New Zealand Energy Announces Strategic Acquisition in Taranaki Basin, New Copper Moki Oil Discoveries and First Quarter 2012 ...

New Zealand Energy Corp. (TSX VENTURE:NZ)(OTCQX:NZERF) ("NZEC" or the "Company")
is pleased to announce that it has entered into a binding agreement (the "Origin
Agreement") with Origin Energy Resources NZ (TAWN) Limited, a wholly-owned
subsidiary of Origin Energy Limited (ASX:ORG) (collectively "Origin") to acquire
upstream and midstream assets (the "Acquisition"). These assets include four
Petroleum Mining Licenses totaling 26,907 acres in the main Taranaki Basin
production fairway (the "Petroleum Licenses") as well as the Waihapa Production
Station and associated gathering and sales infrastructure. 


NZEC is also pleased to announce new oil discoveries in its Copper Moki-3
("CM-3") and Copper Moki-4 ("CM-4") wells, with the expectation of initiating
continuous production from CM-3 toward the end of Q2-2012. Continuous production
from the Copper Moki-1 well ("CM-1") along with the 16-day flow test from the
Copper Moki-2 well ("CM-2") generated positive cash flow of $4.5 million during
Q1-2012 based on a realized netback averaging approximately US$90 per barrel of
oil sold. 


HIGHLIGHTS 

Strategic Acquisition



--  Four Petroleum Licenses in key production fairway provide significant
    exploration and production potential 
    --  Petroleum Licenses are permitted until 2016 and renewable without
        relinquishment thereafter 
    --  93 km2 of 3D seismic data with coverage over approximately 50% of
        the Petroleum Licenses and 585 km of 2D seismic data 
    --  Well log data from 27 wells, a number of which demonstrate multi-
        zone potential in NZEC's target formations: Urenui, Mt. Messenger,
        Moki and Kapuni 
    --  16 established drill pads, most with existing oil and gas production
        infrastructure 
    --  Uphole completion opportunities in existing wells for Urenui, Mt.
        Messenger and Moki formations 
    --  Significant expansion to NZEC's drilling inventory 
--  Waihapa Production Station provides full spectrum midstream processing 
    --  Provides direct access to markets for NZEC production through oil
        and gas sales pipelines 
    --  Gathering capacity in place to service NZEC's oil and gas production
    --  Includes facilities for gas processing, liquefied petroleum gas
        ("LPG") recovery, oil processing and water disposal with associated
        gathering and oil and gas sales pipelines 
    --  NZEC will own the only open-access midstream production facility in
        the Taranaki Basin, providing cash flow potential through agreements
        with third-party producers 



Copper Moki Oil Discoveries



--  CM-3 confirms third consecutive Mt. Messenger discovery, yielding 510
    barrels of oil per day ("bbl/d") and 320 thousand cubic feet of natural
    gas per day(1) ("mcf/d") 
--  CM-3 confirmed reservoir potential in the Moki formation 
--  CM-4 oil discovery in the Urenui formation, production test underway 



(1) Natural gas and associated natural gas liquids are currently being flared
until the Company completes a pipeline to the Waihapa Production Station, with
the pipeline on schedule for tie-in by the end of Q2-2012.


First Quarter Financial Results



--  54,677 bbl produced and 49,486 bbl sold, representing a 170% and 172%
    increase over Q4-2011, respectively 
--  Generated positive cash flow of $4.5 million from production, resulting
    from netbacks of approximately US$90/bbl 
--  Reduced production costs by approximately 5% to $22.25/bbl from
    $23.44/bbl in Q4-2011 
--  Closed a $63.5 million bought deal financing in March 2012 in which 21.2
    million shares were issued at $3.00 per share 
--  Strong balance sheet with $70.4 million of working capital as at March
    31, 2012 



"With 170,649 acres of Petroleum Exploration Permits and 26,907 acres of
Petroleum Licenses, NZEC will control a significant portion of the exploration
fairway in the Taranaki Basin," said Bruce McIntyre, President and Director of
NZEC. "We believe that the Petroleum Licenses are highly prospective across
multiple formations, offering exploration, uphole completion and production
potential from existing wells and the ability to rapidly drill new wells. Along
with the prospects on our existing permits, NZEC's technical team has identified
a number of Urenui, Mt. Messenger and Moki leads on the Petroleum Licenses,
significantly increasing NZEC's drilling inventory in the Taranaki Basin." 


