Growth Through Exploration and Acquisition Corporate Presentation June 17, 2013 TSX-V: NZ OTCQX: NZERF
Cautionary Notes Forward-looking Statements This document contains certain forward-looking information and forward-looking statements within the meaning of applicable securities legislation (collectively “forward-looking statements”). The use of any of the words “being”, “will”, “until”, “estimate”, “will be”, “is considering”, “will proceed”, “plans”, “reactivate”, “recommence”, “would be”, “could be”, “will bring”, “could bring”, “expected”, and similar expressions are intended to identify forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements. Such forward-looking statements should not be unduly relied upon. The Company believes the expectations reflected in those forward-looking statements are reasonable, but no assurance can be given that these expectations will prove to be correct. This document contains forward-looking statements and assumptions pertaining to the following: business strategy, strength and focus; the granting of regulatory approvals; the timing for receipt of regulatory approvals; geological and engineering estimates relating to the resource potential of the Properties; the estimated quantity and quality of the Company’s oil and natural gas resources; supply and demand for oil and natural gas and the Company’s ability to market crude oil, natural gas and; expectations regarding the ability to raise capital and to continually add to reserves and resources through acquisitions and development; the Company’s ability to obtain qualified staff and equipment in a timely and cost-efficient manner; the ability of the Company to obtain the necessary approvals and secure the necessary financing to conclude the acquisition of assets from Origin on schedule, or at all; the ability of the Company’s subsidiaries to obtain mining permits and access rights in respect of land and resource and environmental consents; the recoverability of the Company’s crude oil, natural gas reserves and resources; and future capital expenditures to be made by the Company. Actual results could differ materially from those anticipated in these forward-looking statements as a result of the risk factors set forth below and elsewhere in the document, such as the speculative nature of exploration, appraisal and development of oil and natural gas properties; uncertainties associated with estimating oil and natural gas resources; changes in the cost of operations, including costs of extracting and delivering oil and natural gas to market, that affect potential profitability of oil and natural gas exploration; operating hazards and risks inherent in oil and natural gas operations; volatility in market prices for oil and natural gas; market conditions that prevent the Company from raising the funds necessary for exploration and development on acceptable terms or at all; global financial market events that cause significant volatility in commodity prices; unexpected costs or liabilities for environmental matters; competition for, among other things, capital, acquisitions of resources, skilled personnel, and access to equipment and services required for exploration, development and production; changes in exchange rates, laws of New Zealand or laws of Canada affecting foreign trade, taxation and investment; failure to realize the anticipated benefits of acquisitions; and other factors. Readers are cautioned that the foregoing list of factors is not exhaustive. Statements relating to “reserves and resources” are deemed to be forward-looking statements, as they involve the implied assessment, based on certain estimates and assumptions, that the resources described can be profitably produced in the future. The forward-looking statements contained in the document are expressly qualified by this cautionary statement. These statements speak only as of the date of this document and the Company does not undertake to update any forward-looking statements that are contained in this document, except in accordance with applicable securities laws. More information is available in the Company’s Annual Information Form for the year ended December 31, 2012, filed on June 17, 2013 on SEDAR at www.sedar.com. Reserve & Resource Estimates The oil and gas reserve and resource calculations and net present value projections were estimated in accordance with the Canadian Oil and Gas Evaluation Handbook (“COGEH”) and National Instrument 51-101 (“NI 51-101”). The term barrels of oil equivalent (“boe”) may be misleading, particularly if used in isolation. A boe conversion ratio of six Mcf: one bbl was used by NZEC. This conversion ratio is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. Reserves are estimated remaining quantities of oil and natural gas and related substances anticipated to be recoverable from known accumulations, as of a given date, based on: the analysis of drilling, geological, geophysical, and engineering data; the use of established technology; and specified economic conditions, which are generally accepted as being reasonable. Reserves are classified according to the degree of certainty associated with the estimates. Proved Reserves are those reserves that can be estimated with a high degree of certainty to be recoverable. It is likely that the actual remaining quantities recovered will exceed the estimated proved reserves. Probable Reserves are those additional reserves that are less certain to be recovered than proved reserves. It is equally likely that the actual remaining quantities recovered will be greater or less than the sum of the estimated proved plus probable reserves. Possible Reserves are those additional reserves that are less certain to be recovered than probable reserves. There is a 10% probability that the actual remaining quantities recovered will exceed the sum of the estimated proved plus probable plus possible reserves. Revenue projections presented are based in part on forecasts of market prices, current exchange rates, inflation, market demand and government policy which are subject to uncertainties and may in future differ materially from the forecasts above. Present values of future net revenues do not necessarily represent the fair market value of the reserves evaluated. Information concerning reserves may also be deemed to be forward looking as estimates imply that the reserves described can be profitably produced in the future. These statements are based on current expectations that involve a number of risks and uncertainties, which could cause the actual results to differ from those anticipated. Contingent resources are those quantities of oil and gas estimated on a given date to be potentially recoverable from known accumulations using established technology or technology under development, but which are not currently considered to be commercially recoverable due to one or more contingencies. Contingencies may include factors such as economic, legal, environmental, political and regulatory matters, or a lack of markets. Prospective resources are those quantities of oil and gas estimated on a given date to be potentially recoverable from undiscovered accumulations. Undiscovered resources means those quantities of oil and gas estimated on a given date to be contained in accumulations yet to be discovered. The resources reported are estimates only and there is no certainty that any portion of the reported resources will be discovered and that, if discovered, it will be economically viable or technically feasible to produce.
