New Zealand Energy Announces 2012 Year-end and Fourth Quarter Results and 2012 Year-end Reserves Estimate

New Zealand Energy Announces 2012 Year-end and Fourth Quarter Results and 2012 
Year-end Reserves Estimate 
VANCOUVER, BRITISH COLUMBIA -- (Marketwired) -- 04/25/13 -- New
Zealand Energy Corp. ("NZEC" or the "Company") (TSX
VENTURE:NZ)(OTCQX:NZERF) has released the results of its fourth
quarter and fiscal year ended December 31, 2012. Details of the
Company's financial results are described in the Audited Consolidated
Financial Statements and Management's Discussion and Analysis which,
together with further details on each of the Company's projects, are
available on the Company's website at www.newzealandenergy.com and on
SEDAR at www.sedar.com. All amounts are in Canadian dollars unless
otherwise stated. 
NZEC has also released the results of its 2012 year-end reserve and
resource estimation and economic evaluation (the "Report"), prepared
by Deloitte LLP ("AJM Deloitte"). The reserve estimate and economic
evaluation was confined to NZEC's 100% working interest Eltham Permit
(PEP 51150) and was based on reservoir and production data from wells
producing at December 31, 2012. Regulatory filings associated with
the Report are available for review on SEDAR. 
HIGHLIGHTS 


 
--  Four wells in production at year-end 2012 (2011: one well) 
--  162,444 barrels of oil produced and 162,077 barrels of oil sold during
    2012 (2011: 11,623 and 9,567) 
--  Total recorded revenue of $16,475,971 (2011: $974,517) 
--  Average annual field netback of $70.08 per barrel of oil sold (2011:
    $78.43) 
--  Positive cash flow from petroleum operations (including pre-production
    recoveries) of $13.8 million (2011: $1.7 million) 
--  Invested $40.6 million in resource properties, plant and equipment
    during 2012 
--  Increased 2P Reserves by 151% compared to year-end 2011, with an
    undiscounted pre-tax value estimated at $27.5 million 
--  Increased exploration permit holdings by 249,326 acres (12.5%) 
--  Initiated strategic acquisition from Origin Energy of midstream and
    exploration assets 
--  Established strategic partnerships with Westech Energy New Zealand and
    New Zealand Oil & Gas 
--  Established cooperation agreement with Te Runanga o Ngati Ruanui Trust 

 
FINANCIAL SNAPSHOT  


 
----------------------------------------------------------------------------
                                                For the year   For the year 
                                                       ended          ended 
                                                December 31,   December 31, 
                                                        2012           2011 
----------------------------------------------------------------------------
Production                                       162,444 bbl     11,623 bbl 
Sales                                            162,077 bbl      9,567 bbl 
----------------------------------------------------------------------------
Price                                           106.71 $/bbl   106.83 $/bbl 
Production costs                                 31.57 $/bbl    23.44 $/bbl 
Royalties                                         5.06 $/bbl     4.96 $/bbl 
Field netback                                    70.08 $/bbl    78.43 $/bbl 
----------------------------------------------------------------------------
Revenue                                           16,475,971        974,517 
Pre-production recoveries                          2,449,231        950,440 
Total comprehensive loss                          (1,235,492)    (6,655,829)
Finance income                                       211,551        119,583 
(Loss) earnings per share - basic and diluted          (0.03)         (0.08)
Current assets                                    49,137,637     19,293,345 
Total assets                                     116,059,939     31,152,804 
Total long-term liabilities                        2,598,840        120,429 
Total liabilities                                 23,442,632      1,383,376 
Shareholders' equity                              92,617,307     29,769,428 
----------------------------------------------------------------------------
                                                                            
Note: The abbreviation bbl means barrel or barrels of oil.                  

