TAG Oil’s Taranaki Basin Operations Continue to Deliver Excellent Results
VANCOUVER, June 25, 2012 /PRNewswire/ – TAG Oil Ltd. (TSX: TAO and OTCQX: TAOIF), is pleased to provide a Taranaki Basin drilling and operations
update. This update is being provided prior to TAG’s year-end results,
which will include an independent assessment on proven, probable and
possible reserves, and is expected to be announced on June 29, 2012.
Taranaki Basin Production
Current daily production is approximately 2,600 to 2,800 barrels of oil
equivalent per day (“BOE”). The split between oil and natural gas is
currently approximately 57% oil to 43% gas until such time as the
enhancements to Cheal’s artificial lift capabilities are completed,
allowing oil currently held behind-pipe to flow.
There are currently 18 wells at the Cheal oil and gas field that are
capable of production, eight of which are currently on-stream. In
addition, TAG has two of the four commercial wells currently on-stream
at Sidewinder. Once infrastructure upgrades have been fully completed,
a minimum of ten more Cheal wells and two additional Sidewinder wells
will be placed into full-time production. In addition, results from
TAG’s ongoing drilling program and a number of workover operations are
expected to contribute to future increases in production.
Because of the lightly explored nature of TAG’s Taranaki Basin fields,
it is difficult to accurately estimate future daily production. TAG is
confident however, that with twelve successful wells already drilled
with behind-pipe production awaiting tie-in, daily oil and gas
production will increase to more than 5000 BOE per day over the next
six to nine months, with potential to exceed that estimate depending on
well performance, the outcome of additional development drilling,
exploration drilling and workover operations.
Sidewinder and Cheal Drilling Program
Electric logs indicate economic oil-and-gas pay in the recently drilled
Cheal-C3 well consistent with other wells drilled in the Cheal “C”
block. Cheal-C3 recorded a total of 17.5 meters of pay including 6.5
meters of pay within the Urenui Formation and 11 meters of pay in the
Mt. Messenger Formation. It is important to note that Cheal-C3 was
drilled updip of the Cheal-C2 gas/condensate discovery, and continues
to extend the known oil and gas saturation area in this new discovery
site. The Cheal-C2 discovery well achieved initial flow rates of
approximately 14 million cubic feet of gas per day (~2,333 BOE per
day), and with associated condensate production. Completion and testing
operations of Cheal-C3 will be conducted in the near future.
Drilling is presently underway at the Cheal-C4 location, which is the
first down-dip follow-up well to the Cheal-C1 oil discovery announced
on December 8, 2011. It is estimated that Cheal-C4 will reach total
depth on or about June 27, 2012.
Cheal-A11 and Cheal-A12:
TAG intends to drill the Cheal-A11 and A12 wells at the Cheal-A site as
follow-ups to the recent success of the Cheal-A8, Cheal-A9 and
Cheal-A10 wells. These wells will be drilled back-to-back once TAG and
Webster Drilling’s VR500 Nova-1 rig has been released from drilling the
Sidewinder-5 and Sidewinder-6:
On June 6, 2012 TAG received consent from the New Plymouth District
Council (NPDC) to drill four new wells within TAG’s 100%-owned
Sidewinder Oil and Gas Field in New Zealand. The final decision
granting consent in support of TAG’s drilling operations was handed
down after affected landowners requested a hearing. The consent grant
is subject to an appeal process however if an appeal is not filed, TAG
plans to resume drilling operations at Sidewinder. This drilling at
Sidewinder will represent the first wells drilled since the four
Sidewinder oil and gas discovery wells were drilled in 2010 and 2011.
In the event these Sidewinder wells become temporarily delayed due to an
appeal, TAG plans to move the Nova-1 drill rig to the Cheal-B site and
spud the Cheal-B8 well which would be the third well drilled targeting
similar geological characteristics as the high-deliverability Cheal-B5
and Cheal-B7 oil wells.
Testing and Workover Operations
TAG has contracted the Ensign-6 service rig to carry out a number of
operations that will begin on or about July 1, 2012 as follows:
-- The Cheal-B5 and B7 wells will have workovers conducted to install permanent artificial lift allowing TAG to place the wells on full time, stabilized production. These wells are currently producing naturally, without the aid of any artificial lift, at approximately 900 BOE per day combined. It is estimated with artificial lift the two wells can produce approximately 1,500 BOE per day, (predominately oil); -- Complete and test Cheal-C3, where 17.5 meters of oil and gas pay was intersected; -- Complete and test Cheal-C4 as necessary; -- Complete and test Cheal-A11, A12, Sidewinder-5, Sidewinder-6 and Cheal-B8 as necessary; -- Additional Sidewinder compression is expected to increase field production to approximately 10 million cubic feet of gas per day (1,667 BOE per day) in the near future; -- Recomplete Cheal-A2 and Cheal-A4 to convert these two wells into a water flood scheme within the Cheal A-Pool. This operation is intended to increase recovery factors in the Cheal A pool by up to10-15%.
Production Infrastructure and Pipeline Upgrades
TAG’s infrastructure program is progressing on time and on budget to
ensure all of the facilities have excess capacity to handle both
existing and future production capabilities. These Infrastructure
enhancements are anticipated to include:
-- Tripling oil lifting capacity at Cheal; -- Installation of gas processing facilities, including additional compression, to ensure gas meets New Zealand specification to allow for transportation and marketing in the open access pipeline system; -- Construction of a gas plant at Cheal capable of stripping liquid hydrocarbons from Cheal gas; -- Building the Cheal-C site oil battery to establish permanent production from recent Cheal-C site discoveries, as well as allow for future development of the area; -- Adding new pipelines to tie the Cheal-C site to the Cheal-A site; -- Add a new 6,000 meter pipeline to TAG's existing infrastructure from Cheal to New Zealand's open access gas transmission line to maximize marketability of TAG's gas production; -- Establishing TAG as a third-party gas processor in the thriving Taranaki gas market.
TAG Oil CEO Garth Johnson, commented “The execution of our business plan
continues to drive positive results, as well as significant increases
to shareholder value. I’m proud to report our Taranaki operations
continue to hit all milestones and are all being completed on time and
on budget. We plan to have our behind-pipe production unrestrained in
the next six to nine months with substantial upside potential through
further successful development and exploration drilling in our lightly
explored Mining Licences. With just 13% of our proven onshore Taranaki
acreage assigned as reserves to date, we have many years of continued
drilling ahead, both in the shallow formations where we’re achieving
strong success and in the deeper liquids-rich gas prospects, which will
soon be scheduled for drilling. With growing cash flow and production,
a strong balance sheet and a large inventory of high-impact exploration
opportunities, TAG is well positioned to continue to achieve and grow.”
TAG Oil Ltd.
TAG Oil Ltd. (http://www.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 Oil. Such statements can
generally, but not always, be 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
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, workover 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 www.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.
SOURCE TAG Oil Ltd.