TAG Settles Dispute, Will Drill Back-to-Back Wells in Cheal Oil Field
TAG Oil Ltd. announced the upcoming drilling of the A6 and A7 wells in the Cheal Oil Field, Taranaki Basin, New Zealand. The first well is scheduled to commence drilling on or about June 9, 2008.
These new wells will be directionally drilled from the Cheal "A" Site which is the location of the Cheal Production Station, and will target the same oil producing Mt Messenger sands that are currently generating substantial revenue for TAG. It is anticipated that the existing infrastructure will facilitate immediate tie-in of all incremental oil production.
The agreement to drill the A6 and A7 wells is part of an arrangement between the Cheal Joint Venture partners TAG 30.5% and operator Austral Pacific Energy Ltd. 69.5% to resolve the dispute related to the construction of the Cheal Production Station. The agreement includes a full and final settlement of all claims, a commitment to drill the A6 and A7 wells, a comprehensive Cheal technical study program and a best efforts approach to creating a production Joint Venture Operating Agreement to guide future work programs.
The agreement also includes Austral issuing 2.273 million common shares to TAG, subject to TSX-V approval, with anti-dilutive protection provided for a period of six months and in return TAG has agreed not to dispose of these shares for a period of twelve months. In addition, Austral has agreed to pay TAG NZ$300,000 and TAG has agreed to pay its share of the remaining Cheal facilities costs estimated at NZ$563,000 that were withheld pending a resolution to the dispute. Furthermore, in the event Cheal A7 is successfully completed for production, TAG will receive an additional US$250,000 payable in equal instalments over twelve months.
"I am pleased to bring resolution to this matter and more importantly, we can now move forward on further development of the Cheal Oil and Gas Field and exploration in the offsetting Greater Cheal acreage where there is good potential for additional new pool discoveries." explained TAG Oil's Chief Executive Officer, Garth Johnson.
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