VANCOUVER, Aug. 14, 2012 /PRNewswire/ - TAG Oil Ltd. (TSX: TAO) and (OTCQX: TAOIF), a Canadian company with 100% of its exploration, development and production efforts focused in New Zealand, reports the Company has filed its June 30, 2012 condensed consolidated unaudited interim financial statements and management discussion and analysis with the Canadian Securities Administrators for the Company's first quarter of fiscal 2013. 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/.
Q1-2013 and Recent Operating Highlights
- Production revenue increased to $11.83 million, from $5.85 million for Q1-2012;
- Net income of $5.56 million was recorded before deducting non-cash stock-based compensation expenses, compared to $2.18 million for Q1-2012;
- Net operating cash inflow increased to $9.17 million for the quarter compared to $1.76 million for Q1-2012;
- TAG sold 101,880 barrels of oil during quarter at an average price of $107.36 per barrel;
- TAG sold 32,167 boe of gas during the quarter at an average price of $4.61 per mcf;
- Successfully drilled Cheal-C3, Cheal-C4, Cheal-A11, bringing the total to 18 straight successful wells in Taranaki;
- Currently drilling Cheal-A12;
- Active drilling, testing and work-over program ongoing;
- Cheal infrastructure program allowing TAG to initiate production from currently constrained well production and become completely self-sufficient in producing, processing and marketing all oil and gas;
- Completed a bought deal financing where the Company issued 4,435,000 common shares for net proceeds of $43,433,253;
- Ended Q1-2013 with $103 million of cash and no debt;
- Entered into an agreement to acquire three exploration permits located in the East Coast and Canterbury Basin's of New Zealand;
- All work carried out to the highest health and safety and environmental standards.
Liquidity and Financial Summary
At the date of this report, TAG is debt free with approximately $103 million in cash on the balance sheet.
Production revenue for the quarter was $11.83 million compared to $5.85 million for the comparable quarter last year and the Company generated a net profit for the quarter of $5.56 million before deducting $840,721 for non-cash stock-based compensation. TAG has drilled eighteen consecutive successful wells in Taranaki which has necessitated the infrastructure upgrades now underway, expected to be complete by March 31, 2013. TAG's infrastructure project will allow the Company to initiate production on all oil and gas wells currently that have been drilled but are not yet producing (behind pipe) and any additional production arising from further successful wells in the future.
TAG currently has 59,795,757 common shares outstanding and 63,438,020 common shares outstanding on a fully diluted basis.
Taranaki Basin Operations
TAG finished Q1-2013 with excellent results and an ongoing Taranaki program underway with electric logs indicating economic oil-and-gas pay in recent drilling as follows:
- Cheal-C4 recorded a total of 17.5 meters of pay
- Cheal-A11 recorded a total of 30 meters of pay
- Cheal-A12 drilling ahead
Summary of TAG well status
|Cheal A||A3X, A7||A1, A8, A9, A10, A11*|
|Cheal B||BH-1, B3, B4ST||B1, B2, B6, B5, B7|
|Cheal C||C1||C2, C3*, C4*|
|Sidewinder||SW2, SW4||SW1, SW3|
*Drilled and awaiting/undergoing production test
Cheal Oil and Gas Field - 100% Interest
Successful drilling throughout 2011/2012 and now Q1-2013 within the Cheal field has resulted in a material increase to the Company's forecasts. TAG expects continued growth through the following activity:
- Continued exploration and development drilling: pre-emptive right on the Nova-1 drilling rig ensures access to services;
- The Cheal-B5 and B7 wells are currently shut-in undergoing workovers to install permanent artificial lift. Once complete, the wells can be brought onto full time, unrestrained production during Q2-2013;
- Infrastructure enhancement project underway at Cheal ensures maximum value is achieved from behind-pipe production and new discoveries making TAG completely self-sufficient for oil and gas production, processing and marketing;
- Drilling the liquids-rich deep gas target's such as Cardiff and Hellfire; Cardiff has an independent resource potential estimated by Sproule International of 214.5 Bcf and 12.8 million barrels of associated condensate;
- Completion of Cheal's secondary recovery scheme, which is forecast to cost-effectively increase recovery factors within the Cheal A pool's proved and probable oil reserves.
Sidewinder Oil and Gas Field - 100% Interest
On June 6, 2012, TAG received consent to drill four new wells within the Sidewinder permit, which was subsequently appealed by one opposing party. TAG expects the appeal process to be initiated shortly with successful resolution to be expected in Q2/Q3 of fiscal 2013.
