TAG Oil announced that pursuant to an agreement between TAG and the Receivers for Austral Pacific Energy, the Company has completed the acquisition of the remaining 66.67% interest in Petroleum Exploration Permit 38748 (the "Winchester Permit") located in the heart of the onshore Taranaki Basin discovery fairway.
TAG now has 100% control over this 7,910-acre permit, which immediately offsets a number of Taranaki oil and gas fields including TAG's 100%-owned Cheal oil and gas discovery to the south. The Winchester Permit 38748 area already contains six drill-ready prospects identified on 3D seismic, and numerous leads targeting the relatively shallow Mt. Messenger formation. TAG plans to commence drilling operations in the permit area in 2010.
An "Exceptional Opportunity for TAG"
This transaction coincides with sharply increasing interest in New Zealand's petroleum sector by foreign investors, fuelled by high-profit oil discoveries. "This high-graded exploration acreage is an exceptional opportunity for TAG," said Garth Johnson, TAG Oil Chief Executive Officer. "The area is not only complimentary to TAG's Taranaki operations, it is strategic in terms of providing the opportunity to grow near-term production with lower-risk, yet high-impact exploration in a proven discovery fairway," Johnson added.
The target in the Winchester Permit 38748 is light oil in the Mt. Messenger formation consistent with a number of discoveries in the immediate area. TAG Oil acquired a proprietary merged 3-D data set covering the majority of the Winchester permit, which has identified drillable prospects and numerous leads. In the event of discovery, Taranaki oil is readily sold at a premium to West Texas Intermediate, primarily to Australia, Japan and Korea; gas discoveries can easily be tied into existing underutilized infrastructure and sold into a robust local market.
Prolific Taranaki Discoveries Establish Winchester As a Prospective Producer
The Taranaki Basin represents an ideal growth area for TAG. Not only is political risk at a minimum, the Taranaki is an underexplored emerging oil, gas and condensate province located on the North Island of New Zealand, and proving to be prolific with profitable discoveries. "Our Taranaki growth strategy will launch in early 2010 with a view to substantially increasing existing production through fracturing and optimization of recoveries from our existing producing wells at Cheal. We will also be preparing for a drilling campaign that includes testing high-impact prospects in Winchester and step-out drilling at our Cheal discovery," Johnson explained.
Given its size and potential, the Taranaki Basin is underexplored compared to similar rift-complex basins producing light oil. Although the Taranaki Basin covers an area of about 100,000 sq km, only 125 wildcats have been drilled since 1955, yielding proved oil reserves of 528 million barrels and proved gas reserves of 6.9 trillion cubic feet. Last year the Taranaki Basin averaged 387 million cubic feet of net natural gas production per day, as well as 58,400 barrels of oil per day. (Source: New Zealand Ministry of Economic Development http://www.crownminerals.govt.nz/cms/petroleum/facts-and-figures. The source of the information was independent; however, the Company was unable to confirm that this information was prepared by a qualified reserves evaluator or auditor in accordance with the COGE Handbook.)
Mr. Johnson said this acquisition significantly increases the Company's prospective reserves in the Taranaki Basin, and TAG will continue to build upon the contractual, industry and community relationships we have developed over our years of exploration and development in New Zealand.
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