New Zealand Oil & Gas looks for partners on two farm-ins

New Zealand Oil & Gas is seeking drilling partners on two new farm-ins, one of which is in shallow water close to the Taranaki Coast, with a much larger potential oil and gas-bearing structure than was initially expected.

At a briefing for media on its March quarter operational results, NZOG chief executive David Salisbury said the newly named Kaopokonui prospect, in exploration licence area PEP51311, had potential to yield 200 million or more barrels of oil.

The area is within the same system as suppliedd the Mok sands and hold the reservoir for the Maari and Kupe fields, to the west and east of Kaopokonui respectively.

Kaopokonui was "the highest ranked prospect", comprising a stacked series of Motueka coastal sands, "which are laterally truncated and prognosed to be sealed by deep canyons".

While an exciting prospect, Kaopokonui "relies on a trapping mechanism that has been found in other parts of the world but that still needs to be shown to work in Taranaki."

Nonetheless, NZOG hoped to retain as much as a 50% holding after farm-out, a larger proportion than usual in such arrangements, because of its potential.

The other prospect being offered for farm-in is named Barque, in deep water off the Canterbury coast, and is a much more logistically challenging proposition, Salisbury said.

NZOG was talking to the Anadarko/Origin Energy joint venture which will be drilling 75 kilometres to the southwest of Barque, with a view at least to coordinating the use of deepwater drilling equipment. A drilling decision is due by 2010.

NZOG was also in touch with permit holders in the Great South Basin, which include Exxon-Mobil, Todd Energy and OMV.

The company began receiving income from the Kupe field for the first time in the March quarter, augmenting its previously sole source of cashflow, the Tui oilfield, and taking quarterly operating revenue to $30.2 million, of $17.0 million was from Tui and $13.6 million from sales of Kupe gas, LPG, and light oil.

Drilling expenditure of $4.4 million during the quarter related mainly to the wild-cat Hoki-1 well, drilled further offshore Taranaki than any previous New Zealand well, and which was plugged and abandoned earlier this month after finding no traces of hydrocarbons.

Ther cash balance at quarter end was equivalent to NZ$192.5 million, with 59% of the company's cash reserves still held in US dollars.

Delays to drilling caused by repairs meant the bulk of the Hoki drilling costs would come to book in the June quarter.

NZOG shares fell slightly to $1.54 in NZX trading this morning after the announcement.

The Kan Tan IV drilling rig is now on-site to begin drilling the first of two highly prospective wells - Southwest-1 and Kahu-1, adjacent to the producing Tui field.

Businesswire.co.nz

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