new life into three oil and gas licences in Taranaki, part of the "Tawn" licences that have been dormant for the past year.

The deal included the Waihapa oil and gas production station, but the price was C$8.5m less than a deal first announced last year. NZEC said it was still looking at options to fund the balance of C$12m needed to pay Origin for the TWN licences and to add extra working capital.

Loudon said he had long believed the TWN licences and infrastructure held "great potential" for exploration and the business opportunities represented by the Waihapa production station.

Mining professional Loudon is a New Zealand-based international investor. He completed a $48 million takeover of L&M Energy in January through New Dawn.

L&M holds a number of oil and gas exploration permits in the North and South Islands, including a 35 per cent stake in NZEC's Alton permit, also in Taranaki. NZEC holds the 65 per cent balance of the Alton permit.

Yesterday NZEC said L&M Energy was taking a 50 per cent stake in the TWN licences and the Waihapa production station and associated pipelines and infrastructure. NZEC and L&M plan to finalise the deal shortly and settle the transaction at the same time as NZEC settles with Origin Energy.

NZEC chief executive John Proust said L&M Energy's C$18.25m investment was a "significant show of confidence" in their plans to explore and develop the TWN licences and the Waihapa production station.

Exploration and development and TWN would be half-paid for by L&M Energy.

NZEC will be the operator of the licences and the Waihapa production station.

NZEC said yesterday the TWN joint venture and Waihapa station would provide "significant benefits" to shareholders, turning the company into a fully integrated company with cashflow, infrastructure and inventory to support long-term growth.

The deal to buy into TWN would lift NZEC's reserves by 150 per cent, with the addition of 1.07 million barrels of oil-equivalent, of proven plus probable reserves, with a before-tax net present value of C$31.4 million.

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There would be "immediate" production and cashflow with the reactivation of six existing Tikorangi formation wells using an existing gas lift system. The company expected production to be lifted in future.

- BusinessDay.co.nz

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