TAG Confirms O&G Discoveries in Taranaki Basin

TAG Oil reported that strong test results confirm new oil and gas discoveries in the Sidewinder-2 well and the Cheal-C1 well, both located in the Taranaki Basin, New Zealand.

Lower Mt. Messenger Oil Discovery in Sidewinder-2 Well

TAG has completed isolated flow testing on oil-and-gas-bearing zones discovered in the Sidewinder-2 well. These additional productive zones were encountered in the shallower Urenui Formation and in the lower Mt. Messenger Formation, below the main Sidewinder gas zone discovery, which tested at stabilized rates of 8.8 million cubic feet per day (~1467 BOE per day).

Of particular importance are the oil-bearing sands Sidewinder-2 discovered in the lower section of the Mt. Messenger Formation (~1800m), where the Company recovered significant volumes of light oil during recent swab testing. Technical data suggests that this oil zone can produce at rates consistent with other established Mt. Messenger oil wells in the immediate area. These oil-bearing Mt. Messenger sands are interpreted to be widespread in the Sidewinder permit area and will be a primary target in future exploration wells.

TAG will proceed to commercialize oil production from the lower Mt. Messenger zone and will acquire artificial lifting equipment that will best suit the overall Sidewinder exploration and development strategy.

Also of interest in Sidewinder-2 is the gas discovered in the shallow Urenui Formation (~1400m). The Company tested clean, dry natural gas at rates ranging from 1 to 2 million cubic feet of gas per day (167- 333 BOE's per day) utilizing various choke sizes. Production from the Urenui Formation zone can be commercialized by comingling with the main Sidewinder gas zone.

TAG CEO Garth Johnson commented, "We continue to achieve excellent exploration results which indicate that TAG has potentially discovered a large oil and gas field at Sidewinder. In addition to the prolific main gas zone discovered, there are now two significant high-impact discovery zones to pursue in this acreage. This new Mt. Messenger oil discovery will add high net-back oil production to the ~5000 BOE's of behind pipe awaiting commissioning of the Sidewinder production facilities."

The Sidewinder oil and gas discoveries are located in TAG Oil's Petroleum Exploration Permit 38748 (TAG 100%) in the Taranaki Basin, New Zealand.

Cheal-C1 Testing Confirms Oil Discovery

TAG also reports that testing of the Cheal-C1 exploration well confirms the oil and gas discovery in the Cheal "C" area. Cheal-C1 intercepted oil-and-gas-bearing sands in the Mt. Messenger Formation producing substantial volumes of light oil during swab testing along with clean, dry gas at rates between 1.5 million to 3 million cubic feet per day.

Artificial lifting equipment is now being acquired to establish daily oil production rates, however the Company estimates production capabilities from Cheal-C1 to be similar to TAG's Cheal-B4ST well. This well tested 360 barrels of oil + 240 thousand cubic feet of gas per day.

The Cheal-C1 well also encountered strong oil shows within a 73-meter-thick section of sandstone within the deeper Moki Formation. The Moki zone was tested but commercial flow rates were not achieved. TAG's technical interpretation indicates that Cheal-C1 penetrated a "transitional zone" where oil migrated through the contacted zone into a large structural closure, updip from the Cheal-C1 penetration. Given the extensive oil shows recorded while drilling coupled with the excellent reservoir quality interpreted from electric logs, TAG will plan a new well that will directly target the Moki Formation prospect, drilled from a more optimal location on the structure.

TAG CEO Garth Johnson said, "I'm pleased to achieve such positive results from the Cheal-C1 well, significantly expanding the Cheal development area. We expect to commercialize the Cheal-C1 discovery in conjunction with appraisal drilling included in our next drilling campaign, scheduled to start in September 2011."

The Cheal oil and gas discoveries are located in TAG Oil's Petroleum Mining Permit 38156 (TAG 100%) in the Taranaki Basin, New Zealand.


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