The permits awarded have been assigned the Petroleum Exploration Permit (PEP) numbers 54873, 54876, 54877, 54879 and are all located in the Taranaki Basin, New Zealand.
Key attributes to these awards are:
• 37,253 additional gross acres in the main Taranaki oil and gas discovery fairway;
• Extensive TAG controlled proprietary 3D seismic coverage over three of the four new permits;
• PEP's 54876, 54877, and 54879 initially add at least 10 shallow, low-risk drilling prospects plus numerous leads identified on 3D seismic in close proximity to the producing Cheal oil field;
• Joint venture created with East West Petroleum Ltd.; TAG will operate the permits and East West will fund four wells within PEP 54876, 54877 and 54879 in 2013 earning East West a 50% interest in PEP 54876 and PEP 54879 and a 30% interest in PEP 54877.
• PEP 54873 (100% TAG) provides several shallow drilling leads along with significant exploration upside via a drill-ready deep gas and condensate prospect that has similar geological features to the adjacent 1.3 TCF Kapuni gas/condensate field;
• Economically robust commercial potential: any new discoveries arising from drilling in these new blocks will be cost-effectively tied into to TAG's expanded Cheal Production Station without delay.
TAG CEO Garth Johnson commented,“We are very pleased that New Zealand Petroleum & Minerals has awarded TAG this additional acreage that is complimentary to our current Taranaki operations. Our new oil and gas production facility expansion and associated pipelines in this area unencumber all production, transportation and marketing of TAG's oil and gas, including any new discoveries from these newly awarded lands. We are also pleased to have established a joint venture with East West Petroleum according to a joint-bidding agreement entered into by our companies prior to making application in the 2012 Block Offer.”
TAG's Infrastructure Expansion On Track
TAG's $30 million infrastructure expansion investment continues to proceed on schedule to meet the March 31, 2013 anticipated completion date. At that time, the Company expects all current shut in discovery wells can be tied into TAG's 100% controlled facility, and daily production will exceed 5,000 barrels of oil equivalent per day as forecasted.
TAG has amended its production timeline for the next two fiscal quarters after making a decision to conserve natural gas and minimize flaring during the Cheal infrastructure upgrade. In this regard, TAG will maintain its production at approximately 2,000 BOE per day until the infrastructure expansion is complete.
“We initially anticipated phasing in shut-in production over the next few fiscal periods; however, after considering a number of factors, the long term benefits of conserving in situ reservoir energy until our gas infrastructure is complete far outweigh the optics of short term production increases,” Mr. Johnson commented,“Our shut-in wells have all been production tested and we remain confident of meeting or exceeding our production guidance of 5,000 BOE per day. We also look forward to investing the associated cash flow into more exciting high-impact exploration and development drilling opportunities in 2013 across a significant prospect portfolio.”
An Update on Cheal-B8 Drilling
The Cheal-B8 well has reached a total depth of 3,600 meters encountering 26 meters of high quality oil-and-gas pay within the initial 2,000 meters of the well. TAG will mobilize a service rig to Cheal-B8 in the next two weeks to perforate and production test the well.
Following the logging and casing of the up-hole oil discovery, the Cheal-B8 well was deepened a further 1600 meters to test a wildcat target in the Tikorangi Formation, however electric logging did not indicate sufficient pay present at this depth. This result does in no way effect the potential in the deeper Kapuni Formation targets TAG will be drilling, which is a well established, commercially proven play level with numerous major fields discovered in the Taranaki Basin.
The Cheal-B8 well is TAG's 20th straight successful oil and gas well drilled in the Taranaki Basin.
About TAG Oil Ltd
TAG Oil Ltd (tagoil.com) is a Canadian-based production and exploration company with operations focused exclusively in New Zealand. With 100% ownership over all its core assets, including oil and gas production infrastructure, TAG is enjoying substantial oil and gas production and reserve growth through development of several light oil and gas discoveries. TAG is also actively drilling high-impact exploration prospects identified across more than 2,953, 810 net acres of land in New Zealand.
In the East Coast Basin, TAG has entered into a farm-out agreement with Apache Corporation to explore and potentially develop the major unconventional resource potential believed to exist in the tight oil source-rock formations that are widespread over the Company's acreage. These oil-rich and naturally fractured formations have many similarities to North America's Bakken source-rock formation in the successful Williston Basin.
TAG Oil has adopted the standard of six thousand cubic feet of gas to equal one barrel of oil when converting natural gas to “BOE's”. BOEs may be misleading, particularly if used in isolation. A BOE conversion ratio of 6Mcf: 1 Bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.
Cautionary Note Regarding Forward-Looking Statements:
Statements contained in this news release that are not historical facts are forward-looking statements that involve various risks and uncertainty affecting the business of TAG. Such statements can generally, but not always, identified by words such as “expects”,“plans”,“anticipates”,“intends”,“estimates”,“forecasts”,“schedules”,“prepares”,“potential” and similar expressions, or that events or conditions “will”,“would”,“may”,“could” or “should” occur. These statements are based on certain factors and assumptions including:
A. All estimates and statements that describe the Company's objectives, goals, production rates, infrastructure capacity and or future plans relating to the seismic, testing, work over and drilling programs in Taranaki are forward-looking statements under applicable securities laws and necessarily involve risks and uncertainties including, without limitation: risks associated with oil and gas exploration, development, exploitation, production, marketing and transportation, volatility of commodity prices, imprecision of reserve estimates, environmental risks, competition from other producers, and changes in the regulatory and taxation environment. These forward-looking statements are based on certain factors and assumptions, including factors and assumptions regarding the management's views on the oil and gas potential in the Permits, well performance, the success of any operations, completing infrastructure and the costs necessary to complete the operations; and
B. Those relating to TAG Oil's exploration and development of its oil and gas properties within the Cheal and Sidewinder project areas, the production and establishment of additional production of oil and gas in accordance with TAG Oil's expectations at Cheal and Sidewinder, well performance, drilling the completion of new infrastructure at Cheal and Sidewinder, the increase of cash flow from new production, expected growth, results of operations, performance, prospects, evaluations and opportunities. While TAG Oil considers these factors and assumptions to be reasonable based on information currently available, they may prove to be incorrect. Actual results may vary materially from the information provided in this release, and there is no representation by TAG Oil that the actual results realized in the future will be the same in whole or in part as those presented herein.
TAG Oil is involved in the exploration for and production of hydrocarbons, and its property holdings with the exception of the Cheal and Sidewinder project areas are in the grass roots or primary exploration stage. Exploration for hydrocarbons is a speculative venture necessarily involving substantial risk. There is no certainty that the expenditures incurred on TAG Oil's exploration properties will result in discoveries of commercial quantities of hydrocarbons. TAG Oil's future success in exploiting and increasing its current reserve base will depend on TAG Oil's ability to develop its current properties and on its ability to discover and acquire properties or prospects that are producing. There is no assurance that TAG Oil's future exploration and development efforts will result in the discovery or development of additional commercial accumulations of oil and natural gas.
Other factors that could cause actual results to differ from those contained in the forward-looking statements are also set forth in filings that TAG and its independent evaluator have made, including TAG's most recently filed reports in Canada under National Instrument 51-101, which can be found under TAG's SEDAR profile at sedar.com.
TAG undertakes no obligation, except as otherwise required by law, to update these forward-looking statements in the event that management's beliefs, estimates or opinions, or other factors change.