TAG Oil Outlines FY2015 Operational Plans for its New Zealand Assets
TAG Oil Ltd. reported Wednesday its operational plans for the Company’s 2015 fiscal year (April 1, 2014 to March 31, 2015), and to provide an operations’ update on current activities in New Zealand.
Operational Plans and Capital Budget
TAG’s capital budget for fiscal year 2015 is $55 million (CAD 60 million); funded entirely by forecasted cash flow and working capital on hand. The capital budget spend will focus on three key components: low-risk shallow development drilling, high-impact deep and offshore drilling in the Taranaki Basin, and the fractured source rock prospects on the East Coast.
TAG’s goal for the 2015 fiscal year capital program is to create shareholder value from three core areas:
- Unlock the major undiscovered resource potential by confirming unconventional commerciality from the fractured source rocks of the East Coast Basin
- Grow baseline reserves, production, and cashflow in Taranaki via low-risk shallow development drilling; and
- Pursue high-impact exploration on deep Kapuni Formation and Offshore prospects in Taranaki
Cash Flow & Production Guidance
TAG’s premium pricing for its oil (Brent benchmark), combined with low operating costs, allows for a higher cash flow from production operations than what is often achieved by North American producers. TAG estimates cash flow from operations of approximately $40 million, with production averaging approximately 2,000 barrels of oil equivalent per day (boepd) net to TAG for fiscal year 2015 with oil contributing 80 percent to daily production estimates. This guidance is based on TAG’s shallow development wells and existing production: additional success on the Company’s current and ongoing exploration programs could have significant impact on this guidance.
TAG’s current average daily production is approximately 2,000 boepd (1,800 boepd net to TAG) with 75 percent of the production being oil. It is expected that current production levels can be maintained within a 15 percent window of the present production during the year, based on established decline rates and the Company’s intended 2015 shallow Taranaki development drilling program. At the present time, TAG has identified more than 50 shallow, low risk development drilling locations on the Company’s Taranaki acreage, which is a five year inventory based on the current pace of drilling.
This guidance assumes initial production rates of 150 barrels of oil plus 50 boepd of gas in seven new shallow Taranaki wells to be drilled. This guidance also estimates commodity prices of $106.00 per barrel based on Brent pricing and $5.40 per MMcf (million cubic feet) for natural gas. An exchange rate of CAD 1.10 to $1.00 and CAD 0.935 to NZD 1.00 is also assumed.
Taranaki Deep Drilling Program
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