TAG Oil reported that an independent assessment of reserves on the Cheal Mining Permit, onshore Taranaki Basin, New Zealand, conducted as of March 31, 2010, has assigned net proved and probable reserves remaining of 651,000 barrels of oil, plus associated gas of 258mmcf. These result in a net present value of $29.43 million.
The Cheal oil pool presently produces solely from the Mt. Messenger Formation at an approximate depth of 1800m (5900 feet), and the increase in value and reserves are based on a number of factors: increased recovery, revised projected future well performance and revised oil price forecast.
The report was completed by Sproule International Limited, one of Canada's largest petroleum engineering consulting companies.
TAG Oil Chief Executive Officer, Garth Johnson, commented, "We are very pleased with this early increase in proved and probable reserves, given TAG only acquired 100% control of the Cheal Mining Permit in October 2009. More importantly, the strong performance after the fracture treatment of the Cheal A-7 well clearly demonstrates that further increases to flow rates and reserves are possible within the defined proved reserve area in the Mt. Messenger Formation."
Based on the success at the Cheal A-7 well, TAG is proceeding with additional fracture treatments in existing Cheal wells and commencing a horizontal drilling campaign, including multi-stage fracture treatments targeting proved and probable reserve areas. The goal of this program is to significantly boost recovery factors from the 10 million barrels of oil-in-place already defined.
The Company also plans to drill a series of step-out exploration wells to test numerous multi-zone prospects defined on the permit-wide 3D seismic set, and test numerous additional fault blocks within the lightly explored Cheal acreage area.
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