TAG Oil Updates on Drilling at its Taranaki Basin Assets

Canada's TAG Oil Ltd. (the Company or TAG) provided Thursday the following exploration and development drilling update in both the shallow and deeper targets within the Taranaki Basin, New Zealand. As TAG enters calendar year 2014, the Company will be maintaining its strategy of deploying capital to high impact exploration targets while developing shallow reservoirs to provide sustainable capital for continuous exploration activities.

Deep / Eocene Exploration Taranaki Program (TAG 100 percent)

TAG is pleased to announce the Cardiff-3 well in Petroleum Mining Permit (PMP) 38156 targeting the Eocene-aged Kapuni Formation reached Total Depth of 15,954 feet (4,863 meters) in December, fully penetrating and evaluating all three deep target zones as planned; the well took longer to drill than anticipated due to encountering thick coal sections in the Eocene-aged Mangahewa Formation.

Condensate-rich gas shows were recorded in all three target zones within the Kapuni Formation and as a result TAG is casing the well to total depth and will pursue a completion and testing program. Evaluation will begin with perforation and, if necessary, hydraulic stimulation of the deepest targeted prospect, the Kapuni K3E zone. Following evaluation of the K3E zone, the shallower K1A and Mckee Sand zones will be evaluated and a decision will then be made on an
overall production strategy. In total TAG encountered over 754 feet (230 meters) of potential net pay over the three target zones to be evaluated.

TAG COO Drew Cadenhead commented; “Significant data collected during the drilling operation is encouraging, and we will now move on to flow-testing which is the only definitive way to evaluate commercial success in these condensate rich tight-gas plays. This next stage of evaluation will occur throughout the next few months.”

Shallow / Miocene Development Taranaki Program

Cheal-E Site (TAG 70 percent)

TAG successfully completed its initial five well drilling program at the Cheal-E Site in mid-December. Cheal-E1 has been naturally flowing through a 17/64” choke for 44 days and has produced at an average of 547 barrels of oil equivalent per day or boepd (88 percent oil), while Cheal-E4 has been naturally flowing through a 10/64” choke for 7 days and has produced an average of 315 boepd (87 percent oil). In aggregate Cheal-E1 and Cheal-E4 have produced more than 23,100 barrels of oil (26,400 barrels of oil equivalent or boe) to Jan. 7. Following perforation, Cheal-E2 and Cheal-E3 tested oil naturally to surface and will require artificial lift to maximize production as expected. This work, as well as the perforation and completion of Cheal-E5 will be initiated in the second half of January as equipment becomes available. As required work is completed, Cheal-E Site wells will be tied in for permanent production at TAG’s recently commissioned Cheal-E Site separation facilities.

Results of the Cheal-E drilling program have significantly extended the known oil and gas saturated area within TAG’s 100 percent owned Cheal Mining Permit discovery through to E-Site. Pending completion of the outstanding activities at E-Site and further analysis of all results, TAG feels there is potential for 15 to 20 follow-up locations in the newly awarded areas.

Joint venture partner East West Petroleum (30 percent interest) paid 100 percent of the first $4.6 million (CAD 5 million) in drilling costs of the first two Cheal-E wells and is entitled to recover the first $4.6 million (CAD 5 million) in revenue from Cheal-E Site sales, while also paying 100 percent of the costs to produce that revenue.


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