On June 12, 2024, Auctus Advisors analyst Stephane Foucaud initiated coverage on New Zealand Energy Corp. (NZ:TSX.V; NZERF:OTCQX) with a target price of CA$5.00, implying a total return of 614% from the price at the time of the report of C$0.70/
The analyst believes that the company's focus on developing the Tariki Gas field and its dividend-oriented strategy present a compelling investment opportunity.
"NZE is a ~US$10 mm market cap TSX listed company with ~1.6 mmboe of 2P reserves in mature fields onshore New Zealand. The story is about very material free cashflow. NZE is dividend-oriented first and growth second," Foucaud noted.
The analyst highlighted the recent changes in New Zealand's regulatory environment, which have become more favorable for hydrocarbon production due to an unexpected decline in domestic gas production and a spike in natural gas prices to >US$12/mcf. This coincided with NZE being re-capitalized and coming under new management, focusing primarily on developing the Tariki Gas field.
"NZE's key asset is its 50% WI in the Tariki gas field where new well Tariki-5 is due to be drilled this September, and is expected to initially add >1 mboe/d net production growing to 2 mboe/d ~6 months later," Foucaud stated. "The well will also evaluate an exploration opportunity (~1.5 mmbbl net) in the shallower Tikorangi limestone where oil has been produced in an offset Tariki well."
The company plans to restore production at the Tariki field for more than 12 months before converting the reservoir into a gas storage facility in mid-2026.
"By then, the free cashflow generation is expected to allow NZE to distribute to shareholders an amount at least equivalent to the current market cap," the analyst added.
Foucaud also noted that NZE will work to restore continuous oil and gas production at its Copper Moki and Waihapa fields through well workovers and drilling activities. These initiatives could add another 1 mboe/d net production over the next 6-8 months.
The analyst expects NZE to generate significant free cash flow, with long-term gas realizations of ~US$7/mcf and oil realizations at a ~US$14/bbl discount to Brent.
"We forecast NZE will have ~US$17 mm (~C$1.30/sh) in net cash at YE25, increasing to ~US$25 mm (~CA$1.90/sh) by June 2026. This represents respectively >1.7x and ~2.5x the current market cap," Foucaud stated.
Auctus Advisors' valuation methodology for NZE is based on a Risked Net Asset Value (ReNAV) approach, which considers the company's reserves, production estimates, and financial projections. The analyst's target price of CA$5.00 per share reflects this valuation and implies a significant upside potential from the current share price.
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Disclosures for Auctus Advisors, New Zealand Energy Corp., June 12, 2024
Copyright and Risk Warnings New Zealand Energy Corp. (“New Zealand” or the “Company”) is a corporate client of Auctus Advisors LLP (“Auctus”). Auctus receives, and has received in the past 12 months, compensation for providing corporate broking and/or investment banking services to the Company, including the publication and dissemination of marketing material from time to time.
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Author The research analyst who prepared this research report was Stephane Foucaud, a partner of Auctus.
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