 
During the three-month period ended December 31, 2012, the Company
produced 29,516 barrels of oil and sold 29,901 barrels for total oil
sales of $3,109,206, or $103.98 per barrel. Total recorded production
revenue net of royalties at 5% (or $5.39 per barrel) was $2,948,042.
Production costs during the three-month period ended December 31,
2012 totalled $1,782,939, or $59.63 per barrel, generating a field
netback of $38.96 per barrel during the fourth quarter. NZEC
calculates the netback as the oil sale price less fixed and variable
operating costs and a 5% royalty. The decrease in the field netback
compared to previous quarters is the result of decreased oil
production related to well declines in the Copper Moki wells, a lower
average realized oil price in the quarter, as well as higher fixed
production costs as the Company undertook various additional
production tests with the objective of optimizing production from its
Copper Moki wells. The Company also placed an additional well into
production late in Q4 which added to overall fixed production costs.
During the three-month period ended December 31, 2012, fixed
operating costs represented approximately 85% of total production
costs. During the period, NZEC placed three of its four producing
wells on artificial lift. Artificial lift along with the installation
of permanent production facilities at the Company's well sites is
expected to reduce production costs in the longer term, since the
wells will require reduced maintenance and manpower, while production
equipment rental costs will be reduced significantly. Installation of
the Company's permanent surface facilities at the Copper Moki site is
still underway and the Company continues to investigate opportunities
to optimize oil production from the wells.  
During the year ended December 31, 2012, the Company produced 162,444
barrels of oil and sold 162,077 barrels. Three wells commenced
production in 2012. Additionally, pre-production recoveries generated
from oil sales during the start-up and testing phase of the wells was
treated as a cost recovery of the capitalized well development costs.
Total recoveries on the oil produced and sold during the start-up and
testing phase amounted to $2,449,231 ($95.80 per barrel).  
The aggregate volume of oil produced during the year ended December
31, 2012, including pre-production testing, was 188,011 barrels with
187,643 barrels sold, taking into consideration the opening period
inventory balances, resulting in positive cash flow from oil sale and
pre-production recoveries of $13,809,143. The average field netback
during the year ended December 31, 2012 was $70.08 per barrel. 
At April 19, 2013, the Company had $11.3 million in estimated net
working capital. This includes US$35 million that has been placed on
deposit to satisfy the balance of the purchase price of the
acquisition of assets from Origin, as summarized below in Property
Review, Origin Agreement. The Company has secured a US$34.5 million
operating line of credit against the US$35 million deposit and to
date has drawn down US$25.7 million.  
RECENT DEVELOPMENTS 
Subsequent to the period end, NZEC initiated completion activities at
two wells that had been drilled in Q4-2012, resulting in a new oil
discovery; drilled two new exploration wells, finishing six wells of
the anticipated eight-well program; released its drill rig; retracted
previously-announced production guidance; appointed a new Chief
Financial Officer; announced the resignation of a Director for
personal health reasons; announced approval from New Zealand's
Overseas Investment Office related to the acquisition of the Waihapa
Production Station from Origin; and completed a reserves update.  
Exploration 
Since year-end 2012, NZEC has undertaken drilling or completion
activities on four wells. The Arakamu-2 well was drilled in November
2012, reaching a measured depth of 2,380 metres (1,870 metres true
vertical depth) and encountering 18 metres of net pay over two
separate intervals in the Mt. Messenger formation. Completion
commenced in December but the well encountered technical difficulties
following perforation, when an inflow of sand resulted in tubing and
the perforating gun getting stuck in the well. Workover activities
commenced in January and continued through March. NZEC commenced
testing the Arakamu-2 well in mid-March and swab tested the intervals
separately and in tandem for a total of 13 days. The well
demonstrated strong inflow of oil, gas and water with the oil cut
increasing, averaging more than 20% over the last three days of swab
testing. The well produces both oil and water and the water column is
heavier than the gas lift; as a result, artificial lift is required
to recover the oil. The well is shut in pending the evaluation of
artificial lift installation.  
The Arakamu-1A well reached target depth in the Moki formation at a
measured depth of 2,900 metres (2,650 metres true vertical depth).
NZEC perforated and flow tested two zones in the Moki formation but
was unable to demonstrate recoverable hydrocarbons, and has suspended
the well.  
NZEC drilled two wells on the Wairere site. The Wairere-1 well was
drilled to a measured depth of 1,971 metres (1,875 metres true
vertical depth) but did not encounter any hydrocarbon-bearing sands.
The Company immediately sidetracked the well to a second target
(Wairere-1A), kicking off at a depth of 394 metres and reaching a
measured depth of 2,152 metres (1,879 metres true vertical depth).
The well intersected sands in the Mt. Messenger formation with good
hydrocarbon indications. The well was cased to total depth and
completion is pending. 
On February 25, 2013, the Company announced its decision to delay the
remaining two wells in its Eltham/Alton drill program to focus on
commercial opportunities arising from the pending acquisition of
assets from Origin. While success in Arakamu-2 and Wairere-1A could
result in additional production and cash flow, the Company's
assessment is that flow rates from these wells will not be adequate
to achieve anticipated targets, and the Company withdrew previous
production guidance. 
Reserves 
Concurrent with its year-end financial results, the Company
commissioned AJM Deloitte to prepare a year-end oil reserve estimate
and economic evaluation, prepared in accordance with National
Instrument 51-101 - Standards of Disclosure for Oil and Gas
Activities with an effective date of December 31, 2012. The reserve
estimate and economic evaluation was confined to NZEC's Eltham Permit
and based on reservoir and production data from the Copper Moki-1,
Copper Moki-2, Copper Moki-3 and Waitapu-2 wells. The results, which
are summarized below, represent a 151% increase to 2P reserves
(Proved + Probable) and a 142% increase to 3P reserves (Proved +
Probable + Possible) when compared to the reserves reported at
December 31, 2011, which were based on reservoir and production data
from the Copper Moki-1 well. 


 
                    Marketable Oil and Gas Reserves (1)                     
                           As at December 31, 2012                          
                          Forecast Prices and Costs                         
                                                                            
----------------------------------------------------------------------------
                             Light &     Natural   Natural Gas   Barrels Oil
                              Medium         Gas       Liquids    Equivalent
Reserves Category      Oil (Mbbl)(2)   (MMcf)(3)        (Mbbl)     (Mboe)(4)
----------------------------------------------------------------------------
Proved Developed                                                            
 Producing                       308         595            39           446
Proved Undeveloped                20          32             2            28
Total Proved                     328         627            41           474
Probable                         158         330            21           235
Proved + Probable                487         956            62           708
Possible (5)                     196         398            26           288
Proved + Probable +                                                         
 Possible                        682       1,355            88           996
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Notes:                                                                      
                                                                            
(1) The Company's reserves are presented before the deduction of royalty    
    obligations payable to the New Zealand government. Numbers may not sum  
    due to rounding.                                                        
(2) Mbbl - thousand barrels of oil.                                         
(3) MMcf - million cubic feet of natural gas.                               
(4) 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.  
(5) 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 Estimates.                                                      
                                                                            
                   Net Present Value of Future Net Revenue                  
                                  After Tax                                 
                           As at December 31, 2012                          
                          Forecast Prices and Costs                         
                                                                            
