Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search


NZEC scales back, warns of ‘significant doubt’ on future

NZ Energy Corp scales back, warns of ‘significant doubt’ on future

By Pattrick Smellie

May 2 (BusinessDesk) – Small-scale Taranaki oil and gas producer New Zealand Energy Corp has warned “there is significant doubt about the company’s ability to continue as a going concern” if a range of production initiatives currently under way fail to provide expected earnings.

In a management discussion and analysis accompanying disclosure of a C$9.3 million comprehensive loss for the year to Dec. 31 (C$1.2 million in 2012), NZEC chief executive John Proust also announced the deferral of the company’s plans to drill new wells in the Tikorangi limestone formation this year, and the withdrawal of production guidance issued last August.

That guidance forecast daily production of 2,300 barrels of oil equivalent daily “exit 2014”, approximately 10 times more than the company is currently achieving. Production in March averaged 233 barrels per day, which fell to 228 barrels per day in April, reflecting various moves to increase production from newly reactivated wells.

The share price for the Vancouver-based, Toronto Stock Exchange-listed company fell 21.6 percent to 15 Canadian cents following the news.

The decision to delay Tikorangi was a direct result of delays in NZEC finalising the purchase of the Tariki, Waihapa and Ngaere (TWN) assets from Origin Energy, a protracted process that required NZEC to bring on a 50/50 joint venture partner, L&M Energy, to complete the transaction.

“NZEC still expects to achieve that production target,” said Proust. “All that’s changed is the timing.

“For the remainder of 2014, NZEC will prioritise low-cost, low-risk opportunities that are expected to bring near-term production and cash flow,” he said.

The company, which turned over C$10.7 million in total in the last financial year, compared with C$16.5 million in the previous year, had working capital on hand at April 30 of C$2.7 million, which Proust described as “sufficient to meet short term operating requirements.”

While it has successfully reactivated four previously producing wells in the first few months of the year, Proust said new “higher impact operations” initiatives such as Tikorangi would only occur “once the company has established a strong production and cash flow base.”

However, there were “no assurances that these activities will be successful, or that the company will be able to attain sufficient profitable operations from those activities.”

“In light of the reliance on successful completion of ongoing development activities, there is significant doubt about the company’s ability to continue as a going concern,” said Proust. The company was considering initiatives including increased oil sales, credit facilities, joint or commercial arrangements, or “other financial alternatives” to meet planned capital expenditure in the next 12 months.

The announcements show NZEC has managed to improve field netbacks per barrel of oil produced from a weak average C$44.38 per barrel for the year as a whole to C$61.84 a barrel in the last three months of the year.

Average production costs fell to C$43.39 a barrel in the final quarter from an average C$58.73 during the last financial year. But that’s still well ahead of the C$31.57 per barrel production costs and C$70.08 field netback per barrel it achieved in the 2012 financial year.


© Scoop Media

Business Headlines | Sci-Tech Headlines


Postnatal Depression: 'The Thief That Steals Motherhood' - Alison McCulloch

Post-natal depression is a sly and cruel illness, described by one expert as ‘the thief that steals motherhood’, it creeps up on its victims, hiding behind the stress and exhaustion of being a new parent, catching many women unaware and unprepared. More>>


DIY: Kiwi Ingenuity And Masking Tape Saves Chick

Kiwi ingenuity and masking tape has saved a Kiwi chick after its egg was badly damaged endangering the chick's life. The egg was delivered to Kiwi Encounter at Rainbow Springs in Rotorua 14 days ago by a DOC worker with a large hole in its shell and against all odds has just successfully hatched. More>>


Trade: Key To Lead Mission To India; ASEAN FTA Review Announced

Prime Minister John Key will lead a trade delegation to India next week, saying the pursuit of a free trade agreement with the protectionist giant is "the primary reason we're going" but playing down the likelihood of early progress. More>>



MYOB: Digital Signatures Go Live

From today, Inland Revenue will begin accepting “digital signatures”, saving businesses and their accountants a huge amount of administration time and further reducing the need for pen and paper in the workplace. More>>

Oil Searches: Norway's Statoil Quits Reinga Basin

Statoil, the Norwegian state-owned oil company, has given up oil and gas exploration in Northland's Reinga Basin, saying the probably of a find was 'too low'. More>>


Modern Living: Auckland Development Blowouts Reminiscent Of Run Up To GFC

The collapse of property developments in Auckland is "almost groundhog day" to the run-up of the global financial crisis in 2007/2008 as banks refuse to fund projects due to blowouts in construction and labour costs, says John Kensington, the author of KPMG's Financial Institutions Performance Survey. More>>


Health: New Zealand's First ‘No Sugary Drinks’ Logo Unveiled

New Zealand’s first “no sugary drinks logo” has been unveiled at an event in Wellington... It will empower communities around New Zealand to lift their health and wellbeing and send a clear message about the damage caused by too much sugar in our diets. More>>


Get More From Scoop

Search Scoop  
Powered by Vodafone
NZ independent news