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Building a Leading Oil & Gas Company Conventional Focus, Unconventional Opportunity
3
• Largest onshore exploration portfolio in New Zealand’s North Island with 2.27 million acres (including permits pending) 1
• 7,497 km2 3D seismic database with seamless coverage across main production fairway
• Four wells in production, oil sold at Brent pricing 2
• Substantial inventory of 3D-defined drill targets
• Experienced team with New Zealand and Western Canadian oil and gas expertise
• Strong relationships with local communities • Strategic acquisition underway
- Three mining licences with estimated 2P reserves of 2,144,700 boe along with additional resources 3
- 45 million cf/d, 25,000 bbl/d full-cycle, open-access production facility
1. Two permits and acquisition pending. See Asset Overview. 2. Waitapu-2 was temporarily shut in at the end of May to allow the Company to analyze artificial lift options and perform tests related to the Copper Moki reservoir study. 3. Reserves estimated by Deloitte LLP. See TWN Reserve Estimate and Cautionary Note Regarding Reserve and Resource Estimates.
Asset Overview
4
Permit Working Interest
Net Acres 2P BOE Reserves 1
Contingent Resource 2
Prospective Resource 2
Eltham 100% 93,166 708 Mboe - 31.6 MM bbl
Alton 65% 77,482 - - 45.0 MM bbl
Manaia 60% 16,456 - - Early stage
TWN 3 100% 23,049 2,145 Mboe 1,162 Mboe 23,541 Mboe
Ranui 100% 223,087 - - 40.5 MM bbl
Castlepoint 100% 551,045 - - 208.6 MM bbl
Wairoa 4 80% 214,290 - - Under review
East Cape 5 100% 1,067,495 - - 355.4 MM bbl
Total Acreage 2,266,070
1. Estimated by Deloitte LLP with an effective date of April 30, 2013. 2. Best estimate of contingent and prospective resources assuming 9 to 14% recovery for conventional oil resources and 50% for gas resources. Estimated 2% recovery for unconventional oil resources. See detailed Reserve and Resource tables and Cautionary Notes. 3. Acquisition of TWN Petroleum Licenses and Waihapa Production Station pending. See Strategic Acquisition. 4. Acquisition of Wairoa Permit pending NZPAM approval. 5. Grant of East Cape Permit pending NZPAM approval. 6. TWN Reserves and Resources will not transfer to NZEC until the Acquisition is complete.
Eltham Alton
Ranui
Castlepoint
East Cape
Conventional Focus
Conventional and Unconventional Targets
• 3D seismic database: 7,497 km2
• 2D seismic database: 82,844 km
Wairoa TWN
Manaia
New Zealand Advantage
• Proactive Government approach to exploration and development
• Favorable tax and royalty structure 28% corporate tax, royalty higher of 5% of net revenue or 20% of net accounting profits 1
• Brent pricing environment • Proven hydrocarbon systems with
multi-zone potential • Established infrastructure with
capacity • New Zealand Government goal of
energy self sufficiency by 2030 significant in-country demand for both oil and gas
5
1. The Company’s permits and licences are subject to the following Government royalties: (1) exploration permits: 5% of net revenue (hydrocarbon sales less operating expenses incurred between point of valuation and point of sale); (2) mining permits: greater of 5% of net revenue or 20% of net accounting profits (including deductions for capital costs); (3) TWN Licences: “grandfathered” under 1937 Petroleum Act, 10% of net revenue.
Multi-zone Potential Reduces Drilling Risk
6
Moki
Tikorangi
Kapuni
Mt Messenger
Three new Petroleum Licences in the main production fairway
• Near-term production potential from existing wells
• New exploration opportunities • 2,144,700 boe 2P Reserves • 1,162,000 boe Contingent Resources • 23,541,000 boe Prospective
Resources Full-cycle production facility central to NZEC’s permits and other oil/gas fields
Strategic Acquisition
1. Closing of the Acquisition is subject to meeting the financing condition precedent by August 14 and the government approval condition precedent by September 13, in order to close the Acquisition by September 20, 2013. Resources are best estimate. The Petroleum Licences and attributable reserves and resources will not transfer to NZEC until the Acquisition is complete. See TWN Reserves and TWN Resources and Cautionary Notes.
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1
Final Deal Terms for Strategic Acquisition
• Reduced purchase price to C$33.5 million with no additional adjustments (from C$42 million + adjustments internally estimated at $9 million) 1
• Acquiring Tariki, Waihapa and Ngaere Licences = 23,049 acres • NZEC retains 100% of production from existing and new wells in all formations
on the TWN Licences, subject only to a 9% royalty payable to Origin 1
• Origin relinquishes all other rights and encumbrances on the TWN Licences, other than the royalty
• Results of extended negotiation:1 - Reduced purchase price and simplified deal terms - Established reserves and resources on the TWN Licences will add 2,144,700 boe
of 2P reserves to NZEC’s inventory (300% increase) plus substantial resources 2
- Identified potential gas supply adequate to run Waihapa Production Station and reactivate gas lift on Tikorangi wells 3
- Identified opportunities to use Waihapa Production Station to full capacity
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1. See Final TWN Acquisition Terms. 2. The Origin royalty is payable at 9% of net revenue (hydrocarbon sales less operating expenses incurred between the point of valuation and the point of sale). NZEC may buy back at any time and from time to time up to 4% of the Origin royalty by paying C$4.25 million per percentage point. The TWN Licences are also subject to a government royalty payable at 10% of net revenue as they are “grandfathered” under the 1937 Petroleum Act. 3. See TWN Reserves and Cautionary notes. Reserves will not transfer to NZEC until the acquisition is complete. 4. Gas supply dependent on outcome of NZEC/Contact gas throughput study and gas looping trial.