----------------------------------------------------------------------------
                  Net Present Value of Future Net Revenues                  
                     After Tax, Discounted at % per year                    
----------------------------------------------------------------------------
                                                                        Unit
                                                                       Value
Reserves            0%       5%       8%      10%      15%      20%      10%
 Category      ($'000)  ($'000)  ($'000)  ($'000)  ($'000)  ($'000)  ($/boe)
----------------------------------------------------------------------------
Proved                                                                      
 Developed                                                                  
 Producing      16,229   15,254   14,728   14,400   13,649   12,987    32.29
Proved                                                                      
 Undeveloped     1,061      972      924      893      823      760    31.89
Total Proved    17,290   16,226   15,652   15,293   14,472   13,747    32.26
Probable        10,216    8,584    7,789    7,320    6,327    5,536    31.28
Proved +                                                                    
 Probable       27,506   24,810   23,440   22,613   20,799   19,283    31.94
Possible        11,414    8,939    7,817    7,184    5,911    4,965    24.94
Proved +                                                                    
 Probable +                                                                 
 Possible       38,920   33,749   31,257   29,797   26,710   24,248    29.92
----------------------------------------------------------------------------

 
Change to Senior Management and Board of Directors 
On November 1, 2012, NZEC announced its decision to move the Chief
Financial Officer role to New Zealand to allow for closer interaction
with the Company's technical and accounting teams. John Hudson,
NZEC's Group Financial Controller located in New Plymouth, New
Zealand, temporarily assumed the role of interim Chief Financial
Officer until the Company appointed Chris Ferguson as its Chief
Financial Officer on January 28, 2013.  
Mr. Ferguson is a Chartered Accountant with 18 years of financial,
accounting and operational experience in both the public and private
sectors. Mr. Ferguson has extensive oil and gas experience within the
Taranaki Basin, having held senior financial positions over the past
13 years with both local and international exploration and production
companies. Previously he held the role of Finance and Planning
Manager with Origin Energy New Zealand, overseeing the financial
integration of the TAWN and Rimu/Kauri oil and gas assets acquired
from Swift Energy and the transition to operations of the Kupe Gas
Field. Mr. Ferguson's extensive operating knowledge of Taranaki oil
and gas assets is complemented with a strong financial background
that includes New Zealand statutory reporting, SEC reporting
requirements, SOX 404 compliance, systems implementation and
execution and leadership of finance and accounting teams. Mr.
Ferguson is based in the Company's operations office in New Plymouth,
New Zealand. 
On February 11, 2013, NZEC announced the resignation of Ken Truscott
from the Company's Board of Directors for personal health reasons.
Mr. Truscott was a founding Director of the Company, and his oil and
gas expertise and insight were invaluable as NZEC expanded from a
start-up company to an oil and gas producer with operations on
multiple sites. NZEC thanks Mr. Truscott for his valuable
contributions and wishes him well in his recovery. 
PROPERTY REVIEW  
Taranaki Basin 
The Taranaki Basin is situated on the west coast of the North Island
and is currently New Zealand's only oil and gas producing basin, with
total production of approximately 130,000 boe/d from 18 fields.
Within the Taranaki Basin, NZEC holds a 100% interest in the Eltham
Permit; a 65% interest in the Alton Permit in joint arrangement with
L&M and a 60% interest in the Manaia Permit in joint arrangement with
New Zealand Oil & Gas ("NZOG"). The Eltham Permit covers
approximately 93,166 acres (377 km2) of which approximately 31,877
acres (129 km2) are offshore in shallow water. The Alton Permit
covers approximately 119,204 onshore acres (482 km2). NZEC increased
its interest in the Alton Permit from 50% to 65% by completing the
acquisition and processing of approximately 50 km2 of 3D seismic
across the northern end of the permit. The transfer of the additional
15% interest was approved by NZPAM on December 21, 2012. The Manaia
Permit covers approximately 27,426 onshore acres (111 km2) and was
granted to NZEC and NZOG in December 2012 as part of the annual New
Zealand block offer for exploration permits. 
NZEC also expects to acquire four Petroleum Licenses and the Waihapa
Production Station upon completion of the acquisition of assets from
Origin, as outlined below under Origin Agreement. 
Production 
Four wells have been advanced to commercial production. The wells are
producing light oil that is trucked to the Shell-operated Omata tank
farm and sold at Brent pricing.  
Copper Moki-1 has been producing from the Mt. Messenger formation
since December 10, 2011. Copper Moki-2 has been producing from the
Mt. Messenger formation since April 1, 2012. Copper Moki-3 has been
producing from the Mt. Messenger formation since July 2, 2012. The
wells produce approx. 42 degrees API oil and flowed from natural
reservoir pressure until October 2012, when NZEC began installing
artificial lift (pump jacks) to optimize and stabilize production
rates. All three wells are now producing with artificial lift.  
The Waitapu-2 well (refer to Well Sites below) is producing approx.
40 degrees API oil and flowing from natural reservoir pressure. The
well was flow tested in November and commenced commercial production
on December 20, 2012.  
The Company has completed a natural gas pipeline from the Copper Moki
site to the Waihapa Production Station and is considering laying 1.3
km of natural gas pipeline to tie-in Waitapu-2 to the Waihapa
Production Station through the existing Copper Moki pipeline. The
Company is not yet generating cash flow from its natural gas
production.  
The Company has produced approximately 240,221 barrels of oil, with
cumulative pre-tax oil sales exceeding US$25.49 million, including
sales from oil produced during testing (net results of operations are
discussed under Results of Operations). Over 22 production days in
April 2013, the wells have collectively produced oil at an average
rate of 268 bbl/day and generated gas at an average rate of 665
mcf/day.  
Management believes that the declines in production following
installation of artificial lift may not be due to reservoir
conditions, but rather relate to mechanical issues, including
possible wax build-up down-hole. Accordingly, management is engaging
global industry leaders to investigate the cause of and define
remedies to these issues in an effort to optimize production. Such
remedies may include stimulation of well flow by means of condensate
washes, modifying pumping mechanisms or other forms of reservoir
stimulation. Following a condensate wash of one well during the past
five days, production from the wells increased to a rate of 369
bbl/day as of the date of this report. 
Well Sites  
NZEC has drilled ten wells on its Eltham Permit and made six oil
discoveries, with results still pending from one well. The wells have
been drilled from four separate sites, and have demonstrated
repeatability in the Mt. Messenger formation, as the Company drilled
away from its original Copper Moki discovery.  
The table below summarizes the drilling Company's drilling results: 


