TAG Oil Reports 2013 Fiscal Year End Financial Results and 2014 Drilling Program
VANCOUVER, June 28, 2013 /PRNewswire/ - TAG Oil Ltd. (TSX: TAO) and (OTCQX: TAOIF), reports the Company has filed its consolidated, audited financial statements, management discussion and analysis and annual information form with the Canadian Securities Administrators for the Company's March 31, 2013 fiscal year-end. Copies of these documents can be obtained electronically at http://www.sedar.com, or for additional information please visit TAG Oil's website at http://www.tagoil.com/.
Poised for Many Years of Growth
During FY2012 and 2013, TAG Oil conducted an extensive Taranaki drilling campaign consisting of wells averaging approximately 2,000 meters depth, commonly referred to as TAG's shallow drilling program. This program, which targeted the Urenui and Mt. Messenger formations within the Company's 100% owned Cheal and Sidewinder fields, now provides TAG with ongoing high netback production and steady cash flow.
Decline rates from new wells tied in are now stable and in line with other typical Cheal wells on long term production. Some wells from the drilling campaign came onstream with record flow rates, however did not maintain these high rates and declined to production levels in line with other profitable wells in the field. The resulting long-term cash flow has positioned TAG to execute the Company's most diverse and active drilling campaign in the Company's history, including high-impact drilling in the East Coast Basin, while maintaining a very strong debt free balance sheet. Furthermore, control of extensive Taranaki production and delivery infrastructure ensures rapid commerciality of new wells.
FY2013 TAG Oil Highlights
At March 31, 2013, the Company had cash of $68.9 million, working
capital of $68.1 million and no debt.
Daily average production increased 23% for the year, from 1,433 BOE to
Income of $10.69 million was recorded for fiscal 2013 before the
deduction of non-cash share-based compensation, and production revenue
increased 4% to $44.59 million.
Operations generated $34.21 million in cashflow, compared to $15.56
million in 2012.
Total production for the year was 641,142 BOE's.
Sproule International assigned 1p, 2p and 3p reserves of 2,216,000 BOE
(85% oil), 6,112,000 BOE (88% oil) and 8,268,000 BOE (86% oil),
Successfully drilled, completed and placed on permanent production at
the Cheal field: Cheal-A11, Cheal-A12 and Cheal-B8 wells.
Successfully drilled, completed and placed on permanent production at
the Sidewinder field: Sidewinder-A5 and Sidewinder-A6, and drilled the
Successfully drilled and cased the Ngapaeruru-1 well and encountered
excellent mud gas shows indicating the presence of gas zones or soluble
gas in oil between the intervals within a 155m gross hydrocarbon
Infrastructure expansion program completed by March 31, 2013 as planned,
allowing increased production capacity, processing of natural gas
including liquid stripping capabilities, and export of natural gas to
the open-access pipeline infrastructure.
In May 2012, TAG closed a bought deal financing at $10.45 per share,
issuing 4,435,000 common shares for net proceeds of $43,365,746.
The Company acquired a 90% interest in a New Zealand electricity
generation and retailing company, Opunake Hydro Limited ("OHL") through
the investment of approximately $5.0 million, with all funds being used
to acquire new gas-fired generation equipment to be located at the
Company's Cheal site.
Acquired 40% in Coronado Resources Ltd. (TSXV: CRD) and will acquire an
additional 10% of Coronado's common shares as a result of selling OHL.
The deal is subject to the terms and conditions of the Share Purchase
Agreement that has been executed by all parties involved.
Acquired three New Zealand exploration permits in the East Coast and
Canterbury basins: PEP 52589, PEP 52676 and PEP 53674, comprised of
approximately two-million acres in favourable geological areas offering
high-impact exploration opportunities.
- Awarded four new onshore Taranaki exploration blocks in New Zealand's 2012 Block Offer adding at least 10 drilling prospects plus numerous leads identified on 3D seismic in close proximity to TAG's producing Cheal oil field. A Joint Venture created with East West Petroleum Ltd. on three of the new permits carries TAG through $10 million in exploration costs while maintaining operatorship.
Financial and Production Review
|Net income prior to share-based compensation||10,694,371||18,924,540|
|Earnings per share||0.09||0.24|
|Long term debt||-||-|
TAG currently has 59,344,052 common shares outstanding and 63,052,386 common shares outstanding on a fully diluted basis.
