New Zealand Energy Corp. (TSX-V: NZ): Increasing domestic natural gas prices. Tariki-5 to spud in September
• The Tariki-5 well continues to be expected to spud in early September. Drilling operations are expected to take 28 days with production starting in late October or early November. Initial production is expected to be around 6-8 mmcf/d growing to 20 mmcf/d within 10 months once New Zealand Energy has upgraded its facilities to comply with current safety and production standards.• A gas offtake agreement has been signed for 1.8 bcf (0.9 bcf net to New Zealand).
• The offtaker will also pay New Zealand NZ$1 mm net for the exclusive right to negotiate a gas storage contract on Tariki. The exclusivity period is for a period of 12 months following the commencement of drilling of Tariki-5.
• The exclusivity payment provides additional funding and is in line with our forecasts.
• We value the natural gas reserves at Tariki-5 at ~C$3.20 per share. We re-iterate our target price of C$5.00 per share that also includes the potential upside associated with oil opportunities in the Tikorangi reservoir.
Increasing gas prices
Natural gas prices continue to increase in New Zealand. The current spot price for natural gas is ~NZ$40/mcf (~US$24/mcf). This is well above what we are assuming in our model (~US$9/mcf) and our assumptions could be overly conservative. During the first 10 months of production, New Zealand’s natural gas production will be exported through the Cheal facilities at a cost of NZ$3/mcf. (~US$1.8/mcf). This cost will be reduced to ~NZ$1/mcf once New Zealand can use its own facilities. Only 0.9 bcf (~one third only of the 2P reserves at Tariki) have been committed to an offtaker (at probably a discount to spot price) with the balance to be sold on the open market.
Valuation
We have assumed some delays to the oil enhancement operations in 3Q24 and we have taken a more cautious view on the Copper Moki work-overs. We are also incorporating a delay of one quarter for the production increase to 20 mmcf/d at Tariki. The Tikorangi oil target at Tariki-5 has an unrisked NAV of ~C$2.50 per share. Our total ReNAv for the company is ~C$5.20 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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