Significant Growth in Reserves Post Acquisition
9
0
500
1000
1500
2000
2500
3000
3500
NZEC Reserves TWN Reserves Total NZEC ReservesPost Acquisition
Estim
ated
Res
erve
s M
boe
Proved Probable Possible
1. Reserves estimated by Deloitte LLP. NZEC reserves have an effective date of December 31, 2012 and are restricted to the Eltham Permit. TWN Reserves have an effective date of April 30, 2013 and are restricted to the Tikorangi Formation on the Waihapa and Ngaere Permits. See detailed Reserve tables and Cautionary Notes. The TWN Reserves will not be attributable to NZEC until the Acquisition closes and NZEC files an updated reserve report. See Strategic Acquisition.
TWN Reserve Estimate 1
10
Reserve Category Light & Medium Oil
(Mbbl)
Natural Gas
(MMcf)
Natural Gas Liquids (Mbbl)
Barrels of Oil Equivalent
(Mboe)
NPV, Before Tax (10%)
Proved Developed (Non-producing)
983.7
762.0
26.7
1,137.4
$36,142,000
Proved Undeveloped
258.1
206.5
7.2
299.8
$7,340,000
Total Proved
1,241.8
968.5
33.9
1,437.1
$43,482,000
Probable
610.9
479.3
16.8
707.6
$19,393,000
Proved + Probable
1,852.7
1,447.8
50.7
2,144.7
$62,875,000
Possible
-
-
-
-
- Proved + Probable + Possible
1,852.7
1,447.8
50.7
2,144.7
$62,875,000
1. Reserve estimate completed by Deloitte LLP with an effective date of April 30, 2013. Reserves restricted to the Tikorangi Formation on the Waihapa and Ngaere Licences. See Cautionary Note Regarding Reserve & Resource Estimates. Reserves will not be attributable to NZEC until the Acquisition is complete and NZEC files an updated reserve report.
TWN Resource Estimate 1
Formation Product Type Low Best High
Contingent Resources
Miocene Sands (Mt. Messenger) Oil (Mbbl) 35 88 203
Eocene Sands (Kapuni Group) Gas (MMcf – sales) 2,513 5,036 10,336
NGL (Mbbl) 101 233 525
Total BOE (Mboe) 567 1,162 2,426
Prospective Resources
Miocene Sands (Urenui, Mt. Messenger, Moki) Oil (Mbbl) 1,606 2,941 5,732
Eocene Sands (Kapuni Group) Gas (MMcf – sales) 42,833 95,837 226,424
NGL (Mbbl) 1,909 4,498 11,375
Total BOE (Mboe) 10,825 23,541 54,368
Discovered PIIP
Miocene Sands (Mt. Messenger) Oil (Mbbl) 327 681 1,400
Eocene Sands (Kapuni Group) Gas (MMcf – raw) 7,211 13,770 26,935
Total BOE (Mboe) 1,529 2,976 5,889
Undiscovered PIIP
Miocene Sands (Urenui, Mt. Messenger, Moki) Oil (Mbbl) 11,315 20,442 37,804
Eocene Sands (Kapuni Group) Gas (MMcf – raw) 118,981 261,080 605,860
Total BOE (Mboe) 31,145 63,955 138,781
1. Resources estimated by Deloitte with an effective date of April 30, 2013 assuming 9 to 14% recovery for oil resources and 50% for gas resources. See Cautionary Note Regarding Reserve and Resource Estimates. Resources will not be attributable to NZEC until the Acquisition is complete. 11
Valuable Upstream Assets
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• Tariki, Waihapa and Ngaere petroleum licences covering 23,049 acres, contiguous with Eltham and Alton permits
• 23 MM bbl historical production from the Tikorangi formation 2,144,700 boe 2P Tikorangi reserves remaining 1
• Additional contingent and prospective resources from other formations 1
• 16 established drill sites with oil and gas gathering systems in place
Technical Data • Well information from 27 existing wells • 3D seismic covering southern half of the TWN
Licences • 585 km 2D seismic • TWN seismic has been merged with NZEC’s
existing seismic, providing seamless coverage across TWN, Eltham and Alton permits
1. Reserve estimate completed by Deloitte LLP with an effective date of April 30, 2013. Reserves restricted to the Tikorangi Formation on the Waihapa and Ngaere Licences. See Cautionary Note Regarding Reserve & Resource Estimates. Reserves and resources will not be attributable to NZEC until the Acquisition is complete and NZEC files an updated reserve report.
Waihapa Production
Station
Waipapa site
TARIKI LICENCE
NGAERE LICENCE
WAIHAPA LICENCE
Tikorangi Formation
Drill-proven formation • 23 million bbl historical production from 17 wells • Remaining 2P reserves estimated at 1,852,700
bbl oil, 1.45 Bcf gas, 50,700 bbl NGL 1
Recommence production from existing wells • Six wells with reactivation potential • Gas lift system in place, potential gas supply
identified • Gathering systems in place • Near-term production potential, low cost
Drill crestal well into remaining reserves • Significant opportunity to drill new wells to
access further identified oil accumulations in the Tikorangi
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1. Reserve estimate completed by Deloitte LLP with an effective date of April 30, 2013. Reserves restricted to the Tikorangi Formation on the Waihapa and Ngaere Licences. See Cautionary Note Regarding Reserve & Resource Estimates. Reserves will not be attributable to NZEC until the Acquisition closes and NZEC files an updated reserve report. Gas supply dependent on outcome of NZEC/Contact gas throughput study and gas looping trial.