"These acquisitions increase NZEC's presence in New Zealand from both an
exploration and infrastructure perspective," said John Proust, Chief Executive
Officer and Director of NZEC. "Controlling a central oil and gas production
facility in the Taranaki Basin provides NZEC with the strategic opportunity and
capacity to independently process production, at reduced operating costs, as
well as generate cash flow through third-party processing agreements. This
transaction is consistent with NZEC's business strategy of adding value for
shareholders through acquisition and development." 


STRATEGIC ACQUISITION

The purchase price for the Acquisition comprises CDN$42 million in cash (plus
adjustments) and a 5% gross overriding royalty on the Petroleum Licenses,
payable to Origin. The Company will be using funds previously allocated for
acquisitions, working capital on hand and cash flow from production to complete
the Acquisition. With a current cash position of $61 million, post-acquisition
NZEC will remain fully funded to complete its previously announced 2012 capital
program and reiterates its forecasted exit rate of 3,000 barrels of oil
equivalent per day ("boe/d").


Closing of the Acquisition is targeted for October 2012 and contingent on
receiving government approvals, Origin completing the current recommissioning of
the TAWN LPG extraction facility, Origin and/or NZEC entering into an agreement
with Contact Energy ("Contact") regarding the use and development of Origin's
Ahuroa gas storage facility, and standard TSX Venture Exchange approvals. 


Exploration Assets

Pursuant to the Origin Agreement, NZEC will acquire four Petroleum Licenses in
the main production fairway of the Taranaki Basin, contiguous with the northern
border of NZEC's Eltham and Alton permits (Figure 1 -
http://media3.marketwire.com/docs/nz531_F1.pdf, Table 1 -
http://media3.marketwire.com/docs/nz531_Table1.pdf). Totalling 26,907 acres
(108.9 km2), the Petroleum Licenses offer multi-zone potential from the Urenui,
Mt. Messenger, Moki, Kapuni and Tikorangi formations. The Petroleum Licenses are
permitted and renewable without relinquishment, subject to government approval.
Included are 16 established drill pads, most with full production infrastructure
in place, which will allow for timely tie-in to the Waihapa Production Station
upon exploration and completion success. 


The Acquisition includes 93 km2 of 3D seismic data with coverage over
approximately 50% of the Petroleum Licenses and 585 km of 2D seismic data. NZEC
has access to well log data from 27 previously drilled wells, offering the
necessary well control to expedite exploration cycle time and reduce drilling
risk. Numerous existing wells offer uphole completion opportunities in NZEC's
target formations. In addition, six of the wells contribute limited oil
production from the Tikorangi limestone reservoir using existing gas-lift
infrastructure. 


NZEC's technical team has completed a preliminary review of the 3D seismic and
well log data covering the southern half of the Petroleum Licenses and
identified 8 Urenui leads, 14 Mt. Messenger leads and 8 Moki leads,
significantly expanding NZEC's drilling inventory in the Taranaki Basin. NZEC
will refine and prioritize these leads within the context of its 2012
exploration program. NZEC has also identified six leads on 2D seismic and will
continue to evaluate exploration potential across the Petroleum Licenses,
including an extensive evaluation of the deeper Kapuni group, as Origin's
exploration and production data is incorporated into NZEC's technical database.


The Petroleum Licenses have a long history of oil and gas production that
confirms the presence of substantial hydrocarbons in this region. While
exploration and production has focused on the Tikorangi limestone formation, a
number of wells have demonstrated production potential from the Mt. Messenger
and Kapuni formations, as well as good hydrocarbon shows from the Moki and
Urenui formations. NZEC intends to build on the success of its Copper Moki
geological model by fully evaluating, exploring and developing its target
formations on the Petroleum Licenses. 


