New Zealand Energy Corp. (TSX-V: NZ): The Tariki-5 well needs to be sidetracked
• The T-5 development well did not encounter the main reservoir target. The fault delimiting the reservoir is interpreted to be shallower (worst case scenario) than in the base case. The well will now be sidetracked to the west into the reservoir. The results are expected in November.• No natural fractures were encountered at the shallower Tikorangi secondary target. The sidetrack will provide a second opportunity to look for a fracture in this horizon.
• Monumental Energy will fund the work-overs of the CM1 & 2 wells (~US$0.48 mm). In return Monumental will receive 75% of the production proceeds from the two wells until the investment is recouped and 25% thereafter.
• We have changed our target price to C$3.80/sh in line with our new ReNAV. Our new target price incorporates the recent C$0.95 mm equity raise and some delays.
• Our NAV for the company’s 2P reserves is ~C$2.25/sh. This assumes a 30% reduction in the Tariki reserves and a production plateau of 15 mmcf/d. This includes (1) C$1.45/sh for the ~0.9 mmboe to be put in production plus (2) C$0.27/sh for ~0.1 mmboe that NZE will keep to take advantage of the volatility of gas prices in New Zealand and (3) C$0.53/sh for the 0.2 mmboe of cushion gas.
• In addition, NZE anticipates that a domestic utility will fund the conversion capex of Tariki into a gas storage and pay the company a net fee of 50%xUS$9-12 mm/y. This fee represents ~C$0.3-0.4/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$25 mm in net cash by YE26.
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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