Mt. Messenger Formation (Miocene Sands)
Drill-proven formation • Significant discoveries to the West (TAG:
Cheal), South (NZEC: Copper Moki, Waitapu, Arakamu) and East (Kea: Puka)
• Contingent resources: 88,000 bbl oil 1
• Prospective resources: 2,061,000 bbl oil 1
Low-cost production potential in existing wells • Well information shows uphole completion
potential in six existing wells • Drill pads and gathering systems in place • Reduced drilling expense, expedited tie-in
New exploration opportunities • More than 18 new Mt. Messenger leads
identified on 3D seismic • Five high-priority targets at Waipapa site,
permitting complete
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1. Prospective resources for Mt. Messenger formation only. Additional ~880,000 bbl prospective resources estimated for Urenui and Moki formation. Resources estimated by Deloitte with an effective date of April 30, 2013 assuming 9 to 14% recovery for P50 resources. See Cautionary Note Regarding Reserve and Resource Estimates. Resources will not be attributable to NZEC until the Acquisition closes.
Kapuni Group (Eocene Sands)
Drill-proven formation • Kapuni Gas Field onshore oil/gas discovery
(Shell) producing since 1969, estimated ultimate recovery of 1,365 Bcf natural gas and 66 million bbl oil
• TWN Licences tested by four wells all encountered gas in the Kapuni Group
2013 Deloitte Resource Estimate 1
• Contingent resource: 5.0 Bcf gas, 233,000 bbl NGL 1
• Prospective resource: 95.8 Bcf gas, 4.5 million bbl NGL 1
• Discovered PIIP: 13.8 Bcf gas 1 • Undiscovered PIIP: 261.1 Bcf gas 1
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1. Resources estimated by Deloitte with an effective date of April 30, 2013 assuming 50% recovery for P50 gas resources. See Cautionary Note Regarding Reserve and Resource Estimates. Resources will not be attributable to NZEC until the Acquisition closes.
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Oil facility • 25,000 bbl/d oil handling facility • 7,800 bbl oil storage capacity • 49-km 15,500 bbl/d oil sales pipeline
from Waihapa to Omata Tank Farm Gas facility
• 45 mmcf/d separation and compression capacity
• 70 tonne/d LPG processing capacity • 51-km 8-inch gas sales pipeline from
Waihapa to New Plymouth • Storage bullets for LPG
Water disposal operations • 3,600 bbl water storage capacity • 18,000 bbl/d water injection capacity
Waihapa Production Station Assets Full-cycle facility with gathering and sales pipeline infrastructure
Includes 100 acres of fields surrounding the facility
1. Closing of the Acquisition is subject to meeting the financing condition precedent by August 14 and the government approval condition precedent by September 13, in order to close the Acquisition by September 20, 2013.
Production Facility: Buy vs Build Waihapa Production Station Neighbouring Production Facility
Gas processing 45 MMcf/day Gas processing 15 MMcf/day
Oil handling 25,000 bbl/day Oil handling 5,000 bbl/day
Water handling 18,000 bbl/day Water handling None
NGL recovery 70 tonne/day NGL recovery None
Pipelines 8” 49-km oil sales line to Omata Tank Farm 8” 51-km gas sales line to New Plymouth Gas lift for Tikorangi wells
Pipelines 11-km gas line to New Zealand’s open access gas pipelines
Cost to buy C$33.5 million • Includes 23,049 acres of Petroleum Licences
estimated to host 2,144,700 boe of 2P reserves with $62.9 million NPV (before tax, 10% discount)
• Includes additional 1,162,000 boe contingent resources, 23,541,000 boe prospective resources
Cost to expand C$30 million No exploration land
Cost to replace +/- 30%
Oil plant: NZ$35.2 million, Gas plant: NZ$40.8 million Gathering systems: NZ$70.6 million, Wellsite and satellite facilities: NZ$10.6 million
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1. Closing of the acquisition is subject to meeting the financing condition precedent by August 14 and the government approval condition precedent by September 13, in order to close the Acquisition by September 20, 2013. Reserves will not be attributable to NZEC until the Acquisition closes and NZEC files an updated reserve report. Cost to replace NZEC plant and pipelines estimated by Strive Engineering effective July 18, 2012. Information regarding neighbouring production facility compiled using publicly available information.
Waihapa Production Station Expedited tie-in of discoveries, midstream commercial opportunities
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• Central to NZEC’s inventory of exploration prospects - Expedites tie-in of natural gas and liquids - Reduces NZEC’s processing and transportation costs - Gathering capacity in place to service NZEC’s oil and
gas production - Sales pipelines in place to deliver NZEC production to
market • Only open-access midstream facility in Taranaki
Basin business opportunities for processing and handling third-party gas, liquids, oil and water
• NZEC / Contact study underway regarding gas looping
• If successful, 6-month trial will commence to achieve the following:1 - Blend NZEC’s liquid-rich gas for delivery to market - Activate gas lift for Tikorangi wells to extract additional
oil and gas production - Test economics of natural gas liquids extraction
1. Gas supply dependent on outcome of NZEC/Contact gas throughput study and gas looping trial. There can be no certainty as to the tenure of the arrangement or that the gas throughput trial will be successful.
Corporate Profile
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1. As per NZEC’s year-end 2012 financial results, released on April 25, 2013. NZEC’s Q1-2013 results will be released in the last week of May.
2. NZEC’s wells are producing light (~40 API), high-quality oil that sells at Brent pricing. NZEC calculates its netback as the oil sale price less fixed and variable operating costs and a royalty.