Oil and Natural Gas Production, Pricing and Revenue
|Three months ended March 31||Year ended March 31|
|Daily production volumes(1)|
|Natural gas (BOE/d)||678||752||797||515|
|Daily sales volumes(1)|
|Natural gas (BOE/d)||436||496||548||413|
|Natural Gas (Mmcf/d)||2,618||2,977||3,287||2,480|
|Natural gas ($/Mmcf)||4.94||4.48||4.63||4.16|
|Oil and natural gas revenue - gross||$11,993,143||$16,701,663||$44,286,567||$42,908,655|
|Other revenue - gross(2)||304,634||-||304,634||-|
|Total revenue - gross||12,297,777||16,701,663||44,591,201||42,908,655|
|Oil and natural gas royalties(3)||(1,376,561)||(2,973,964)||(5,036,005)||(9,706,513)|
|Revenue - net||$10,921,216||$13,727,699||$39,555,196||$33,202,142|
|(1)||Natural gas production converted at 6 Mcf:1BOE (for BOE figures)|
|(2)||Other revenue is electricity revenue related to OHL.|
Includes a 25% royalty related to the acquisition of a 69.5% interest in
the Cheal field that was reduced to 7.5% during the fourth quarter of
A summary of TAG's drilling program over the next 12 months:
|Permit Number||Well Name||
|# of Wells||Target Depth|
|PEP 54877||Cheal D & E-Sites||70%||5||Miocene <2,500m|
|PEP 54876||Southern Cross||50%||1||Miocene <2,500m|
|PEP 54879||Cheal F & G-Sites||50%||3||Miocene <2,500m|
|PMP 38156||Cardiff||100%||1||Eocene > 4,000m|
|PEP 54873||Heatseeker||100%||1||Eocene > 4,000m|
The program will consist of nine shallow Taranaki wells with permit interests between 50% to 70%. The Company will apply what it has learned from the extensive new drilling data acquired in the last three years to target the low-risk step out prospects, and build the Company's net proved and probable reserves of 6,112,000 BOE's (88% oil) estimated by Sproule as of March 31, 2013. The intention of this drilling program is to continue to exploit the shallow play potential and further maximize the value of the Cheal and Sidewinder fields which remain lightly explored.
Deep Gas and Condensate Program
TAG will step up its efforts in the Taranaki Basin to drill larger, seismically defined, prospects which have the potential to materially bolster the Company's long-term production and reserve growth profiles.
The Company will drill at least two of its 100% owned deep Kapuni gas/condensate prospects in FY2014.
Cardiff and Heatseeker are scheduled to commence in the third quarter of calendar 2013. A third prospect, the Hellfire deep prospect, may be drilled contingent on the results of Cardiff and Heatseeker. These deep Eocene-aged targets are materially larger in reserve size and deliverability potential than what TAG has been targeting in the shallow Miocene formations. Drilling of TAG's Kapuni prospects will use a large seismic database to target prospect depths of approximately 3,500 to 4,000 meters. TAG's Kapuni targets are on trend and similar to the large deep gas/condensate plays in Taranaki such as the Kapuni Field that has produced 1.5 TCF and 65 mmbls of condensate to date and 800 BCF Mangahewa field operated by Shell and Todd Petroleum.
In a report dated February 28, 2011, Sproule International Limited estimates the gross undiscovered resource potential associated with TAG's Cardiff Prospect as follows:
East Coast Basin Tight Oil
In April of 2013, the Company drilled and cased its first unconventional test well, Ngapaeruru-1. The Ngapaeruru-1 well reached a total depth of 1,417 meters after successfully drilling through the Waipawa and Whangai source rock formations, the main objective of the well. Initial results are very encouraging with 155 meters of potential tight oil and gas pay. TAG cut and recovered sidewall cores over 14 separate intervals within the 155 meters of potential tight pay, sampled total organic content (TOC) and acquired in-situ gas analysis at depth. Detailed petrophysical evaluation is now underway with a full suite of unconventional logs to ascertain source rock quality, fracture identification, geochemistry, and rock moduli data. This data will be used to determine the most suitable completion method for production testing the Ngapaeruru-1 well.
TAG plans to drill at least three more exploration wells in the East Coast Basin over the next 18 months, to achieve the Company's goal of converting a potentially major undiscovered unconventional resource into proven reserves.
After some encouraging early stage results, further resource potential is being assessed after processing and interpreting 80km's of recently acquired seismic data. TAG's new 2D seismic, acquired over leads initially identified using geochemical surface data, has resulted in a clearly imaged subsurface, resulting in four newly mapped features within the permit. TAG intends to acquire additional seismic over these specific leads to confirm aerial extent of the anomalies as well as closure prior to making a commitment to drill.
The Canterbury Basin is an underexplored oil and gas frontier that is recognized to have major discovery potential. Large energy companies such as US-based Anadarko Petroleum and Australian-based Origin Energy are exploring the offshore region in the immediate vicinity to TAG's 1.17 million acres under permit.
Conference Call Information
TAG Oil will host a discussion of its 2014 forward program as well as fourth quarter 2013 results conference call on Friday June 28, 2013 at 1:00 pm Pacific Time. Please call in ten minutes before the conference call starts and stay on the line (an operator will be available to assist you should you have questions of management during the call). In addition, questions can be forwarded by e-mail in advance to email@example.com.
Interested parties may access the conference call using the information below:
|Date||June 28th, 2013|
|Time||1:00pm Pacific Time|
|Toll-Free Dial-in #||1-866-318-8614|
|Secondary Dial-in #||1-617-399-5133|
|E-mail questions to:||firstname.lastname@example.org|
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 extensive 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 2,984,171 net acres of land in New Zealand.
In the East Coast Basin, TAG is exploring the major unconventional resource potential believed to exist in the 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 "BOEs". 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 be 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, optimization, infrastructure capacity and or future plans relating to the seismic, testing, work over and drilling programs in the Taranaki, Canterbury and East Coast Basins 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 TAG's 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, optimization, 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.