TAG Oil has completed its acquisition of the remaining 69.5% interest in Petroleum Mining Permit 38156-S ("Cheal") and Petroleum Exploration Permit 38738-01 ("Greater Cheal") located in the Taranaki Basin, New Zealand. The Company now has 100% control over the 7,487-acre Cheal Production License, which encompasses the Cheal oil discovery, the Cheal Treatment and Production Facility, and an additional 7,988 net acres granted under exploration rights along trend.
Pursuant to a binding agreement between the Company and the Receivers for Austral Pacific Energy Ltd., TAG, through a wholly-owned subsidiary, has purchased these interests for consideration of US$2,000,000 in cash, a 25% net oil revenue royalty on the first 500,000 barrels produced after the effective date of June 1, 2009, then reducing to 7.5% for the life of the Cheal pool, and making certain permit work commitments, including optimization and drilling operations, within 30 months of completion.
TAG's initial program includes an optimization plan consisting of work-overs, hydraulic fracturing and down-hole heating within six producing Cheal oil wells. The wells are already tied into the 100%-owned Cheal Production Facility, which was completed in 2006 and was designed to handle up to 2000 barrels per day of throughput. This initial program is expected to result in a material increase to current oil production of approximately 325 barrels per day.
Garth Johnson, TAG CEO, commented, "The completion of this acquisition represents an important milestone in TAG's long history of exploration in New Zealand. With 100% control of Cheal, TAG can now initiate the long-awaited development of the Cheal pool and further exploration in this exciting new discovery area." Mr. Johnson then elaborated on TAG's plans, "With a strong working capital position and the anticipated increase in production revenue from our optimization program, TAG will initiate development drilling into the Cheal pool while exploiting our portfolio of high-impact, drill-ready 3-D defined prospects in the discovery fairway with Cheal and other Taranaki discoveries."
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