Production and Infrastructure Assets

The Waihapa Production Station (Figure 2 -
http://media3.marketwire.com/docs/nz531_F2.pdf, Table 1 -
http://media3.marketwire.com/docs/nz531_Table1.pdf) will give NZEC strategic
control over gathering, processing and sales infrastructure in the Taranaki
Basin and provide NZEC with the ability to quickly bring on near-term production
additions, reduce full-cycle development lead times and execute on longer-term
growth plans. In addition, as the only open-access midstream facility in the
Taranaki Basin, the Waihapa Production Station offers business opportunities for
processing third-party gas, liquids, oil and water. The Waihapa Production
Station is located approximately three kilometres from NZEC's Copper Moki site
and is central to NZEC's inventory of exploration prospects, thereby reducing
transportation and processing costs for NZEC's oil and gas production. NZEC is
currently completing a pipeline from the Copper Moki site to the Waihapa
Production Station, with tie-in scheduled for the end of Q2-2012.


Origin will continue as operator of the Production Station during a transition
period through to mid-2013. 


The Waihapa Production Station and associated infrastructure includes:



--  a 45 mmcf/d gas processing, gas compression and LPG extraction facility
    ("TAWN facility"); 
--  a 51-km 8-inch gas sales pipeline from the Waihapa Production Station to
    the Stratford Gas Power Generation Plant then terminating in New
    Plymouth; 
--  59 km of oil/gas mixed product pipelines including gas lift lines; 
--  a 25,000 bbl/d oil processing facility; 
--  a 49-km oil sales pipeline from the Waihapa Production Station to the
    Omata Tank Farm, capable of transporting up to 15,500 bbl/d; and 
--  an 18,000 bbl/d water disposal processing system. 



Origin Agreement

Under the terms of the Origin Agreement, and pursuant to an exclusive
arrangement, NZEC has agreed to pay Origin consideration in the amount of CDN$42
million in cash and such other adjustments as may be required at closing. A $5
million deposit is payable immediately with the remainder due on closing, which
is anticipated to occur in October 2012. Origin will retain the right to a 5%
gross overriding royalty ("Origin GOR") on all hydrocarbons produced by NZEC
from the Petroleum Licenses. The Petroleum Licenses are subject to a
"grandfathered" New Zealand Petroleum & Minerals 10% net profits royalty. 


Origin will maintain an option for a period of 10 years to use eight former
production wells ("Option Wells") located within the Tikorangi limestone
reservoir to inject, store, monitor and withdraw natural gas. If Origin
exercises its option in respect of one or more of the Option Wells, it has the
right to apply to New Zealand Petroleum & Minerals for a stratified carve out of
a discrete area of the Tikorangi limestone for gas storage purposes ("Tikorangi
Gas Storage Area"). Other than potential remaining attic oil reserves, NZEC sees
limited exploration potential within the Tikorangi Gas Storage Area and this
potential carve out is considered immaterial to NZEC's valuation of the
Acquisition. 


NZEC and Origin have agreed to collaborate on well location and design to drill
one exploration well into the crestal interval of the Tikorangi formation to
access remaining attic oil reserves. NZEC will fund 100% of the capital cost to
drill and, if warranted, complete the well. If successful, net cash proceeds of
any hydrocarbon production from the well will be split equally between NZEC and
Origin. 


In addition, NZEC and Origin have agreed to enter into an agreement to process
Origin's remaining onshore oil and gas production through the Waihapa Production
Station for a pre-determined, market-comparable fee.


NEW COPPER MOKI DISCOVERIES

Copper Moki-3

NZEC has completed an initial production test of CM-3, its third production well
in the Taranaki Basin. CM-3 flowed through a 24/64-inch choke for seven days,
producing 3,570 bbl of 40 degrees API oil and 2,239 mcf(1) at an average rate of
510 bbl/d and 320 mcf/d(1). Following this initial production test, CM-3 will be
shut-in for pressure build up before commencing continuous production toward the
end of Q2-2012. 