 
----------------------------------------------------------------------------
                                            Formation                       
                    --------------------------------------------------------
Well                    Urenui          Mt. Messenger                   Moki
----------------------------------------------------------------------------
Copper Moki-1                                       u                       
----------------------------------------------------------------------------
Copper Moki-2                                       u                       
----------------------------------------------------------------------------
Copper Moki-3                                       u                       
----------------------------------------------------------------------------
Copper Moki-4                u                                              
----------------------------------------------------------------------------
Waitapu-1                          Pending evaluation                       
----------------------------------------------------------------------------
Waitapu-2                                           u                       
----------------------------------------------------------------------------
Arakamu-1A                                                Pending evaluation
----------------------------------------------------------------------------
Arakamu-2                                           u                       
----------------------------------------------------------------------------
Wairere-1                                 Sidetracked                       
----------------------------------------------------------------------------
Wairere-1A                         Pending completion                       
----------------------------------------------------------------------------
u - Successful hydrocarbon discovery                                        

 
Copper Moki site  
The Copper Moki-1, Copper Moki-2 and Copper Moki-3 wells discovered
oil in the Mt. Messenger formation and were subsequently placed into
production.  
Copper Moki-4, discovered oil in the Urenui formation, which is
shallower than the Mt. Messenger formation and produces heavier oil
(approx. 29 degrees API) with a pour point of approximately 42
degrees C which is very close to the reservoir temperature. Copper
Moki-4 is currently shut in while NZEC completes the well test
analyses and economic evaluation of artificial lift systems required
to make a production decision.  
Waitapu site  
The Waitapu site is located approximately 1.3 km south of the Copper
Moki site.  
The Waitapu-1 well was drilled during Q4-2012 to a total measured
depth of 2,213 metres (1,926 metres true vertical depth) and
encountered a sand interval within the Mt. Messenger formation with
oil and natural gas shows. However, the permeability and porosity was
such that the well did not immediately yield economic production. The
well has been suspended pending further evaluation and/or sidetrack
to an alternate target. 
The Waitapu-2 well was drilled in Q4-2012 to a total measured depth
of 2,085 metres (1,977 metres true vertical depth), encountering
approximately 6.2 metres of net pay in the Mt. Messenger formation.
The well was flow tested in November and commenced commercial
production on December 20, 2012.  
Arakamu site  
The Arakamu site is located approximately 3.8 km southwest of the
Copper Moki site and 2.5 km south of the Waitapu site.  
The Arakamu-1A well reached measured depth of 2,900 metres in the
Moki formation (2,653 meters true vertical depth). NZEC perforated
and flow tested two zones in the Moki formation but was unable to
demonstrate recoverable hydrocarbons, and the well has been suspended
pending evaluation.  
The Arakamu-2 well was drilled in November 2012, reaching a measured
depth of 2,380 metres (1,870 metres true vertical depth) and
encountering 18 metres of net pay over two separate intervals in the
Mt. Messenger formation. Following extensive workover operations to
recover stuck tubing and a perforating gun, NZEC commenced testing
the Arakamu-2 well in mid-March and swab tested both intervals
separately and in tandem over 13 days. The well demonstrated strong
inflow of oil, gas and water with the oil cut increasing over the
last three days of swab testing, to more than 20%. The well is shut
in pending the evaluation of artificial lift installation.  
Wairere site  
The Wairere site is located approximately 3.75 km southwest of the
Copper Moki site.  
The Wairere-1 well was drilled to a measured depth of 1,971 metres
(1,875 metres true vertical depth) but did not encounter any
hydrocarbon-bearing sands. The Company immediately sidetracked the
well to a second target (Wairere-1A), kicking off at a depth of 394
metres and reaching a measured depth of 2,152 metres (1,879 metres
true vertical depth). The Wairere-1A well intersected sands in the
Mt. Messenger formation with elevated hydrocarbon indications. The
well was cased to total depth and completion is pending. 
Origin Agreement 
In May 2012, the Company entered into an agreement (the "Origin
Agreement") with Origin Energy Resources NZ (TAWN) Limited, a
wholly-owned subsidiary of Origin Energy Limited (collectively
"Origin") to acquire upstream and midstream assets (the
"Acquisition"). These assets include four Petroleum Licenses
totalling 26,907 acres as well as the Waihapa Production Station and
associated gathering and sales infrastructure.  
Under the terms of the Origin Agreement, and pursuant to an exclusive
arrangement, the Company has agreed to pay Origin consideration in
the amount of $42 million in cash, payable in the US$ equivalent at a
fixed C$/US$ exchange rate of 1.0349 (US$40.6 million), and such
other adjustments as may be required at closing. A $5 million deposit
was paid with the remainder due on closing. The Company is working
diligently to conclude this transaction and expects closing to occur
in Q2-2013. 
Closing of the Acquisition is conditional on the following:  


