Ann: MINE: NZO: Oi well spuds in Tui permit

• Release Date: 03/06/14 10:30
• Summary: MINE: NZO: Oi well spuds in Tui permit
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					NZO
03/06/2014 08:30
MINE

REL: 0830 HRS New Zealand Oil and Gas Limited

MINE: NZO: Oi well spuds in Tui permit

The Kan Tan IV semi-submersible drilling rig began drilling the Oi-1
exploration well in Petroleum Mining Permit 38158, approximately 37
kilometres off the coast of Taranaki, New Zealand at 6.30PM on Friday, 30 May
(NZDT).

At 6.00AM this morning a 17.5 inch hole had been drilled to a depth of 510
metres, and 30 inch casing had been run and cemented to 229 metres. The
current operation was drilling ahead to 1500 metres.

Oi-1 is a vertical well in water depth of about 120 metres. It is expected to
take around 30 days to drill to a planned total measured depth of 3,881
metres.

The operator has publicly stated a pre-drill un-risked best estimate
prospective resource of 11 million barrels of recoverable oil. The New
Zealand Oil & Gas share at drilled equity of 18.75 per cent is 2.06 million
barrels, with the option to restore to 27.5 per cent equity (3 million
barrels) in exchange for reimbursement of pro-rata costs and a buy back
premium. A further joint venture partner, Pan Pacific Petroleum, has publicly
released its own estimates of the prospective resource.

The operator estimates gross drilling costs of USD27 million (New Zealand Oil
and Gas share USD5 million). New Zealand Oil & Gas considers the well has a
17 per cent geological chance of success, and a 16 per cent chance of
commercial development.

If the results of the Oi-1 exploration well indicate the presence of a
hydrocarbon-bearing reservoir, the joint venture may decide to drill a
sidetrack hole to provide additional information to assist with the
determination of resources and viability for any future development. A
sidetrack would be drilled on a full equity share basis (i.e. 27.5% to New
Zealand Oil & Gas). It is expected that a commercial discovery would later be
tied back to the Tui production facility, the FPSO Umuroa.

Resources in this statement have been evaluated using a probabilistic
methodology. The estimate of prospective resources referred to in this
statement is based on, and fairly represents, information and supporting
documentation prepared by New Zealand Oil & Gas Vice President of Operations
and Engineering Andrew Jefferies (B Eng Mech Hons, Msc Pet Eng, MBA), a
Society of Petroleum Engineers Certified Petroleum Engineer who has over 23
years of industry experience, and reflects and summarises the most current
information supplied by the joint venture operator.

The estimated quantities of petroleum that may potentially be recovered by
the application of a future development project relate to undiscovered
accumulations. These estimates have both an associated risk of discovery and
a risk of development. Further exploration appraisal and evaluation is
required to determine the existence of a significant quantity of potentially
moveable hydrocarbons.
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BACKGROUND TO OI
The Oi well is northeast of the producing Tui area oil fields within the same
Petroleum Mining Permit. Tui production currently comes from three distinct
accumulations within the fields - Tui, Pateke, and Amokura. The Pateke-4H
well this year confirmed further resources, and it will be tied back to
Umuroa for production in 2015. If successful, Oi would be an expansion of the
Tui fairway.

The well objective is to evaluate the hydrocarbon potential of a 4-way dip
closed structure similar to the producing Tui, Amokura and Pateke fields and
it will target the same F10 reservoir sandstones.

Oi-1 is the next structure north of Tui with sufficient estimated potential
size to contain commercial amounts of hydrocarbons. New Zealand Oil & Gas
believes several possibilities exist for charge into the well, so the main
uncertainty is whether Kapuni F10 reservoir sands are present. As the seismic
signature over the Oi prospect is different to that over the producing Tui
fields, the company believes there is uncertainty in the quality of the
reservoir and whether it is present.

THE JOINT VENTURE
Pan Pacific Petroleum increased its participation in the Oi exploration well
to 50 per cent under the sole risk provisions of the Tui Joint Venture
Operating Agreement.
In October last year New Zealand Oil & Gas increased its interest in the Tui
fields from 12.5 per cent to 27.5 per cent when Tui joint venture partners
purchased an interest in the field previously held by Mitsui. AWE and Mitsui
had opted to participate in Oi at a reduced interest, so as a result of
purchasing Mitsui's interest both New Zealand Oil & Gas and AWE will
participate in the Oi well at equity levels lower than their equity in
PMP38158. The partners have the option to restore their full equities in any
development subject to reimbursement of pro-rata costs and payment of a
buy-back premium. New Zealand Oil & Gas has further exposure to Oi through
its 15 per cent holding in Pan Pacific Petroleum.

The joint venture partners in the Oi exploration well are: AWE Limited:
31.25% (Operator).
Pan Pacific Petroleum: 50%
New Zealand Oil & Gas (through subsidiary): 18.75%.

The joint venture partners in PMP 38158 are:
AWE Limited: 57.5% (Operator).
Pan Pacific Petroleum: 15%
New Zealand Oil & Gas (through subsidiary): 27.5%.

John Pagani, External Relations Manager, DDI: +64 4 471 8333, MOB: +64 21 570
872
End CA:00251116 For:NZO    Type:MINE       Time:2014-06-03 08:30:45