CM-3 was drilled in March through the Urenui and Mt. Messenger formations to the
deeper Moki formation, with a measured depth of 3,167 metres and true vertical
depth of 2,633 metres. NZEC perforated and tested the Moki formation and
encountered reservoir rock with permeability and porosity and minor oil and gas
shows, confirming two of the three elements required for an oil and gas
discovery. NZEC's drilling inventory includes a number of leads with a Moki
target. The technical and geological information gained from CM-3 in the Moki
formation has resulted in NZEC confirming that at least two of the eight wells
scheduled for the balance of this year will be drilled to the deeper Moki
formation.


Copper Moki-4

NZEC reached target depth in CM-4 in April at a measured depth of 2,125 metres.
CM-4's location was chosen to test the northeastern extent of the targeted
Copper Moki prospect. Completion demonstrated that the well had encountered a
portion of the Mt. Messenger formation that was faulted and had not retained
producible hydrocarbons. NZEC then moved uphole and perforated the Urenui
formation across approximately four metres of net pay, with the potential to
perforate additional pay in the future. 


The Company has commenced production testing of CM-4. The well is producing 29
degrees API oil with a higher pour point than Mt. Messenger oil and
characteristics similar to Urenui oil being produced from third-party wells in
the immediate area. NZEC will continue to evaluate the well to determine the
appropriate artificial lift system to unlock the potential of the Urenui
formation in CM-4. 


With completion of the four Copper Moki wells, NZEC has gained tremendous
insight into the Moki, Mt. Messenger and Urenui formations. NZEC has also
completed data acquisition of a 100 km2 3D seismic survey across the Eltham and
Alton permits. Information gained from exploration to date and seismic
interpretation will guide NZEC's future strategy for both exploration and
acquisition in the Taranaki Basin.


Production Update

Company production over the last 30 days from CM-1 and CM-2 was approximately
991 boe/d (578 bbl/d and 2,475 mcf/d(1)). The wells are producing 41.8 degrees
API oil that is trucked to the Shell-operated Omata tank farm and sold at Brent
pricing, resulting in a field netback of approximately US$90/barrel. NZEC
calculates the netback as the oil sale price less fixed and variable operating
costs and a 5% royalty. The netback reflects an average realized oil price in
Q1-2012 of US$117, and will fluctuate based on variances in oil price. It is
anticipated that CM-3 will be on continuous production toward the end of
Q2-2012.


FIRST QUARTER 2012 FINANCIAL RESULTS

Financial Snapshot 



----------------------------------------------------------------------------
                                  For the period ended   For the year ended 
                                        March 31, 2012    December 31, 2011 
----------------------------------------------------------------------------
Production                                  39,852 bbl           11,623 bbl 
Sales                                       34,659 bbl            9,567 bbl 
----------------------------------------------------------------------------
Price                                     117.94 $/bbl         106.83 $/bbl 
Production costs                           22.25 $/bbl          23.44 $/bbl 
Royalties                                   5.16 $/bbl           4.96 $/bbl 
Field netback                              90.53 $/bbl          78.43 $/bbl 
----------------------------------------------------------------------------
Revenue                         $            3,908,683   $          974,517 
Preproduction recoveries                     1,351,630              950,440 
Total comprehensive income                                                  
 (loss)                                        799,032           (6,655,829)
Interest income                                 18,311              119,583 
Earnings (loss) per share -                                                 
 basic                                            0.00                (0.08)
Earnings (loss) per share -                                                 
 diluted                                          0.00                (0.08)
Current assets                              76,167,931           19,293,345 
Total assets                                96,979,923           31,152,804 
Total liabilities                            6,017,299            1,383,376 
Shareholders' equity                        90,962,624           29,769,428 
----------------------------------------------------------------------------



During the period ended March 31, 2012, the Company produced 39,852 bbl and sold
34,659 bbl from CM-1. CM-2 flowed 14,825 bbl and 15,352 mcf(1) during a 16-day
flow test in February and was subsequently shut in for pressure build up.
Preproduction revenue generated during the start-up and testing phase of the
well 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 of Copper Moki-2 amounted to $1,351,630 or $91.17 per bbl. The aggregate
volume of oil produced during Q1-2012, including Copper Moki-2's preproduction,
was 54,677 bbl with 49,486 bbl sold, resulting in positive cash flow from
operations of $4,489,004.