 
----------------------------------------------------------------------------
Condition                                          Status                   
----------------------------------------------------------------------------
  1. NZPAM approval for transfer of the Petroleum  NZPAM has voiced support 
      Licenses                                     for the transaction.     
----------------------------------------------------------------------------
  2. New Zealand's Overseas Investment Office      Approval obtained.       
      approval for acquisition of the land upon                             
      which the Waihapa Production Station is                               
      situated                                                              
----------------------------------------------------------------------------
  3. Origin completing recommissioning of the      Plant has been certified 
      TAWN LPG plant                               for operation.           
----------------------------------------------------------------------------
  4. Origin and/or NZEC entering into an           In process.              
      agreement with Contact Energy regarding the                           
      use and development of the Ahuroa gas                                 
      storage facility                                                      
----------------------------------------------------------------------------
  5. TSX Venture Exchange conditional approval     Approval obtained.       
----------------------------------------------------------------------------

 
East Coast Basin 
The East Coast Basin of New Zealand's North Island hosts two
prospective oil shale formations, the Waipawa and Whangai, which are
the source of more than 300 oil and gas seeps. Within the East Coast
Basin, NZEC holds a 100% interest in the Castlepoint Permit, which
covers approximately 551,042 onshore acres (2,230 km2), and a 100%
interest in the Ranui Permit, which covers approximately 223,087
onshore acres (903 km2) and is adjacent to the Castlepoint Permit. On
September 3, 2010, NZEC applied to the Minister of Energy to obtain a
100% interest in the East Cape Permit. The application is uncontested
and the Company expects the East Cape Permit to be granted to NZEC
upon completion of NZPAM's review of the application. The East Cape
Permit covers approximately 1,067,495 onshore acres (4,320 km2) on
the northeast tip of the North Island. In addition, NZEC has entered
into a binding agreement with Westech to acquire 80% ownership and
become operator of the Wairoa Permit, which covers approximately
267,862 onshore acres (1,084 km2) south of the East Cape Permit.
Preliminary approval of transfer of ownership was obtained from NZPAM
on December 20, 2012 and formation of a joint arrangement with
Westech is subject to completion of a joint operating agreement and
final NZPAM approval.  
NZEC has completed the coring of two test holes on the Castlepoint
Permit. The Orui (125 metres total depth) and Te Mai (195 metres
total depth) collected core data across the Waipawa and Whangai
shales. NZEC also completed a test hole on the Ranui Permit. Ranui-2
was drilled to 1,440 metres, coring the Whangai shale across several
intervals. In Q2-2012, NZEC completed 70 line kilometres of 2D
seismic data across the Castlepoint and Ranui permits to further its
technical understanding of the area, and is interpreting the data to
finalize targets for exploration in 2013. 
The Wairoa Permit has been actively explored for many years, with
extensive 2D seismic data across the permit and log data from more
than 15 wells drilled on the property. Historical exploration focused
on the conventional Miocene sands. NZEC's technical team has
identified conventional opportunities as well as potential in the
unconventional oil shales that underlie the property. NZEC's team
knows the property well and provided extensive consulting services
(through the consulting company Ian R Brown Associates) to previous
permit holders, assisting with seismic acquisition and
interpretation, wellsite geology and regional prospectivity
evaluation. In addition, NZEC's team assisted with permitting and
land access agreements and worked extensively with local district
council, local service providers, land owners and iwi groups,
allowing the team to establish an excellent relationship with local
communities. 
Subsequent to December 31, 2012, activities commenced with regards to
the Company's planned 2D seismic program in order to fulfil its
minimum work requirements under the Wairoa Permit. The data to be
obtained from the planned 50 km 2D seismic program will form the
basis for defining drill locations on the permit. 
OUTLOOK  
On February 25, 2013, the Company announced the decision to delay the
remaining two wells in its Eltham/Alton drill program to focus on
commercial opportunities in the pending acquisition of assets from
Origin. The Company's objective is to increase near-term production
and cash flow while reducing exploration expenses, and the Company
believes that opportunities exist on the Petroleum Licenses to
achieve this objective. While this decision in no way diminishes the
Company's view of the prospectivity of the Eltham and Alton permits,
NZEC intends to focus in the near-term on lower-cost opportunities
that are close to infrastructure. The acquisition from Origin
includes Petroleum Licenses that are central to a network of oil and
gas gathering pipelines and the full-cycle Waihapa Production
Station.  
The Company is also considering a number of options to increase its
financial capacity to carry out other anticipated activities, as
described below. Details on minimum work program requirements for
each permit are outlined in Permit Expenditure Requirements.  
Taranaki Basin 
NZEC is focused on optimizing production and cash flow, and the
Company's technical and engineering teams continue to investigate
options to enhance recovery and performance of the existing wells. In
addition, a comprehensive review is underway to evaluate NZEC's
drilling and completion operations to date. Approximately 584 wells
have been drilled in the Taranaki Basin of which approximately 107
have targeted the Mt. Messenger Formation. Historically, most of the
successful wells have targeted the Mt. Messenger formation on
structural highs. NZEC has targeted Mt. Messenger seismic anomalies
that are stratigraphically controlled and, as a result, NZEC has had
very little analogous well information upon which it can draw
comparisons and insight for its exploration and production plans.
NZEC has undertaken a comprehensive review of its reprocessed 3D
seismic data and recent well results with the goal of recommencing
drilling operations early in the third quarter of 2013. 
The Company has one remaining commitment well on its Alton permit and
expects to commence drilling a Mt. Messenger target well in Q3-2013.
The Company is responsible for expenditures and is entitled to
profits for its respective interest (65% NZEC / 35% L&M).  
Upon closing of the acquisition of assets from Origin, NZEC plans to
reactivate six wells in the Tikorangi formation using an established
gas lift system, and has also determined that six previously drilled
wells on the Petroleum Licenses have uphole completion potential.
Recompletion of these wells would be significantly less expensive and
