TAG Oil has agreed to terms to earn a 33.33% operating interest in PML 38157, inclusive of a 33.33% equity ownership in the onsite Radnor production station located in the Taranaki Basin, in return for paying 66.66% of the costs to drill and complete a sidetrack well ("Radnor-1a") from the Radnor-1 wellsite. PML 38157 contains the Radnor-1 discovery that previously flowed natural gas and condensate at average rates of 6MMCF of gas and 350 barrels of oil per day before water influx occurred. TAG Oil has evaluated newly acquired 3-D seismic covering the permit, and has defined a crestal drilling location updip from both the Radnor-1 well and the older Stratford-1 well, both of which produced gas and condensate before watering out. Radnor-1a will whipstock out of the original Radnor-1 wellbore and target the McKee Sands at a depth of approximately 13,500' (4100m). TAG has initiated the process to secure the Parker Rig 188 to drill Radnor-1a in June or July of 2006. The whipstock operation is expected to take four weeks to drill.
TAG has recently earned a 35.5% interest in two exploration permits, PEP 38341 and PEP 38342, located in the East Coast Basin, adding 312,211 net acres to TAG's acreage position in New Zealand. To earn the interests TAG participated in a 67 km 2-D seismic program covering both permits.
As a result of the above acquisitions as well as amendments to TAG's evolving exploration program, the Company's planned capital expenditures have increased by 21% since the date of the Company's last report to shareholders on February 27, 2006.
Completions of the above acquisitions are subject to MED approval.
In other news TAG has completed its two operated 2-D seismic programs covering the Kate prospect in PEP 38260 (TAG ownership: 70%) in the Canterbury Basin on the South Island, and PEP 38758 (TAG ownership 100%) located in the Taranaki Basin on the North Island. TAG has acquired over 60 km of 2-D data over these two permits and has now secured Ensign's Rig #19 to test prospects in both Permits later this year.
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