By Neil Ritchie

GEOFF Loudon has again rescued Canadian listed junior New Zealand Energy Corporation (NZEC), though his NZ$5 million reprieve is only temporary.

The company announced in late September that had executed a working capital facility agreement with Mr Loudon’s company New Dawn Energy for up to NZ$5 million.

New Dawn is the parent firm of L&M Energy, NZEC’s 50 per cent partner in the Tariki, Waihapa and Ngaere (TWN) petroleum licences and the associated Waihapa production station, as well as NZEC’s 35% partner in the nearby Alton exploration lease PEP 51151.

Speaking from the company’s corporate headquarters in Vancouver, NZEC chief executive John Proust said execution of the working capital facility was the first step of the group’s capital rebuilding process.

He also said New Dawn’s willingness to advance funds was “a strong vote of confidence in both the quality of the TWN Assets, and the ability of NZEC’s team as operator of the assets.

“The additional working capital will allow NZEC to undertake the activities required to further exploit the TWN licences, with the objective of increasing oil production.”

He added NZEC was also investigating the economics of extracting LPG at the Waihapa production station from the raw gas processed at the facility for various third parties for a tolling fee. This would increase revenue for NZEC and L&M.

Mr Loudon said New Dawn and L&M Energy, of which he is chairman, were “fully supportive of the joint venture with New Zealand Energy, and look forward to unlocking the full potential of these promising assets.”

The New Dawn loan will, to the extent drawn down, bear interest at 12% per annum with a maturity date of 31 March, 2015, or as extended by agreement. Interest is payable monthly or may be capitalised with New Dawn’s consent.

NZEC can draw on this facility to fund its share of expenditures and equipment required to advance the TWN assets, and for other working capital purposes but only as agreed to by New Dawn.

Industry commentators are describing this loan as a “short-term lifeline only” and that the phrase “as agreed to by New Dawn” means L&M has to agree to everything before the loan advanced.

“It’s not five million dollars sitting in the bank”, one told Oil & Gas Australia recently.

“Essentially this means NZEC has to decide to continue selling more of what’s left of its New Zealand assets, rapidly ramping up production and remaining in the country or selling everything and leaving.

“If that happens L&M will have new partner, though most of NZEC’s existing experienced staff will remain.

“NZEC will not able to finance its share of all the planned projects – just the scheduled Alton well will cost over five million dollars – but this loan will enable it to do something.”

This latest loan is in addition to L&M Energy paying NZEC C$18.25 million for a half share in the TWN leases and the Waihapa infrastructure.

This deal, completed over a year ago, helped NZEC finally seal its $C33.5 million purchase of these onshore Taranaki oil and gas assets and infrastructure from Origin Energy 15 months after initially announcing the proposed acquisition.