Common Shares Outstanding Options (Exercisable at average $1.37) Fully Diluted Shares Outstanding
122.0 million 9.9 million
131.9 million
Insider Ownership (fully diluted) 52 Week High / Low Average Volume (Q1-2013)
~35% $2.55 / $0.30
~450,000 shares/day
Current market cap (June 14, 2013) $52.4 million
Financial Highlights 1
Oil sold – during the period (incl. pre-production testing) Oil sold – cumulative (incl. pre-production testing) Cash flow from petroleum operations Average realized oil price Average netback 2
Cash invested in property, plant and equipment
Q1-2013 30,179 bbl
235,992 bbl $1.2 million $112.35/bbl
$45.29/bbl $12.0 million
12 Months 2012 187,643 bbl 205,813 bbl
$13.8 million $106.71/bbl
$70.08/bbl $40.7 million
Estimated net working capital of $12 million (May 22, 2013)
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Taranaki Basin – Existing Permits 20
1. Reserves and resources attributable to the TWN Licences will not transfer to NZEC until the Acquisition closes. Closing of the Acquisition is subject to government and regulatory approvals and NZEC obtaining sufficient financing. See Strategic Acquisition and Cautionary Notes. 2. Reserves estimate by Deloitte with an effective date of April 30, 2013 for TWN Reserves and December 31, 2012 for Eltham Reserves. 3. Best estimate of Contingent Resources attributable to TWN Licences. 4. Waitapu-2 was temporarily shut in at the end of May to allow the Company to analyze artificial lift options and perform tests related to the Copper Moki reservoir study. 5. Best estimate of Petroleum Initially in Place (PIIP) on all permits. See Reserve and Resource tables and Cautionary Note Regarding Reserve & Resource Estimates.
Taranaki Basin Conventional Focus
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• NZEC controls three permits with extensive 3D-identified leads and prospects
• Four wells in production, two wells awaiting artificial lift, results pending from one additional well 4
• Acquisition of assets from Origin will add three new petroleum licences, new drilling leads and near-term production opportunities 1
• 907.42 million boe PIIP 5
• 2D seismic database: 73,364 km • 3D seismic database: 6,835 km2
210,154 Net acres 1
100.15 Million Barrels oil equivalent prospective resource 1,3
1.16 Million Barrels oil equivalent contingent resource 1,3
2.85 Million Barrels oil equivalent 2P reserves 1,2
Drilling / Production Report Card
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Well Name
Target Formation
Total Depth
Status Total Oil Prod (end May 2013)
Copper Moki-1 Copper Moki-2 Copper Moki-3 Copper Moki-4
Mt. M Mt. M
Mt. M / Moki Mt. M / Urenui
2,220 m 2,084 m 3,167 m 2,125 m
Producing since December 2011 Producing since April 2012
Producing from Mt. Messenger since July 2012 Urenui oil discovery, shut in pending further testing
107,499 bbl 84,568 bbl 41,490 bbl
Waitapu-1 Waitapu-2
Mt. M Mt. M
2,213 m 2,084 m
Shut in pending further testing or sidetrack Producing since December 2012 1
18,790 bbl
Arakamu-1A Arakamu-2
Moki Mt. M
2,900 m 2,380 m
Suspended, pending further evaluation Oil discovery in April 2013, awaiting artificial lift
Wairere-1 Wairere-1A
Mt. M Mt. M
1,971 m 2,152 m
Plugged back for sidetrack Completion pending
Drilling / Production Report Card
1. Waitapu-2 was temporarily shut in at the end of May to allow the Company to analyze artificial lift options and perform tests related to the Copper Moki reservoir study.
Building Inventory of Drilling Leads 3D seismic identified new targets in deeper formations
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Eltham Permit
Alton Permit
Shell’s Kapuni
Discovery
Origin’s Rimu/Kauri Discovery
New 3D seismic survey
Waitapu wells
Copper Moki wells
Arakamu wells
Eltham Permit
Alton Permit
Wairere wells
Horoi site
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East Coast Basin
24
East Coast Basin Unconventional Opportunity
25
• World-class resource potential in two oil shale packages
• 2 permits issued, 2 permits pending 1
• Seeking partnerships to advance permits
• 1.4 B bbl conventional PIIP 3
• 20.9 B bbl unconventional PIIP 3
• 2D seismic database: 9,479 km • 3D seismic database: 662 km2
2.06 Million Net acres 1
125.8 Million Barrels conventional prospective resource 2
478.7 Million Barrels unconventional prospective resource 2
1. Grant of East Cape Permit (100% ownership) pending Crown approval. Acquisition of Wairoa Permit (80% ownership) pending Crown approval. 2. Net Prospective Resource as identified by AJM Petroleum Consultants (best estimate) assuming 9% recovery for conventional resources and 2% recovery for unconventional resources. Does not include resource estimate for Wairoa Permit, which is under evaluation. See Resource Estimates and Cautionary Note Regarding Reserve & Resource Estimates. 3. Net Undiscovered Petroleum Initially in Place (PIIP) as identified by AJM Petroleum Consultants. See Resource Estimates and Cautionary Note Regarding Reserve & Resource Estimates.
East Coast Basin Oil Shales
• Over 300 oil and gas seeps sourced back to two oil shale formations: Whangai and Waipawa
- Whangai shale package estimated to be 300 – 600 metres thick
- Characteristics similar to Bakken • Advancing technical understanding of shale
targets - Wairoa acquisition adds 214,290 acres to
NZEC’s portfolio - NZEC analyzing results from three stratigraphic
wells and 70 km of 2D seismic on Ranui and Castlepoint permits
• Two commitment wells required in Q4-2013 (one each on Ranui and Castlepoint)
26 1. Acquisition of Wairoa Permit and grant of East Cape Permit pending Crown approval. Acquisition of TWN Petroleum Licenses and Waihapa Production Station (in Taranaki Basin) pending. See Strategic Acquisition.
