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New Zealand Energy : Q1 – 2023 – MDA
Management’s Discussion & Analysis
This Management’s Discussion and Analysis (“MD&A”) is dated 30 May 2023, for the quarter ended 31 March 2023. It should be read in conjunction with the Unaudited Condensed Consolidated Financial statements for the quarter ended 31 March 2023 of New Zealand Energy Corp. (“NZEC” or the “Company”) as publicly filed on the System for Electronic Document Analysis and Retrieval (“SEDAR”) website at www.sedar.com.
NZEC reports in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and the associated Unaudited Condensed Consolidated Financial statements, are presented in accordance with IFRS.
This MD&A includes certain statements which may be deemed “forward-looking statements” (see Forward-lookingInformation). All amounts are in Canadian dollars unless otherwise stated.
NZEC’s shares are listed on the TSX Venture Exchange under the symbol “NZ”. Additional information is available on SEDAR and on the Company’s website at www.newzealandenergy.com.
NZEC’s BUSINESS
NZEC, through its subsidiaries (collectively “NZEC” or “the Group”) is engaged in the production and appraisal of and exploration for oil and natural gas, as well as the operation of midstream assets, in New Zealand. The Group’s assets are located on New Zealand’s North Island in the Taranaki Basin, New Zealand’s only commercial oil and gas producing area.
Background
NZEC is the Operator of three Petroleum Mining Licences (“PMLs”), one Petroleum Mining Permit (“PMP”) and one Petroleum Exploration Permit (“PEP”) in each of which it has an interest. It holds a 50% interest in PML 38138 (“Tariki Licence”), PML 38140 (“Waihapa Licence”) and PML 38141 (“Ngaere Licence”) (collectively the “TWN Licences”). L&M Energy Limited (“L&M”) holds the remaining 50%.
NZEC has a 100% interest in PMP 55491 (“Copper Moki PMP”) and PEP 51150 (the “Eltham Permit”).
NZEC holds a 50% working interest (with New Dawn Energy Limited) in, and is operator of, the Waihapa Production Station and associated gathering and sales infrastructure (collectively the “TWN Assets”) providing a range of services to its own operated assets and to third parties including, oil handling and pipeline throughput, gas processing and transport, LPG storage and produced water handling and disposal.
The following are the operating highlights for the quarter:
the equipment supporting the artificial lift pump. A remediation plan has been prepared.
2
New Zealand Energy Corp
Three-month period ended 31 March 2023
Management’s Discussion & Analysis
PROPERTY REVIEW AND OUTLOOK
This section reviews activities and developments during the reporting period in respect of the Group’s assets (see map following).
The Group produces petroleum from Waihapa and Ngaere wells in the TWN Petroleum Mining Licences and from the Copper Moki wells in the Copper Moki Mining Permit.
TWN Petroleum Mining Licences
Waihapa/Ngaere
The Waihapa Ngaere wells produce oil and gas from the fractured Oligocene Tikorangi Limestone at a depth of ~2700m. The field has been on production since 1988. It has produced up to 18,000 bopd in the past and has produced ~24 mmstb cumulative oil. Reservoir modelling indicates that there was initially ~44 mmstb Oil-In-Place and after ~24 mmstb cumulative oil production there remains ~20 mmtb Oil-In-Place in the field.
The current focus is on enhancing the effectiveness of gas lifting utilising the right sized compressor installed in 2022. All producing wells within the licence areas are being individually assessed to determine the optimal gas lifting methodologies against a key management focus to maximise production of the remaining recoverable oil.
Tariki
Following completion of the assessment of the 3D seismic survey across the Tariki field a number of opportunities are being evaluated as a result of this analysis.
The data indicates that more than 10PJ of gas can be stored in the Tariki formation with injection and production at a rate of 25TJ/day from a single well (and up to 75TJ/day from 3 wells). Discussions with possible counterparties have been initiated.
Tariki formation – gas production
RPS has provided an independent evaluation confirming there are proved and probable reserves within Tariki. The Tariki Joint Venture is planning to drill a well in 2023. The presence of economically recoverable reserves within Tariki is of material benefit to a gas storage project.
The Tikorangi formation from which over 24,000,000 barrels of oil have been produced at Waihapa/Ngaere is present in the Tariki permit. The Tariki-2C well produced over 180,000 barrels of oil from the Tikorangi formation
– a fractured limestone. The new seismic data indicates the Tariki-2C well penetrated the Tikorangi formation approximately 200 metres down dip from the crest of the structure. Image log data is being evaluated to gain further insight in respect of the fracture network distribution.
The 3D seismic data has identified AVO bright spots and anomalies in the Mt Messenger formation. Oil has been produced from the Mt Messenger formation in several fields within the onshore Taranaki Basin, including at Copper Moki. Evaluation of these leads is continuing.
The Group is advancing plans to drill a well during 2023. While any such well will primarily target the crest of the Tariki formation it is also intended to also penetrate the prospective parts of the Tikorangi formation.
Copper Moki Petroleum Mining Permit
Copper Moki-1:In Q1 2023 production averaged ~30 bopd.
Copper Moki-2:In Q1 2023 there was no production.
5
New Zealand Energy Corp
Three-month period ended 31 March 2023
