"The interpretation of the Tolaga Bay seismic survey acquired in April this year was disappointing, with complex faulting reducing the primary prospect to a sub-commercial size and introducing a number of significant technical risks," Pancontinental said.

"As a consequence, the Joint Venture elected to withdraw from the permit as it was not willing to enter the next permit year, which required the drilling of an exploration well."

But the company will still proceed with drilling in the onshore Taranaki Basin on the other side of the North Island.

In PEP 38716 (Pancontinental 9.42%) the operator, Austral Pacific, has contracted OD&E Rig 19 on behalf of the joint venture to drill the firm Oru-1 exploration well to a total depth of about 1600 metres, and the contingent Pukengahu-1 well to a similar depth.

"Oru-1 and Pekengahu-1 will be one of a number of wells to be operated by Austral in the onshore Taranaki Basin on behalf of several joint venture groups," Pancontinental said.

"Subject to site and access construction approvals, the granting of various local Council and landholder approvals, drilling of Oru–1 is planned to commence in early October. Site and access roads for the drilling of the Pukengahu prospect will be constructed following the drilling of Oru."

The Oru-1 and Pukengahu-1 wells will target the Mt Messenger formation, which is productive in several fields near PEP 38716. The Oru and Pukengahu prospects have been assessed to contain speculative potential P50 recoverable oil reserves of 3 and 4.5 million barrels respectively.