faster than drilling new wells, and economic discoveries could be
quickly tied in to the Waihapa Production Station using existing oil
and gas gathering pipelines. Both the reactivations and uphole
completions could bring near-term, low-cost production and cash flow
to the Company. 
NZEC's technical team has also identified five high-priority Mt.
Messenger targets in the southwest corner of the Petroleum Licenses.
NZEC has completed permitting for a new site called Waipapa (Oru Rd)
and will shortly begin construction of the drill pad to ensure the
Company can move quickly to access these targets once the acquisition
has closed.  
Longer-term exploration plans on the Petroleum Licenses include
accessing Mt. Messenger targets from existing drill pads, many of
which have gathering pipelines in place, that offer lower-cost
exploration potential and can be tied-in to the Waihapa Production
Station on an expedited basis. NZEC is advancing a number of new
commercial opportunities to use the Waihapa Production Station to its
full potential and maximize facility revenues, while ensuring that
NZEC's gas and associated natural gas liquids production can be
efficiently delivered to market. 
Commercial oil discoveries on NZEC's properties and those of its
peers have confirmed the prospectivity of the Mt. Messenger
formation, which remains NZEC's primary exploration target in the
near term. Mt. Messenger leads continue to be refined as the Company
interprets its propriety database of 3D seismic. NZEC's technical
team has also identified a number of leads in the deeper Moki,
Tikorangi and Kapuni formations on both the Petroleum Licenses and
its Eltham and Alton permits. Discoveries by other companies have
demonstrated significant flow rates and long-term production from
reservoirs in these deeper formations. NZEC will continue to advance
these leads to drillable prospects and will move these targets higher
on the Company's priority list as warranted. 
East Coast Basin  
NZEC has drilled two stratigraphic holes on its 100% working interest
Castlepoint Permit and one stratigraphic hole on its 100% working
interest Ranui Permit. These three stratigraphic test wells have
advanced NZEC's understanding of the Waipawa and Whangai formations.
A review of the geochemical and physical properties of the two shale
packages, coupled with information from existing seismic data and the
newly completed 70 km 2D seismic survey, is focusing NZEC's
exploration strategy for the East Coast shales. NZEC plans to drill
one exploration well on both the Ranui and Castlepoint permits in
2013 and has initiated the community engagement and technical
assessments required to obtain land access consents and permits for
the drill locations.  
NZEC has commenced a 50 km 2D seismic survey on the Wairoa Permit,
and will finalize its exploration plans for the permit after
reviewing all of the seismic and well log data.  
The Company's application for the East Cape Permit is uncontested and
NZEC expects the permit to be granted upon completion of NZPAM's
review of the application. 
RESULTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2012 
Revenue 
During the year ended December 31, 2012, the Company produced 162,444
barrels of oil (2011: 11,623) and sold 162,077 barrels (2011: 9,567)
for total oil sales of $17,295,853 (2011: $1,022,009), or $106.71 per
barrel (2011: $106.83). Total recorded revenue was $16,475,971 (2011:
$974,517), which is accounted for net of royalties of $819,882 (2011:
$47,792), or $5.06 per barrel sold (2011: $4.96).  
Expenses and Other Items 
Production costs during the year ended December 31, 2012 totalled
$5,116,059 (2011: 224,219), or $31.57 per barrel (2011: $23.44).
Included in production costs are all site-related expenditures,
including applicable equipment rental fees, site services, overheads
and labour; transportation and storage costs including trucking,
testing, tank storage, processing and handling; and port dues as
incurred prior to the sale of oil. During the year ended December 31,
2012, fixed operating costs represented approximately 77% of total
production costs, giving rise to lower field netbacks in light of
reduced oil production. However, the Company is in the process of
establishing permanent facilities at several of its wells, some of
which will be unmanned, which are expected to reduce the level of
fixed operating costs in the longer term.  
Depreciation and accretion costs recorded during the year ended
December 31, 2012 totalled $4,103,405 (2011: $246,540), or $25.32 per
barrel of oil sold (2011: $25.77). Depreciation is calculated using
the unit-of-production method by reference to the ratio of production
in the period to the related total proved and probable reserves of
oil and natural gas, taking into account estimated future development
costs necessary to access those reserves.  
Stock-based compensation for the year ended December 31, 2012
totalled $1,594,780 compared to $2,203,548 during the same period in
2011. The decrease in stock-based compensation corresponds to fewer
stock options granted during the year.  
General and administrative expenses for the year ended December 31,
2012 totalled $5,896,949 compared to $2,583,530 incurred in the same
period in fiscal 2011. The increase in general and administrative
costs corresponds to increases in salaries related to new hires,
professional fees and travel and administrative expenses, as the
Company prepares for expansion of operations following the
Acquisition. The Company also incurred costs pertaining to consulting
fees in its ongoing refinement of corporate strategies and goals.  
Transaction costs for the year ended December 31, 2012 totalled
$1,161,657 compared to $Nil incurred in the same period in fiscal
2011. The transaction costs incurred during the period included legal
and professional fees incurred for the Origin Agreement, which are
expensed as they are incurred in relation to the anticipated business
combination. 
Finance income for the year ended December 31, 2012 totalled $211,551
compared to $119,583 in the same period in fiscal 2011. Finance
income relates to interest earned on the Company's cash and
cash-equivalent balances held in treasury. 
Foreign exchange loss for the year ended December 31, 2012 amounted
to $1,895,845 compared to a $134,934 gain realized in the same period
of fiscal 2011. The foreign exchange losses incurred in the current
year is a result of the strengthening of the Canadian dollar against
the US dollar, during a period that the Company held significant US
dollar cash balances and deposits in anticipation of completion of
the Origin Agreement. 
Total Comprehensive Loss  
Total comprehensive loss for the year ended December 31, 2012
totalled $1,235,492 after taking into account a foreign translation
reserve gain of $1,845,681 on the translation of foreign operations
and monetary items that form part of NZEC's net investment in foreign
operations. This compares favourably to a total comprehensive loss
for the year ended December 31, 2011 of $6,655,829. 
Based on a weighted average shares outstanding balance of
117,131,297, the Company realized a $0.03 basic and diluted loss per
share for the year ended December 31, 2012. During the year ended
December 31, 2011, the Company realized a $0.08 basic and diluted
loss per share, based on a weighted average share balance of
85,122,879. 
SUMMARY OF QUARTERLY RESULTS 


