New Zealand Energy Corp. (TSX-V: NZ): Gas storage MOU signed with Genesis Energy
• New Zealand Energy, L&M Energy, and Genesis Energy have entered into a memorandum of understanding (MoU) to advance the Tariki gas storage project. The MoU establishes an exclusive framework for collaboration across technical studies, commercial negotiations, and project development milestones, ultimately leading to a final gas storage services agreement. This agreement will underpin the path toward a final investment decision, project completion, and commercial operations.• Genesis Energy’s market day presentation, which dedicated three full slides to gas storage and the Tariki project, serves as a strong endorsement of its materiality and strategic importance. Genesis believes that gas storage will “supercharge the flexibility” of its portfolio. It will also be a very important piece of the broader LNG strategy.
• The key next steps include (1) the completion of subsurface and engineering work by YE25 to define gas storage capacity, cushion-gas requirements, operating pressures, and injection/withdrawal rates and (2) the design and sizing of the surface facilities. In addition, the Tariki-5A well will be returned to production in 1Q26 to assess performance.
• Assuming NZ$10/mcf average seasonal price volatility and 60 mmcf/d withdrawal capacity over ~100 days, the project could generate NZ$60 mm in annual gross revenue (NZ$30 mm / US$18 mm net to New Zealand Energy). Even after NZ$20 mm in annual operating costs, gross pre-tax free cash flow would be ~NZ$40 mm (NZ$20 mm / US$12 mm net). Applying a 10% required return for infrastructure assets implies a market value of ~NZ$200 mm (US$120 mm) net to New Zealand Energy once onstream.
• With gross capex estimated at NZ$120 mm (NZ$60 mm net), the project delivers a pre-capex value of ~NZ$140 mm (~US$85 mm) net to New Zealand Energy, equivalent to ~C$2.85 per share.
• We reiterate our target price of C$1.70 per share, which reflects a net value of ~US$50 mm for the Tariki gas storage project.
Valuation
We currently apply a 50% discount to the unrisked value of the Tariki gas storage project based on the Ahuroa sale in 2017 (assuming 20 bcf storage capacity at Tariki and 11 bcf at Ahuroa). We note that this is well below the valuation based on Tariki’s expected injection/withdrawal capacity. Our ReNAV is C$1.75 per share. Our unrisked NAV for the gas storage is C$3.48 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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