TAG Oil Touts Taranaki Basin Results

TAG Oil Ltd. provided a Taranaki Basin drilling and operations update. This update is being provided prior to TAG's year-end results, which will include an independent assessment on proven, probable and possible reserves, and is expected to be announced on June 29, 2012.

Taranaki Basin Production

Current daily production is approximately 2,600 to 2,800 barrels of oil equivalent per day ("BOE"). The split between oil and natural gas is currently approximately 57 percent oil to 43 percent gas until such time as the enhancements to Cheal's artificial lift capabilities are completed, allowing oil currently held behind-pipe to flow.

There are currently 18 wells at the Cheal oil and gas field that are capable of production, eight of which are currently on-stream. In addition, TAG has two of the four commercial wells currently on-stream at Sidewinder. Once infrastructure upgrades have been fully completed, a minimum of ten more Cheal wells and two additional Sidewinder wells will be placed into full-time production. In addition, results from TAG's ongoing drilling program and a number of workover operations are expected to contribute to future increases in production.

Because of the lightly explored nature of TAG's Taranaki Basin fields, it is difficult to accurately estimate future daily production. TAG is confident however, that with twelve successful wells already drilled with behind-pipe production awaiting tie-in, daily oil and gas production will increase to more than 5000 BOE per day over the next six to nine months, with potential to exceed that estimate depending on well performance, the outcome of additional development drilling, exploration drilling and workover operations.

Sidewinder and Cheal Drilling Program


Electric logs indicate economic oil-and-gas pay in the recently drilled Cheal-C3 well consistent with other wells drilled in the Cheal "C" block. Cheal-C3 recorded a total of 57.4 feet (17.5 meters) of pay including 21.3 feet (6.5 meters) of pay within the Urenui Formation and 36 feet (11 meters) of pay in the Mt. Messenger Formation. It is important to note that Cheal-C3 was drilled updip of the Cheal-C2 gas/condensate discovery, and continues to extend the known oil and gas saturation area in this new discovery site. The Cheal-C2 discovery well achieved initial flow rates of approximately 14 million cubic feet of gas per day (~2,333 BOE per day), and with associated condensate production. Completion and testing operations of Cheal-C3 will be conducted in the near future.


Drilling is presently underway at the Cheal-C4 location, which is the first down-dip follow-up well to the Cheal-C1 oil discovery announced on December 8, 2011. It is estimated that Cheal-C4 will reach total depth on or about June 27, 2012.

Cheal-A11 and Cheal-A12:

TAG intends to drill the Cheal-A11 and A12 wells at the Cheal-A site as follow-ups to the recent success of the Cheal-A8, Cheal-A9 and Cheal-A10 wells. These wells will be drilled back-to-back once TAG and Webster Drilling's VR500 Nova-1 rig has been released from drilling the Cheal-C4 well.

Sidewinder-5 and Sidewinder-6:

On June 6, 2012 TAG received consent from the New Plymouth District Council (NPDC) to drill four new wells within TAG's 100 percent-owned Sidewinder Oil and Gas Field in New Zealand. The final decision granting consent in support of TAG's drilling operations was handed down after affected landowners requested a hearing. The consent grant is subject to an appeal process however if an appeal is not filed, TAG plans to resume drilling operations at Sidewinder. This drilling at Sidewinder will represent the first wells drilled since the four Sidewinder oil and gas discovery wells were drilled in 2010 and 2011.

In the event these Sidewinder wells become temporarily delayed due to an appeal, TAG plans to move the Nova-1 drill rig to the Cheal-B site and spud the Cheal-B8 well which would be the third well drilled targeting similar geological characteristics as the high-deliverability Cheal-B5 and Cheal-B7 oil wells.

Testing and Workover Operations

TAG has contracted the Ensign-6 service rig to carry out a number of operations that will begin on or about July 1, 2012 as follows:

  • The Cheal-B5 and B7 wells will have workovers conducted to install permanent artificial lift allowing TAG to place the wells on full time, stabilized production. These wells are currently producing naturally, without the aid of any artificial lift, at approximately 900 BOE per day combined. It is estimated with artificial lift the two wells can produce approximately 1,500 BOE per day, (predominately oil);
  • Complete and test Cheal-C3, where 57.4 feet (17.5 meters) of oil and gas pay was intersected;
  • Complete and test Cheal-C4 as necessary;
  • Complete and test Cheal-A11, A12, Sidewinder-5, Sidewinder-6 and Cheal-B8 as necessary;
  • Additional Sidewinder compression is expected to increase field production to approximately 10 million cubic feet of gas per day (1,667 BOE per day) in the near future;
  • Recomplete Cheal-A2 and Cheal-A4 to convert these two wells into a water flood scheme within the Cheal A-Pool. This operation is intended to increase recovery factors in the Cheal A pool by up to10-15 percent.

Production Infrastructure and Pipeline Upgrades

TAG's infrastructure program is progressing on time and on budget to ensure all of the facilities have excess capacity to handle both existing and future production capabilities. These Infrastructure enhancements are anticipated to include:

  • Tripling oil lifting capacity at Cheal;
  • Installation of gas processing facilities, including additional compression, to ensure gas meets New Zealand specification to allow for transportation and marketing in the open access pipeline system;
  • Construction of a gas plant at Cheal capable of stripping liquid hydrocarbons from Cheal gas;
  • Building the Cheal-C site oil battery to establish permanent production from recent Cheal-C site discoveries, as well as allow for future development of the area;
  • Adding new pipelines to tie the Cheal-C site to the Cheal-A site;
  • Add a new 19,685 feet (6,000 meter) pipeline to TAG's existing infrastructure from Cheal to New Zealand's open access gas transmission line to maximize marketability of TAG's gas production;
  • Establishing TAG as a third-party gas processor in the thriving Taranaki gas market.

TAG Oil CEO Garth Johnson, commented, "The execution of our business plan continues to drive positive results, as well as significant increases to shareholder value. I'm proud to report our Taranaki operations continue to hit all milestones and are all being completed on time and on budget. We plan to have our behind-pipe production unrestrained in the next six to nine months with substantial upside potential through further successful development and exploration drilling in our lightly explored Mining Licenses. With just 13 percent of our proven onshore Taranaki acreage assigned as reserves to date, we have many years of continued drilling ahead, both in the shallow formations where we're achieving strong success and in the deeper liquids-rich gas prospects, which will soon be scheduled for drilling. With growing cash flow and production, a strong balance sheet and a large inventory of high-impact exploration opportunities, TAG is well positioned to continue to achieve and grow."


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