TAG Oil Ltd(TSX:TAO) Oil and gas exploration and production company, TAG Oil Ltd. (TSX: TAO and OTCQX: TAOIF) is pleased to report third quarter results for the fiscal year ending March 31, 2017, in which oil and gas production, revenue from sales, and operating netbacks increased. Production over the month of February to date is above guidance with a current net daily average rate of 1,293 BOE/d (79% oil).
TAG remains disciplined and focused on optimizing and exploiting opportunities within the Company's core producing operations, which has demonstrated substantial upside potential for near-term production and reserve building, and completing additional acquisition opportunities in New Zealand and Australia. TAG is also set to resume drilling on March 1, 2017, and enter its next phase of reserve and production growth through exploration, exploitation, and commercializing the deep Cardiff gas/condensate discovery, one of TAG's premier deep gas assets in New Zealand.
TAG Oil CEO Toby Pierce commented "I am very pleased to report another successful quarter for TAG with stable production base and higher oil prices leading to improved revenues and netbacks. TAG's operations continued to remain active with workovers at our core Cheal and Sidewinder fields delivering incremental production, while successful well tests at both Supplejack and Cardiff have demonstrated near term development opportunities. Further, preliminary results from the Cheal B waterflood are encouraging and we will be further expanding the waterflood to Cheal A and Cheal E in the upcoming months. Finally, going forward we expect to shift back towards a more growth oriented trajectory focusing on drilling and exploiting our exceptional higher impact exploration inventory."
Q3 2017 FINANCIAL AND OPERATING HIGHLIGHTS
RECENT DEVELOPMENTS / LOOKING AHEAD
The Cheal B Mt. Messenger pool has been identified as the first phase of a larger waterflood project within the greater Cheal area. TAG's enhanced recovery waterflood project commenced on September 21, 2016, and water injection continues at a rate of approximately 700 BW/d. The pressure response in the reservoir is being monitored and TAG expects to see a production response from water injection in calendar 2017.
The Cheal A Mt. Messenger pool waterflood project has progressed with the implementation of the Cheal-A2 injection conversion project that is expected to be completed during Q1 2018. Pressure support is expected to double the recovery factor, resulting in incremental production and reserves.
Execution of the waterflood project at the Cheal E site continues, with pipeline construction completed in Q3 2017. The completion target date is the end of Q4 2017. This will involve the provision of additional pumps and associated equipment, as well as converting the Cheal-E7 well into an injection well. In addition, the joint venture submitted an application in early November 2016 to New Zealand Petroleum and Minerals to convert Cheal E from an exploration license to a mining license. This will allow the joint venture to commence water injection into the Cheal E pool upon receipt of the mining license.
Options to commercialize both the Cardiff-2 and Cardiff-3 wells are currently being considered in order to support production via tie back to TAG's nearby Cheal A facility will progress in Q4 2017. The Cardiff structure is approximately 3 km by 12 km in extent and has potential to contain a large high-liquids gas resource. The Cardiff field is situated nearby and on trend with onshore New Zealand's landmark Kapuni discovery.
Pukatea - Tikorangi Limestone Target
TAG Oil (70%) and its joint venture partner, Melbana Energy Ltd. (30%), have approved drilling of the Pukatea-1 well, located onshore in New Zealand within PEP 51153 ("Puka"), which is planned to commence in Q3/Q4 2018. The Pukatea prospect is a high impact exploration opportunity, targeting the Tikorangi Limestone, a highly productive conventional reservoir with initial flow rates of 5,000 to 10,000 B/d in nearby wells. The Puka joint venture has recently upgraded the prospective resources attributable to the Pukatea prospect, which are estimated to range from 1.3 to 40 million barrels (low-high estimates) with a best estimate of 12.4 million BOE. The chance of success for Pukatea has also been revised upward from 16% to 19%. The Pukatea prospect is proximal to existing infrastructure and has several low-cost alternative development paths. The Pukatea-1 well will be drilled from the existing Puka production pad where the previous operator has previously drilled three wells.
A low-cost perforation of a deeper zone in the existing Sidewinder-1 wellbore enabled access to a previously unproduced oil leg resulting in additional production. On that success, a further workover on the Sidewinder-2 well has been progressed and is scheduled to be completed in Q4 2017. It is expected that this will add approximately 85 BOE/d to production. Several additional gas wells at Sidewinder and Cheal continue to be reviewed as candidates for recompletions as oil producers.
Planning for drilling of the Supplejack-A2X well on the Waitoriki permit has commenced with drilling to begin in March 2017. If successful, the Supplejack-A2X well will be completed in Q1 2018.
TAG will continue to work towards achieving the following goals:
About TAG Oil Ltd.
TAG Oil Ltd. (http://www.tagoil.com/) is a development-stage international oil and gas producer with established high netback production, development and exploration assets, including production infrastructure in New Zealand and Australia. TAG is poised for significant reserve and production growth with several oil and gas fields under development and high-impact exploration in proven oil and gas fairways. TAG is debt-free and currently has 62,212,252 shares outstanding.
TAG Oil has adopted the standard of six thousand cubic feet of gas to equal one barrel of oil when converting natural gas to "BOEs." BOEs may be misleading, particularly if used in isolation. A BOE conversion ratio of 6 Mcf: 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.
The resource estimates in this document are by TAG professionals, a non-independent qualified reserves evaluator, in accordance with NI 51-101 and the COGE Handbook, with effective dates of November 30, 2016, andDecember 1, 2016.
Prospective resources are those quantities of petroleum estimated, as of a given date, to be potentially recoverable from undiscovered accumulations by application of future development projects. Prospective resources have both an associated chance of discovery and a chance of development. There is no certainty that any portion of the resources will be discovered. If discovered, there is no certainty that it will be commercially viable to produce any portion of the resources.
Exploration for hydrocarbons is a speculative venture necessarily involving substantial risk. TAG's future success in exploiting and increasing its current reserve base will depend on its ability to develop its current properties and on its ability to discover and acquire properties or prospects that are capable of commercial production. However, there is no assurance that TAG's future exploration and development efforts will result in the discovery or development of additional commercial accumulations of oil and natural gas. In addition, even if further hydrocarbons are discovered, the costs of extracting and delivering the hydrocarbons to market and variations in the market price may render uneconomic any discovered deposit. Geological conditions are variable and unpredictable. Even if production is commenced from a well, the quantity of hydrocarbons produced inevitably will decline over time, and production may be adversely affected or may have to be terminated altogether if TAG encounters unforeseen geological conditions. TAG is subject to uncertainties related to the proximity of any reserves that it may discover to pipelines and processing facilities. It expects that its operational costs will increase proportionally to the remoteness of, and any restrictions on access to, the properties on which any such reserves may be found. Adverse climatic conditions at such properties may also hinder TAG's ability to carry on exploration or production activities continuously throughout any given year.
The significant positive factors that are relevant to the resource estimate are: proven production in close proximity; proven commercial quality reservoirs in close proximity; oil and gas shows while drilling wells; and calculated hydrocarbon pay intervals from open hole logs.
The significant negative factors that are relevant to the resource estimate are: tectonically complex geology could compromise seal potential; and seismic attribute mapping can be indicative but not certain in identifying proven resource.
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, 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. All estimates and statements that describe TAG's objectives, goals, or future plans relating to operations are forward-looking statements under applicable securities laws and necessarily involve risks and uncertainties. Actual results may vary materially from the information provided in this release, and there is no representation by TAG that the actual results realized in the future will be the same in whole or in part as those presented herein.
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.
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