 
----------------------------------------------------------------------------
                                2012         2012         2012         2012 
                                  Q4           Q3           Q2           Q1 
                                   $            $            $            $ 
----------------------------------------------------------------------------
                                                                            
Total assets             116,059,939   98,882,087   98,814,102   96,979,923 
Exploration and                                                             
 evaluation assets        37,379,726   26,377,188   25,373,718   12,103,712 
Property, plant and                                                         
 equipment                23,867,758   16,293,123    8,674,152    8,150,802 
Working capital           28,293,845   45,204,695   53,844,035   70,401,191 
Revenues                   2,948,041    3,708,254    5,910,993    3,908,683 
Accumulated deficit      (19,992,243) (17,804,045) (15,613,594) (16,548,180)
Total comprehensive                                                         
 (loss) income            (1,333,805)  (2,018,634)   1,317,915      799,032 
Basic (loss) earnings                                                       
 per share                     (0.02)       (0.02)        0.01         0.00 
Diluted (loss) earnings                                                     
 per share                     (0.02)       (0.02)        0.01         0.00 
----------------------------------------------------------------------------
                                                                            
----------------------------------------------------------------------------
                                2011         2011         2011         2011 
                                  Q4           Q3           Q2           Q1 
                                   $            $            $            $ 
----------------------------------------------------------------------------
                                                                            
Total assets              31,152,804   33,566,611   10,683,239   11,491,806 
Exploration and                                                             
 evaluation assets         6,052,699    9,509,095    4,641,525    3,161,561 
Property, plant and                                                         
 equipment                 5,509,511       63,421       68,366       65,721 
Working capital           18,030,398   18,699,022    5,333,999    7,596,329 
Revenues                     974,517            -            -            - 
Accumulated deficit      (16,911,070) (17,057,134) (13,258,649) (12,168,826)
Total comprehensive                                                         
 loss                  (1,258,314)(1)  (4,279,538)    (773,524)  (1,878,754)
Basic (loss) earnings                                                       
 per share                      0.01        (0.04)       (0.01)       (0.03)
Diluted (loss)                                                              
 earnings per share             0.01        (0.04)       (0.01)       (0.03)
----------------------------------------------------------------------------
                                                                            
(1) During the fourth quarter of fiscal 2011, the Company reclassified      
 various expenditures to exploration and evaluation assets.                 

