New Zealand Energy Corp. (TSX-V: NZ): Tariki-5A flow constrained by liquid. First injection in gas storage by YE25
• Tariki-5A has been put on production at a stable rate of 1 mmcf/d plus 25-30 bbl/d of condensate. This is less than anticipated (2-5.5 mmcf/d during clean-up with deliverability estimates of ~12 mmcf/d based on wellhead data) due to liquid loading in the tubing and difficulties in managing liquid slugging at Waihapa after ~30 km of pipeline. NZE is considering remediation operations to reduce the amount of liquid production, which could increase wellhead pressure and potentially gas production.• The high quality of the sands encountered at Tariki-5A allows NZE to accelerate the conversion of the Tariki field to gas storage, enabling the commencement of injection in 4Q25. Stage 1 of the development would target the injection of 10-15 mmcf/d and extraction of ~30 mmcf/d based on the existing Tariki-5A and Tariki-1A wells. Stage 2 would add a further well. Most of the required infrastructure for Stage 1 is already in place, except for the final stage compression required at the well site. An existing mobile unit currently at the Waihapa Production Station could potentially be modified to provide the necessary wellsite compression.
• Overall, the Tariki gas storage could store 25-40 bcf of gas.
• As we reduce our gas production forecasts for Tariki but revisit our valuation for the gas storage project, we have changed our target price to C$2.70 per share in line with our new ReNAV.
Valuing the gas storage project
We previously valued the Tariki Gas storage based solely on the remaining cushion gas. The adjacent Ahuroa gas storage, with ~18 bcf, was sold in late 2017 for NZ$200 mm (~US$120 mm or ~US$6.7 mm/bcf). Both Ahuroa and Tariki are over-thrust structures of the Tariki Sandstone at very similar depths. Assuming the same value per bcf, this gives an unrisked value of approximately US$83-133 mm (midpoint of US$108 mm or C$6.13/sh) for NZE’s 50% WI in Tariki. This valuation may be too conservative, given that gas prices have more than doubled since the sale of Ahuroa. With recent gas price volatility reaching up to NZ$35/mcf in 2024, gas storage has become far more critical and valuable than it was eight years ago.
Valuation
We are now assuming only one year of production at Tariki (1 mmcf/d) until its conversion to gas storage. Workover operations at Waihapa and Copper Moki could add ~300 bbl/d of gross production. The only remaining requirements to take FID on the Tariki gas project are: (1) an update of the reservoir simulation model, (2) a detailed costing of the residual infrastructure, and (3) agreeing terms with a utility firm. Ahead of FID, we have conservatively applied a 50% discount to the unrisked value of Tariki gas storage based on the Ahuroa sale. Our new ReNAV is C$2.70 per share.
Sintana Energy is a development stage company engaged in oil and gas exploration and development activities in the United States.
Auctus Advisors is a specialist Equity Capital Markets and Advisory business with a focus in the Energy Sector.
The partners have complementary skill sets, with decades of experience across Equity Capital Markets, Investment Banking and the Energy industry. We have worked at Société Générale, Canaccord Capital, BMO Capital Markets and Schlumberger. Most recently we have worked together for many years at GMP FirstEnergy.
Auctus has been set up at the beginning of a new decade in which we see significant opportunities in the Energy space. Globally, demand for energy is at record levels and continues to grow. Conversely, investment in traditional energy sources has been severely constrained. We believe this imbalance creates opportunities for both companies and investors.
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