TAG Oil Sees Increase in Taranaki Reserves
TAG Oil reported that an independent assessment of reserves has been completed as of March 31, 2011 on TAG Oil's 100%-owned Cheal Mining Permit (PMP 38156) and Sidewinder Exploration Permit (PEP 38748), located in the Taranaki Basin, New Zealand. Sproule International Limited, one of Canada's largest petroleum engineering consulting companies prepared the report in accordance with definitions, standards and procedures contained in the Canadian Oil and Gas Evaluation Handbook (COGE Handbook) and National Instrument 51-101, Standards of Disclosure for Oil and Gas Activities.
The reserves reported for the 2011 fiscal year relate primarily to the Cheal oil and gas field due to fiscal year-end 2011 cut-offs required under NI-51-101. Due to the timing of operations occurring after March 31, 2011, the Sidewinder reserve assessment was completed with information related only to the Sidewinder-1 well and does not include the now-completed Sidewinder-2, Sidewinder-3 and Sidewinder-4 wells.
The assessment of reserves has assigned net proved and probable reserves ("2P") remaining of 1,360,000 barrels of oil (2010 = 651,000 bbls) and 1,864 million cubic feet ("mmcf") of associated gas (2010 = 258 mmcf). This reserves report, on a 2P basis, amounts to 1,677,000 barrels of oil equivalent ("BOE") assessed within a reserves area covering just 475 acres of the 7,487-acre Cheal permit and just 107 acres of the 7,910-acre Sidewinder permit.
After considering production during the 2011 fiscal year, the 1,677,000 BOE in proved and probable reserves represents a 221% increase over the March 31, 2010 year-end independent reserve assessment. The key factors for the increase in reserves for fiscal 2011 are as follows:
- One new well drilled and completed
- Establishment of commercial production from a bypassed discovery
- Increased recovery factors
- Upward revision to projected future well performance
During the 2011 fiscal year, TAG focused primarily on optimizing the production from the producing Cheal wells. This resulted in an increase in the recovery factors being assigned to the Mt. Messenger Formation. In addition, TAG was successful in establishing the first-ever commercial production from the bypassed Urenui Formation oil discovery, using two historical wells drilled at Cheal by the previous operator. Having successfully completed these operations, Cheal now produces from both the Urenui and Mt. Messenger Formations at approximate depths of 1400m (~4600 feet) and 1800m (~5900 feet), respectively.
TAG Oil's Chief Executive Officer, Garth Johnson, commented, "We are very pleased to follow fiscal 2010's reserve increase with another large increase in fiscal 2011, even after having produced ~160,000 barrels of oil during the year. This report has established initial reserves within the Sidewinder discovery area, where the majority of our operations occurred after year-end and could not be considered for fiscal 2011 reserves. The commercialization of the Urenui oil discovery has also allowed us to book initial reserves and is another low-risk opportunity to build reserves in Taranaki from this widespread formation identified at Cheal."
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