TAG pilot hole
Expanded East Coast Acreage – Wairoa Permit
• Wairoa Permit and surrounding area is most-explored region of East Coast
• Log data from 16 wells and more than 500 km of 2D seismic shows both conventional and unconventional opportunities
• NZEC’s technical team has worked extensively on the property (as consultants) - Seismic acquisition and interpretation - Wellsite geology and prospectivity evaluation - Permitting and land access agreements - Consultation with community members, local
government, local iwi, service providers • Established relationships with local communities • 2013 plans include technical studies, new 2D
seismic survey, interpretation of existing seismic
27
Exploration wells drilled by Westech Energy New Zealand discovered oil and natural gas, but did not make a commercial discovery
1. Acquisition of Wairoa Permit pending Crown approval. NZEC will own 80% and operate the permit, in partnership with Westech Energy New Zealand.
Building a Leading Oil & Gas Company Growth through acquisition, exploration, and strategic partnerships
28
Completion of the Acquisition will: • Increase NZEC’s portfolio to 2.27 million acres 1
• Increase NZEC’s 2P reserve base by 300% to 2,853,000 boe 2
• Add 1,162,000 boe of contingent resources and 23,541,000 boe of prospective resources 3
• Bring low-cost, near-term opportunities for production and cash flow with reactivation and uphole completion of existing wells
• Expand NZEC’s drilling inventory across all formations • Bring business opportunities with third-party producers • Ensure NZEC can deliver its oil production to market, with capacity for growth • Allow NZEC to deliver its gas to market, pending successful completion of looping trial 4
Exploration • Unlock potential of East Coast oil shales • Additional exploration into conventional Taranaki targets in 2013 • Seamless 3D seismic coverage across main production fairway reduces drilling risk
Partnerships • Experienced team with both New Zealand and Western Canadian experience • Strong community relationships
1. Acquisition of Wairoa Permit and grant of East Cape Permit pending Crown approval. Acquisition of TWN Petroleum Licenses pending. See Strategic Acquisition. 2. TWN Reserves will not be attributable to NZEC until the acquisition closes and NZEC files an updated reserve report. See TWN Reserves and Cautionary Notes. 3. Best estimate of resources. See TWN Resources and Cautionary Note. Resources will not be attributable to NZEC until the acquisition closes. Gas supply dependent on outcome of NZEC/Contact gas throughput study and gas looping trial. There can be no certainty as to the tenure of the arrangement or that the gas throughput trial will be successful.
APPENDIX
29 Waitapu site – oil production from Mt. Messenger formation 29
Appendix
30
Final TWN Acquisition Terms
Final Terms Original Terms Purchase price • C$33.5 million • No additional adjustments to purchase price
Purchase price • C$42 million • Additional C$9 million in adjustments at closing
(NZEC internal estimate)
Petroleum Licences • Ultimate ownership of three Petroleum Licences: Tariki, Waihapa and
Ngaere (“TWN Licences”). The Ahuroa Licence will be transferred to Contact Energy. Total acreage: 23,049 acres (93.3 km2)
Petroleum Licences • NZEC purchasing four Petroleum Licences: Tariki,
Ahuroa, Waihapa and Ngaere. Total acreage: 26,907 acres (108.9 km2)
Royalty payable to Origin • 9% net revenue royalty payable to Origin on all future hydrocarbon
production on the Licences • NZEC retains the ability to buy back up to 4% of the royalty at any
time for C$4.25 million per point
Royalty payable to Origin • 5% net revenue royalty payable to Origin on all
future hydrocarbon production on the Petroleum Licences
Commitments to Origin • Simplified sale agreement
- NZEC retains 100% of production from all existing and new wells on the TWN Licences in all formations, subject only to the Origin Royalty (and a 10% royalty payable to the NZ Government)
- Origin relinquishes all other rights and encumbrances on the TWN Licences
Commitments to Origin • NZEC responsible for 100% of costs associated with
drilling a well to the crestal interval of the Tikorangi formation, with profits to be shared 50/50 with Origin
• Origin retained rights to eight “option wells” for gas storage
History of TAWN Permits 1 Tariki, Ahuroa, Waihapa and Ngaere Petroleum Mining Licenses (“PMLs”)
• 1978 – Petroleum Corporation of New Zealand formed for NZ Government’s petroleum exploration activities
• 1987 – Petrocorp publicly listed, Fletcher Challenge buys 15%, government retains 70%, TAWN Permits granted to Petrocorp
• March 1988 – Fletcher Challenge buys remaining 70% of Petrocorp, assumes ownership of TAWN Permits, becomes Fletcher Energy
• 1988-1998 – Petrocorp drills a number of wells, including 14 that produce oil and gas, converts permits to PMLs
• October 2000 – Shell and Apache buy Fletcher Energy, Shell gets TAWN PMLs • January 2002 – Swift Energy acquires TAWN PMLs and Waihapa Production
Station • 2002-2006 – Swift Energy drills a numbers of wells, including three producers • June 2008 – Origin Energy acquires Swift Energy’s NZ assets, sells inset permit
within Ahuroa PML to Contact Energy for gas storage usage (Origin owns 51% of Contact)
• May 2012 – NZEC agrees to acquire TAWN assets • June 2013 – NZEC / Origin / Contact finalize agreements for acquisition 1
31 1. Based on publicly available information. 2. Closing of the acquisition subject to government approvals and NZEC securing sufficient financing to deposit the remainder of the acquisition price in an escrow account.