 
New Zealand Energy Corp. was incorporated on October 29, 2010 under
the Business Corporations Act of British Columbia. Upon
incorporation, 40,000,000 common shares were granted to certain
directors and officers of the Company in lieu of the services
performed and substantial financial guarantees provided to assist in
obtaining legal rights to the Castlepoint and East Cape exploration
permits within the East Coast Basin. The Corporation then raised seed
capital of $7,000,000 upon the subsequent issuance of 28,000,000
common shares in Q4-2010 and Q1-2011 to engage in the exploration,
acquisition and development of petroleum and natural gas assets in
New Zealand. This financing was followed by another private placement
completed in Q1-2011 for gross proceeds of $5,257,500 on the issuance
of 7,010,000 common shares. The Company also entered into an
agreement in Q1-2011 with Ian R Brown Associates ("IRBA") pursuant to
which it would acquire certain assets and provide employment to
certain personnel in consideration for $400,000 and the issuance of
2,000,000 common shares. Also in Q1-2011, upon satisfying the
conditions of a deed of assignment, the Company took ownership of its
Eltham Permit. Further exploration and evaluation expenditures
continued on the Eltham Permit throughout fiscal 2011, which
ultimately saw the commercialization of the Copper Moki-1 well in
Q4-2011. All costs related to the Copper Moki-1 well were transferred
to property, plant and equipment in Q4-2011. In Q2-2011, the Company
agreed to acquire a 50% interest in the Alton permit for AUD2,000,000
and fund 100% of the Talon-1 well development costs, which totalled
$2,544,131. The Talon-1 well development costs were written off in
Q3-2011 due to management's view that the well would not provide any
future benefits. In Q2-2011, the Company completed the acquisition of
its Ranui permit for US$1,000,000 and the issuance of 1,000,000
common shares.  
In Q1-2012, the Company continued its development plans by drilling
Copper Moki-2 and Copper Moki-3. In addition, the Company entered
into an agreement to increase its interest by 15% within the Alton
Permit and completed a bought deal financing for gross proceeds of
$63.5 million during the first quarter through issuance of 21,160,000
common shares at a price of $3.00/share. During Q2-2012, the Company
reached commercial production with Copper Moki-2, initiated testing
of Copper Moki-3 and drilled Copper Moki-4. Copper Moki-3 produced
and sold 7,456 barrels of oil during the start-up and testing phase
and recorded recoveries of $759,280. During Q2-2012, the Company also
entered into the Origin Agreement with Origin to acquire upstream and
midstream assets for $42 million in cash, payable in the US$
equivalent of US$40.6 million applying a fixed C$/US$ exchange rate
of 1.0349, and such other adjustments as may be required at closing.
A $5 million deposit was paid with the remainder due on closing,
which is anticipated to occur in Q2-2013. During Q3-2012, the Company
reached commercial production with Copper Moki-3, and commenced
drilling the first of eight wells planned in the Company's second
Eltham/Alton drill program. During Q4-2012 the Company drilled a
total of four exploration wells. The Waitapu-2 well reached
commercial production towards the end of the quarter. The Waitapu-1
well was suspended pending further evaluation or potential sidetrack.
As at the end of Q4-2012 the Company issued a reserve update based on
reservoir and production data from the Copper Moki-1, Copper Moki-2,
Copper Moki-3 and Waitapu-2 wells, resulting in a 151% increase to 2P
reserves compared to year-end 2011. During Q4-2012 the Company also
expanded its exploration portfolio by 230,673 net acres and entered
into two strategic partnerships; the Company entered into an
agreement with Westech to acquire 80% and assume operatorship of the
Wairoa Permit in the East Coast Basin, and entered into a joint
arrangement with NZOG to explore the Manaia Permit in the Taranaki
Basin.  
Since the Company's inception, general and administrative costs have
been incurred to assist in establishing the operating structure,
setting up offices in both Canada and New Zealand, securing key
personnel and general business development. 
On behalf of the Board of Directors 
John Proust, Chief Executive Officer & Director  
About New Zealand Energy Corp. 
NZEC is an oil and natural gas company engaged in the production,
development and exploration of petroleum and natural gas assets in
New Zealand. NZEC's property portfolio collectively covers
approximately 2.25 million acres (including pending permits) of
conventional and unconventional prospects in the Taranaki Basin and
East Coast Basin of New Zealand's North Island. The Company's
management team has extensive experience exploring and developing oil
and natural gas fields in New Zealand and Canada. NZEC plans to add
shareholder value by executing a technically disciplined exploration
and development program focused on the onshore and offshore oil and
natural gas resources in the politically and fiscally stable country
of New Zealand. NZEC is listed on the TSX Venture Exchange under the
symbol "NZ" and on the OTCQX International under the symbol "NZERF".
More information is available at www.newzealandenergy.com or by
emailing info@newzealandenergy.com.  
FORWARD-LOOKING INFORMATION 
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 "anticipate", "continue", "estimate",
"expect", "may", "will", "should", "believe", "initiate", "with the
objective of", "plan", "strategy", "goal", "pending", "could result",
"is engaging", "investigate", "effort to", "may include", "subject
to", "conditional on", "intends", "considering", "entitled to",
"could", "would", "will begin", "advancing", "will finalize" 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. 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. Such forward-looking statements included in the document
should not be unduly relied upon. These statements speak only as of
the date of the document. 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 Company's future production levels; 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 natural gas liquids production;
and expectations regarding the ability to raise capital and to
continually add to resources through acquisitions and development;
future commodity prices; the Company's ability to obtain qualified
staff and equipment in a timely and cost-efficient manner; the
ability of the Company to progress through the conditions precedent
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 and natural gas liquids resources; future capital
expenditures to be made by the Company; and future cash flows from
production meeting the expectations stated herein.  
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 presentation, 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 "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. 
CAUTIONARY NOTE REGARDING RESERVE ESTIMATES 
The oil and gas reserves calculations and income projections, upon
which the Report was based, 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 in the Report 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 documented in the Report do not necessarily
represent the fair market value of the reserves evaluated in the
Report. The Report also contains forward-looking statements including
expectations of future production and capital expenditures.
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.  
Neither the TSX Venture Exchange nor its Regulation Services Provider
(as such term is defined in the policies of the TSX Venture Exchange)
accepts responsibility for the adequacy or accuracy of this release. 
Contacts:
New Zealand Energy Corp.
John Proust
Chief Executive Officer & Director
North American toll-free: 1-855-630-8997 
New Zealand Energy Corp.
Bruce McIntyre
Executive Director
North American toll-free: 1-855-630-8997 
New Zealand Energy Corp.
Rhylin Bailie
Vice President Communications & Investor Relations
North American toll-free: 1-855-630-8997 
New Zealand Energy Corp.
Chris Bush
New Zealand Country Manager
New Zealand: 64-6-757-4470
info@newzealandenergy.com
www.newzealandenergy.com
 
 
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