New Zealand Energy Corp. (TSX-V: NZ): Tariki-5A well test performance towards the upper end of expectations
• Tariki-5A has been perforated over the top 8 m of the 20 m of gas bearing sands intersected. Gas sales have commenced.• The well initially flowed at estimated rates increasing from 2 to 5.5 mmcf/d during clean-up.
• The full well testing program has only just commenced. While a maximum flow rate test has not yet been carried out, the Tariki-5A well is estimated to be able to deliver ~12 mmcf/d of gas and associated condensate to market through the existing Cheal infrastructure based on wellhead data.
• This compares with previous indications of “at least 9 mmcf/d” and our conservative forecasts of 8 mmcf/d until the end of June. Gas sales above 6.5 mmcf/d can be sold at spot prices.
• Pending further flow rate data, we reiterate our target price of C$3.50 per share in line with our ReNAV.
Valuation
We have not changed our estimates pending further details on production over the coming weeks. Our NAV for the company’s 2P reserves is ~C$1.85 per share with a ReNAV of C$3.53 per share. There are three phases in the monetization of the Tariki field. (1) A proportion of the 2P reserves will first be produced (we assume ~3.5 bcfe net the company). (2) ~2 bcfe producible natural gas (net to New Zealand Energy) will be left in the ground and sold as cushion gas on conversion to gas storage. This could command >US$20 mm (net). We have cautiously assumed only US$15 mm. (3) The company anticipates that a domestic utility will fund the capex to convert Tariki into a gas storage asset and pay the company a net fee of 50% x US$9-12 mm/y. This fee represents ~C$0.25-0.35/sh every year. We are currently not carrying any value for this fee in our valuation pending the signature of the gas storage contract. We forecast that NZE will hold ~US$35 mm in net cash by YE26, versus today’s mkt cap of just US$16 mm.
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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