Results of Operations For The Three-Month Period Ended March 31, 2012

Revenue 

During the period ended March 31, 2012, the Company produced 39,852 bbl and sold
34,659 bbl for total revenues of $4,087,676, or $117.94 per bbl. Total recorded
gross production revenue was $3,908,683, which accounted for royalties of
$178,993, or $5.16 per bbl sold. No revenues or royalties were recognized during
the same period in fiscal 2011.


Expenses and Other Items 

Production costs during the period ended March 31, 2012 totalled $771,309, or
$22.25 per barrel. 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. No production costs were incurred during the same period in
fiscal 2011.


Depreciation and accretion costs incurred during the period ended March 31, 2012
totalled $922,833, or $26.63 per bbl sold. Depreciation is based on 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. No depreciation and accretion costs were incurred during the same
period in fiscal 2011.


Stock-based compensation for the period ended March 31, 2012 totalled $579,230
compared to $1,000,000 during the same period in 2011. The non-cash charge
incurred during the period related to the options granted to directors, officers
and employees of the Company upon the completion of the Company's initial public
offering in August 2011. The balance of stock-based compensation recognized in
the same period in fiscal 2011 related to the issuance of 2,000,000 common
shares to Ian R Brown Associates, at a deemed price of $0.50 per common share,
pursuant to the asset purchase agreement. 


General and administrative expenses for the period ended March 31, 2012 totalled
$1,261,136 compared to $826,122 incurred in the same period in fiscal 2011. The
general and administrative expenses incurred during the period related to
professional fees, management fees, consulting fees, travel and promotion, rent,
overheads, filing and insurance costs. See Note 10 to the March 31, 2012
unaudited condensed consolidated interim financial statements for detail.


Finance income for the period ended March 31, 2012 totalled $18,311 compared to
$7,455 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 period ended March 31, 2012 amounted to $29,596
compared to $1,611 realized in the same period of fiscal 2011. Foreign exchange
gains and losses are a result of currency exchange differences being recognized
on transactions during the period.


Total Comprehensive Income for the Period 

Total comprehensive income for the period ended March 31, 2012 totalled $799,032
after taking into account an exchange difference on translation of foreign
currency of $436,142, which compared to a total comprehensive loss for the
period ended March 31, 2011 of $1,878,754.


Based on a weighted average shares outstanding balance of 102,934,380, the
Company realized a positive $0.00 basic and diluted earnings per share for the
period ended March 31, 2012. During the period ended March 31, 2011, the Company
realized a $0.03 basic and diluted loss per share on a weighted average share
balance of 72,131,778.


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 more than two million acres 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, and takes a multi-disciplinary approach to value creation with a
track record of successful discoveries. 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
[e-mail].


Forward-looking Statements

This news release 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 "will", "will be", "will allow", "offer", "continue", "evaluate",
"intends", "build", "expected", "targeted", "anticipated" 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, including without limitation, the ability of
NZEC to progress through the conditions precedent to conclude the Origin
Agreement on schedule, or at all; the speculative nature of exploration,
appraisal and development of oil and natural gas properties; uncertainties
associated with estimating oil and natural gas resources; uncertainties in both
daily and long-term production rates and resulting cash flow; volatility in
market prices for oil and natural gas; 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; the need to
obtain various approvals before exploring and producing oil and natural gas
resources; the need to obtain government approval of work programs before
exploring or developing the Petroleum Licenses; uncertainty in the timing of
receipt of permits and the Company's ability to extend the permits if required;
exploration hazards and risks inherent in oil and natural gas exploration;
operating hazards and risks inherent in oil and natural gas operations; 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 as disclosed in documents released
by NZEC as part of its continuous disclosure obligations. 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. 


NZEC 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 this news release should
not be unduly relied upon. These statements speak only as of the date of this
news release and NZEC does not undertake to update any forward-looking
statements that are contained in this news release, except in accordance with
applicable securities laws.