The acquisition gives TAG a significant interest in the Cheal oil pool, which includes two wells to be placed into permanent production, and four more development and appraisal wells to be drilled as part of a significant development plan underway for the field. Existing wells Cheal A3X and Cheal A4 have produced 37,000 barrels and 54,000 barrels of oil respectively, averaging over 300 bbls/day each on intermittent 2005 testing.
Independent engineering firm Sproule International recently assigned the Cheal oil pool Gross Proved Undeveloped Reserves of 1,589,700 boe, and Gross Probable Reserves of 1,830,000 boe. Sproule reported another 1,592,500 boe of Gross Possible Reserves for a 3-P reserve total of 5,012,200 boe (TAG net 1,528,721 boe).
President and CEO Drew Cadenhead commented: "This production and reserve acquisition provides TAG with significant cash flow, long-life reserves and further exploration potential, which in turn enables us to move forward with some of our high impact projects -- and that's what this company is really all about.
TAG Oil is a junior company that is well capitalized and particularly well staffed, and the Cheal/Cardiff acquisition grows us from a pure exploration company, to a producing and reserve-based company with cash flow, which will enhance our ability to carry out high-impact exploration in New Zealand over the coming years."
The acquisition of Cheal Petroleum from South Pacific Lease Operations Ltd. includes cash totaling NZ$18,542,857 (approximately CDN$12,800,000) as well as 5.0 million shares of TAG Oil Ltd. and a 0.775% Gross Over Riding Royalty on PEP 38738-D production.
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