New Zealand Energy Corp. (TSX-V: NZ): Better than expected results at Tariki-5A
• The Tariki-5A well has encountered a gas column of at least 8 metres out of a gross Tariki sand of ~60 m. An additional column of a further 8 to 12 m may be confirmed upon completion of log analyses.• This is above company expectations. The gas water contact appears to be deeper than expected from the offset well Tariki-1A, and this has a positive impact on the gas volume remaining in place.
• Pending further details, we have increased our expected recoverable volumes by 20% to ~0.85 mmboe net to New Zealand Energy.
• The reservoir is expected to be able to deliver at least 9 mmcf/d, which is sufficient to exceed the 6.5 mmcf/d requirements of the Gas Sales Agreement between the Tariki Joint Venture and Genesis Energy. The gas sales above this level can be sold at spot prices. Production is expected to start later in December.
• The larger than expected gross sand also has positive implications for the potential size (and value) of the future gas storage after conversion.
• As we incorporate the additional volumes at Tariki and the dilution associated with the recent C$2 mm equity raise, we have changed our target price to C$3.50 per share in line with our new ReNAV.
Valuation
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 to New Zealand Energy). (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) New Zealand Energy anticipates that a domestic utility will fund the conversion capex of Tariki into a gas storage asset and pay the company a net fee of 50%xUS$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$19 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.
Auctus provides Corporate Broking, Equity Research and Investment Banking services.
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