TAG has planned a new multi-well drilling program using its proprietary 3D seismic, combined with new 2D seismic that was acquired during fiscal 2012. The Sidewinder Permit is a lightly-explored proven oil and gas province, where only 2.5% of TAG's acreage has been drilled to date. Significant exploration potential remain in both shallow and deeper targets within the Permit area. Near-term operations are as follows:
- Drill a minimum of four new exploration wells;
- Drill Sidewinder's deeper gas/condensate targets such as the Hellfire prospect where TAG's technical team has used 3D seismic to interpret Hellfire as a large prospect potentially exceeding the size of Cheal's deep prospects such as Cardiff.
East Coast Basin Operations
The farmout agreement with Apache Corp in Q1 2012 was completed to explore and potentially develop oil and natural gas resources in the East Coast Basin of New Zealand. Apache Corp has agreed to spend up to $100 million to conduct a multi-phased exploration, appraisal and potential development program within TAG's East Coast Basin Petroleum Exploration Permits PEP 38348, PEP 38349 and PEP 50940 (the "Permits").
TAG and Apache Corp have completed its 2D seismic program within the Permits and the TAG / Apache JV are continuing an extensive consultation process relating to the upcoming drilling of four vertical wells targeting the Whangai and Waipawa source rocks. Upon receipt of the necessary drilling consents from district and regional councils being obtained in a timely manner, TAG and Apache anticipate well-site construction to begin in the first quarter of calendar 2013 followed shortly by drilling operations.
In addition to East Coast Basin permits noted above that form the TAG/Apache JV, TAG acquired 100% interest in two additional East Coast Basin permits during the quarter. Consent has been received from the New Zealand Ministry of Petroleum at the date of this report and the acquisition of these properties as well as the Canterbury permit mentioned below is expected to close shortly.
Canterbury Basin Operations
During the quarter TAG acquired a new frontier exploration permit, situated both offshore and onshore. The Canterbury Basin is an under-explored frontier area with many geological similarities to the productive Taranaki Basin and historical drilling results indicating good potential for new discovery.
Historical drilling results indicate good exploration potential with two gas/condensate discoveries drilled in the offshore portion of the Basin, one of which tested in excess of 10 million cubic feet of gas and 2,300 barrels of oil per day. Although these discoveries were uneconomical due to the high cost of offshore development, more importantly, the gas/condensate accumulations found in these wells confirm that generation, migration and entrapment of hydrocarbons occur in the basin, indicating additional accumulations are likely to be present.
Offshore drilling scheduled by majors such as Anadarko and Origin Energy in 2013/2014 allow TAG to focus initially onshore while holding considerable upside related to its control over the onshore and near shore acreage directly updip of the scheduled deep water offshore wells.
Expenditures on the Company's oil and gas properties during Q1 of the 2013 fiscal year amounted to approximately $11.1 million, primarily invested in the Company's Taranaki operations for drilling, testing, workovers and infrastructure as follows:
|Cheal Field||$9.0 million|
|Sidewinder Field||$1.3 million|
|East Coast JV||$0.8 million|
In other news, TAG also advises that the Company has granted a total of 1,270,000 incentive stock options with 955,000 being granted to certain directors and officers. These options are exercisable until August 8, 2017, at a price of $6.70 per share, subject to one-third of the total options vesting every six months from the date of grant over a period of eighteen months.
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% control 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 2.9 million net acres of land in New Zealand.
In the East Coast Basin, TAG has entered into a farm-out agreement with Apache Corp on three permits to explore and potentially develop the major 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.
"BOEs" or "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 Anticipated Results and 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 including;
A. all estimates and statements that describe the Company's objectives, goals, or future plans relating to the seismic, testing 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 considerations, 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 Taranaki Permits, the success of any operations, and the costs necessary to complete the operations; and
B. those relating to TAG Oil's successful 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, the completion of new infrastructure at Cheal and Sidewinder, oil and gas exploration in the East Coast and Canterbury Basins, the increase of cash flow from new production, oil and gas price assumptions and fluctuations, foreign exchange rates, expected growth, results of operations, performance, prospects, evaluations and opportunities and effective income tax rates. 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 Oil Field and Sidewinder project area are in the grass roots or primary exploration stage. Exploration for hydrocarbons is a highly speculative venture with no guarantees of discovery or development. 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. But, 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 related to upcoming operations, production forecast modeling and other items, are also set forth in, filings that TAG Oil and its independent evaluator have made, including TAG Oil's most recent reports in Canada under National Instrument 51-101.
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.