Melbana Energy has started drilling its Pukatea-1 exploration well in the prolific New Zealand Taranaki Basin.

“Spudding” — the process of beginning to drill a well — started today at 2pm (NZDT).

The drilling program is expected to take 33 days to reach the primary Tikorangi Limestone objective at a depth of about 3170 metres.

The Pukatea prospect — which has a best estimate of 12.4 million barrels of oil equivalent (MMboe) — os 30 per cent owned by Melbana (ASX:MAY). Operator TAG Oil owns the other 70 per cent.

The Taranaki Basin is the premier oil province of New Zealand, with the majority of the country’s production coming from there.

The New Zealand government says oil and gas are its fourth largest export, worth $NZ3 billion ($2.7 billion) a year.

High-impact, low-cost opportunity

Melbana has already drilled one shallow well on its onshore permit, but a recent seismic survey identified a deeper untapped target.

Pukata-1 will also penetrate a secondary objective in the shallower Mt Messenger sands within the Puka field while drilling to the deeper primary objective.

“The secondary Mt Messenger objective is an added bonus as any discovery in this zone will support the potential re-start of production from the Puka field,” CEO Robert Zammit said.

“Given the overall potential size of the Pukatea prospect, a discovery has the potential to be transformational for Melbana shareholders.”

The Pukatea prospect, for an onshore setting, is a large prospect.

“It’s of the order of 12 million barrels in our most likely case and what makes that particularly attractive is that it is right next door to an existing field: the Waihapa field, it’s only 4km away in the same reservoir,” non-executive director Peter Stickland said.

The Waihapa field is a highly productive reservoir, with individual wells producing initial oil rates of 5000 barrels per day.

“So for an oil and gas investor what that means is you don’t need to spend a lot of money to get a lot of oil out of the ground,” Mr Stickland said.

“The Pukatea prospect then has the benefit of being a proven play right next door to the analogue field of Waihapa.”

The Pukatea prospect is close to existing infrastructure with a number of potentially near-term, low-cost alternative development paths.

Melbana estimates that a successful Pukatea-1 result, consistent with the best estimate of 12.4MMboe, would result in a three-well development plan with a gross production plateau of between 6000 and 10,600 barrels of oil per day for over four years and at a very low development cost.

Robust economics

Melbana believes oil and gas economics in the Taranaki Basin are robust in the current price environment.

An independent expert valued partner TAG Oil’s 2P Reserves in nearby fields at about $20 a barrel on an NPV10 basis in mid-2017.

Oil prices have increased by some 50 per cent since that valuation was released, suggesting current valuations could be considerably higher.

Drilling of the Pukatea-1 exploration well is due to start on or around January 25 and take about 33 days to reach a total depth of approximately 3100 metres.


This special report is brought to you by Melbana Energy.

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