Historical Production – Tikorangi Formation
1. Select production data using publicly available information regarding wells that produced oil on the TWN Licences.
Waihapa Production
Station
Well name 1 Max bbl/d Total bbl produced
Ngaere-1 7,537 4,337,084
Ngaere-2 3,658 1,002,565
Ngaere-3 8,652 1,089,505
Toko-2B 298 126,286
Waihapa H-1 1,953 45,349
Waihapa-1B 4,804 4,909,317
Waihapa-2 3,182 4,798,752
Waihapa-4 2,674 2,990,189
Waihapa-5 979 91,055
Waihapa-6A 4,674 4,262,707
23 million bbl of historical production
32
NZEC Eltham Reserve Estimate
33
Notes: Gross reserves before the deduction of royalty obligations payable to the New Zealand government. Numbers may not sum due to rounding. Reserve estimates calculated by Deloitte. Mbbl – thousand barrels of oil. MMcf – million cubic feet of natural gas. Mboe – thousand barrels of oil equivalent using a conversion ratio of 6 Mcf : 1 bbl. Barrels of oil equivalent (boe) may be misleading, particularly if used in isolation. The boe conversion ratio is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. Possible reserves are those additional reserves that are less certain to be recovered than probable reserves. There is a 10% probability that the quantities actually recovered will equal or exceed the sum of proved plus probable plus possible reserves. See Cautionary Note Regarding Reserve and Resource Estimates.
Proved Developed Producing 307.8 594.9 38.7 445.7
Proved Undeveloped 20.6 31.9 2.0 27.9
Total Proved 328.4 626.8 40.7 473.6
Probable 158.3 329.6 21.5 234.7
Proved + Probable 486.7 956.4 62.2 708.3
Possible 195.6 398.1 25.8 287.8
Proved + Probable + Possible 682.3 1354.5 88.0 996.1
Marketable Oil and Gas ReservesAs at December 31, 2012Forecast Prices and Costs
Reserves Category Natural Gas Liquids (Mbbl)
Barrels Oil Equivalent (Mboe)
Natural Gas (MMcf)
Light & Medium Oil (Mbbl)
NZEC Resource Estimates (Current Permits)
34
Low Best High Low Best High
TARANAKI BASINEltham (PEP 51150) 377.0 93,166.1 100% NZECConventional 231.4 346.8 578.8 19.7 31.6 56.9
Alton (PEP 51151) 313.6 77,482.4 65% NZEC / 35% L&MConventional 224.8 493.7 1,229.7 18.9 45.0 116.9
Manaia (PEP 54867) 66.6 16,455.7 60% NZEC / 40% NZOGConventional
EAST COAST BASINCastlepoint (PEP 52694) 2,230.0 551,045.0 100% NZECConventional 349.0 586.3 1,053.1 30.3 54.5 102.0 Unconventional 2,958.2 6,743.0 16,190.7 56.2 154.1 458.5
Ranui (PEP 38342) 902.8 223,086.7 100% NZECConventional 94.3 198.3 435.0 8.1 18.0 42.0 Unconventional 440.4 969.0 2,252.5 8.6 22.5 65.2
East Cape (PEP 52976) 4,320.0 1,067,495.2 100% NZEC 1
Conventional 189.8 615.7 1,997.4 14.6 53.3 195.4 Unconventional 5,747.2 13,148.1 31,838.3 110.3 302.1 906.3
Wairoa (PEP 38346) 867.2 214,289.8 80% NZEC / 20% WestechConventionalUnconventional
Total 9,077.2 2,243,020.9 10,235.1 23,100.9 55,575.5 266.7 681.1 1,943.2 Conventional 1,089.3 2,240.8 5,294.0 91.6 202.4 513.2 Unconventional 9,145.8 20,860.1 50,281.5 175.1 478.7 1,430.0 1 Grant of permit pending. Source: Deloitte LLP, effective date February 1, 2011.
Estimate pending Estimate pending
(MM barrels of oil)
Early stage Early stage
Net Permit Area
Net Permit Acreage
Net Unrisked Undiscovered Petroleum (MM barrels of oil)
Net Unrisked Prospective Recoverable
East Coast Basin Oil Shale Potential
35
Waipawa Whangai Bakken
Basin/Jurisdiction East Coast New Zealand
East Coast New Zealand
Willesden North Dakota & Saskatchewan
Quartz Content (%) 40 – 80 40 – 80 40 – 60 Carbonate Content (%) 5 – 40 5 – 40 10 – 20 Clay Content (%) Unknown Unknown 5 – 20 Depth (meters) 0 – 5,000 0 – 5,000 2,700 – 3,500 Thickness (meters) 10 – 70 300 – 600 10 – 50 Porosity (%) 3 – 8 3 – 8 4 – 12 Permeability (microdarcies) 10 – 200 10 – 110 5 – 1,000 Kerogen Type Type II Type II Type II TOC (%) 3.0 – 12.0 0.2 – 1.7 1.0 – 21.0 Vit Reflectance (R) 0.3 – 0.4 0.4 – 1.4 0.7 – 1.1 Tmax (Celsius) 430 – 445 420 – 445 420 – 450
Geologic Age Late Paleocene Late Cretaceous / Paleocene Upper Devonian
Source: AJM Petroleum Consultants
Board of Directors
36
Name Expertise Experience
John A. Greig, M.Sc, P.Geo
Chairman
• Founder and financier of numerous mining and oil and gas companies. Specializing in recognizing undervalued geological assets
• Founder, Director & Officer Sutton Resources, Cumberland Resources Ltd., Eurozinc Mining Corp., Crown Resources Corp.
John G. Proust, C.Dir CEO
Director
•Proven track record of building companies from grass roots to advanced development. Specializes in identifying undervalued assets on a global basis
•Chairman, CEO & Director, Southern Arc Minerals Inc. •Chairman, Canada Energy Partners Inc.
Bruce G. McIntyre, P.Geol
Executive Director
•Professional petroleum geologist with over 30 years of proven exploration and development oriented value creation
•President, CEO Sebring Energy Inc. •President, CEO TriQuest Energy Corp. •President, CEO BXL Energy Ltd., • Exploration Manager Gascan Resources Ltd.
