By New Zealand Correspondent Neil Ritchie
CANADA listed junior TAG Oil will spend at least C$60 million during the March 2014-2015 fiscal year, while its fellow Canadian company New Zealand Energy Corporation (NZEC) counts its pennies after announcing a loss of more than C$9.3 million for the 2013 calendar year.
TAG expects to fund its entire 2014-2015 budget by forecast cashflow and existing working capital.
It will focus on three key components: low-risk shallow development drilling, high-impact deep and offshore drilling in the Taranaki basin, and the fractured source rock prospects on the East Coast.
It plans to drill a total of nine new shallow (Miocene-aged) onshore Taranaki development wells – seven within the Cheal and Greater Cheal area and two at the more northern Sidewinder-B wellsite targeting oil-prone prospects.
TAG will have a 70 per cent interest in one well in the new Cheal-E site acreage, while another has already been drilled at the Southern Cross wellsite east of Stratford, while the company will retain a 100% interest in another seven wells.
TAG also plans to spud its onshore East Coast Waitangi Valley-1 wildcat well, north of Gisborne in licence PEP 38348, during July, drilling to a total depth of about 3,600 metres and targeting the naturally fractured Waipawa Black Shale and Whangai source rock formations
TAG has also outlined some recent shallow and deep Taranaki wells, with some mixed results.
It says the shallow Cheal area development and step-out campaign “continues to achieve excellent results”, with the successful Cheal-E1 step-out well placed on production last November and that this success “substantially extends” the oil saturated area of the greater Cheal field.
The Cheal-E site has already produced over 90,000 barrels of oil with current stabilised production of about 650 barrels of oil per day, with 455 bopd net to TAG, plus solution gas from three wells.
Separately, in a 50-50 joint venture with fellow Canada-listed junior East West Petroleum, TAG drilled a total of four shallow exploration wells and one exploration sidetrack within the Cheal South and Southern Cross areas.
It presently plans to production test the Cheal-G1 well as a potential new discovery, while plugging and abandoning the others.
TAG has not yet given up on the sub-economic tight gas Cardiff field, though testing of the fracked deepest of three potential producing zones, the Eocene-aged K3E zone at the Cardiff-3 well, has produced only sub-economic f lows of oil, gas, and condensate.
However, chief operating officer Drew Cadenhead told Oil & Gas Australia that TAG “isn’t discouraged with the results to date at Cardiff . . . no one has ever recovered hydrocarbons from the K3E Zone, and we did, albeit at sub-commercial flow rates.
“So people thinking Cardiff is a write-off need more patience.”
Independent experts and further analysis have concluded that either the fracking was affected by a poor cement bond over the interval or skin damage must exist in the near wellbore area, restricting flow.
“As a result, TAG is now planning to move uphole and initiate testing on the second of the zones, where there is a competent cement bond in place, while incorporating the results of the K3E zone to the overall completion strategy for the well,” Mr Cadenhead said.
While NZEC has described 2013 as a “transformative year”, it also concedes there is “significant doubt about the company’s ability to continue as a going concern” if it does not increase its financial capability to meet planned capital expenditure for the next 12 months.
The company’s share price, hit a then all-time low of C16c after the 2013 results announcement, before sliding further to C12.5c.
While NZEC ended 2013 with more producing wells than at the end of 2012 – 10 compared to four – oil production slumped, with only 77,484 barrels of oil last year, less than half the 2012 total of 162,444 barrels.
Revenue was also lower, at C$10.7 million in 2013, compared to C$16.5 million in 2012.
NZEC also spent over C$20 million on property, plant and equipment, including C$15.25 million of the C$33.5 million acquisition, in conjunction with L&M Energy, of the Tariki, Waihapa and Ngaere (TWN) fields and infrastructure last June from Australian company Origin Energy.
Overall gross profit per barrel fell during 2013 – from about C$70 per barrel to only C$44 per barrel, though that is trending back up to C$60 per barrel.
The company had an estimated working capital of only C$2.7 million at the end of April, less than it needs to complete its amended 2014 work programs.
However, NZEC still expects to achieve a 2014 production target of 2,300 barrels oil equivalent per day, pledging to focus on low-cost, low- risk opportunities that are expected to boost near-term production and cashflow for the rest of the year.
Besides NZEC’s Copper Moki field, it and L&M Energy are also bringing more TWN wells back into production.
However, NZEC and New Zealand Oil & Gas have recently relinquished licence PEP 54867 and NZEC is also seeking farm-in partners for its nearby Eltham and Alton permits and also for its onshore East Coast permits.
The company is also closing its Wellington office, consolidating all operations to New Plymouth, though it is believed new chief executive David Robinson and chief financial officer Derek Gardiner will remain resident in the capital, with same shared office space, and commute to Taranaki as necessary.
It is also downsizing in terms of staff numbers and merging some positions.
It is, however, advertising for an effective replacement for industry veteran Ian Brown, who was the company’s operating officer, then its corporate affairs and development manager.
Mr Brown has replaced Australian Richard Parkes as head of London-listed but New Zealand-focused Kea Petroleum.
Meanwhile, Ensign International Energy Services has shipped its Ensign Rig 931 to Melbourne two and a half years after importing it from the Middle East, primarily to work on Todd Energy’s massive Mangahewa Expansion Project (MEP) in Taranaki.
However, Todd imported its own Bentec Euro 450 rig for the MEP drilling last January, leaving insufficient work for the big Ensign rig that is more suited to drilling deep Eocene-aged wells than shallow ones.
The disassembled rig left Port Taranaki aboard the Industrial Eagle in late May, leaving Ensign with only two rigs here, the medium sized Rig 919 and workover Rig 906.