Hamish J. Campbell B.Sc (Geology),
FAusIMM Director
•Professional geologist with 30 years of experience managing exploration programs, evaluation and assessment of joint ventures and acquisitions
•Director of a number of New Zealand limited liability mineral and petroleum companies
•Principal Indonesian mining service company
Corporate Office – Canada
37
Name Expertise Experience
John G. Proust, C.Dir Chief Executive Officer
• Proven track record of building companies from grass roots to advanced development. Specializes in identifying undervalued assets on a global basis
• Chairman, CEO & Director, Southern Arc Minerals Inc. • Chairman, Canada Energy Partners Inc.
Bruce G. McIntyre, P.Geol Executive Director
• Professional petroleum geologist with over 30 years of proven exploration and development oriented value creation
• President, CEO Sebring Energy Inc. • President, CEO TriQuest Energy Corp. • President, CEO BXL Energy Ltd., • Exploration Manager Gascan Resources Ltd.
Celeste M. Curran, B.A. (Hon), L.L.B.
VP Corporate & Legal Affairs
• Over 20 years of legal and negotiating experience specializing in major projects
• VP, Corporate & Legal Affairs, J. Proust & Associates • Lead counsel for City of Vancouver and City of Richmond
for the 2010 Olympic and Paralympic Winter Games • Senior Solicitor, City of Vancouver
Rhylin Bailie, B.ES VP Communications &
Investor Relations
• More than 17 years of experience in the resource industry, in both finance and investor relations
• Professional writer and editor
• Director Communications & Investor Relations, NovaGold Resources Inc.
• Supervisor Treasury Administration, Placer Dome Inc.
Gerrie van der Westhuizen, CA
VP Finance
• Chartered Accountant with expertise in financial reporting and controls, equity offerings, treasury management and debt structures, tax compliance
• Progressively senior positions with publicly-traded natural resource companies
• Audit Manager, Mining Group, PricewaterhouseCoopers
Eileen Au, B.Sc Corporate Secretary
• More than 16 years of experience overseeing corporate governance and corporate affairs for publicly-listed resource companies
• Corporate Secretary for various public and private resource companies
• Director of Bryant Resources and Charlotte Resources
Operations Team – New Plymouth, NZ
38
Name Expertise Experience
Chris Bush, B.E (Hon) New Zealand
Country Manager
• Chemical engineer with more than 30 years in both upstream and downstream oil and gas experience internationally
• New Zealand Country Manager/Director, Origin Energy • Chairman of Petroleum Exploration and Producers Association
of New Zealand
Chris Ferguson, CA Chief Financial Officer
• Chartered accountant with 18 years of financial, accounting and operational experience
• New Zealand reporting, SEC reporting, SOX 404 compliance
• Finance and Planning Manager, Origin Energy • 13 years of oil and gas experience within the Taranaki Basin
Mike Oakes General Manager
Midstream Operations
• More than 30 years of international oil and gas experience overseeing design, commissioning and start up, staffing and operation of oil and gas fields and production facilities
• Operations Manager, Asset Manager and Operational Excellence Advisor, Origin Energy
• Technical Advisor, Total E&P Borneo
Cliff Butchko P.Eng, MBA (Hon) General Manager
Upstream Operations
• Professional engineer with over 30 years experience evaluating and managing oil and gas resources
• President Omni Oil and Gas Inc. • Vice President Lexoil Inc. • Partner and Co-founder TIFF advisory group • Senior technical positions in several resource companies
James Watchorn, B.Sc Operations Manager
• Mechanical engineer with more than 15 years of experience in all aspects of drilling, completions and production, and facility and wellsite construction
• Production and Facilities Manager, TAG Oil • Senior Petroleum Engineer, Origin Energy • Operations Engineer, Iteration Energy/Chinook Energy
Stewart Angelo Engineering & Maintenance
Manager
• 25 years in oil and gas midstream assets focused around development and implementation of procedures and processes for asset management systems
• Engineering Officer with New Zealand Merchant Navy • Maintenance Engineer, Fletcher Challenge • Director of Productive Maintenance
Toka Walden Land Manager • Senior Manager, New Zealand Dept. of Conservation
• Negotiating access provisions and facilitating resource consent process, assisting with community relationship building
Technical Team – Wellington, NZ
39
Name Qualifications Expertise
Dr. Ian Brown B.Sc (Hons), M.Phil, D.Eng, MIPENZ, C.P.Eng Chief Operating Officer; professional geological engineer
June Cahill B.Sc,
B. Applied Econ. Acquisition, management, and analysis of complex geoscience data
Bill Leask B.Sc (Hons) M.Sc (Hons)
Petroleum geology related to the East Coast and other New Zealand basins
Dr. Simon Ward B.Sc (Hons)
Ph.D Petroleum geology related to the Taranaki and other New Zealand basins
Ian Calman B.Sc (Hons) Seismic data acquisition, processing, and interpretation
Gareth Reynolds B.Sc (Hons) Geology Geoscientist with experience in New Zealand Basin analysis
Dr. Richard Kellett B.Sc (Hons), Ph.D, P.Geoph Geoscientist with worldwide exploration and business development experience
Peter Wood B.E (Hons), B.Sc ,
M.Comp.Sci Management and development of computing resources for geoscience applications
Sam Pryde B.Sc
Post.Grad.Dip. Geological investigations in the East Coast basin area
Contact NZEC
40
Corporate Head Office John Proust, Chief Executive Officer Bruce McIntyre, Executive Director Rhylin Bailie, VP Investor Relations North America Toll-free: 1-855-630-8997 [email protected]
New Zealand Office Chris Bush, New Zealand Country Manager Tel: + 64-6-757-4470 New Zealand Toll-free: 0800-469-363 www.NewZealandEnergy.com