NZ-Focused TAG Oil Cuts Capex for Rest of FY16 Due to Low Oil Prices
New Zealand-focused TAG Oil Ltd. disclosed Wednesday that it is cutting its forward guidance and planned capital expenditures for the remainder of fiscal 2016 in response to the low commodity price environment, and due to a slower than expected ramp up of our workover program in the Taranaki Basin of New Zealand. TAG will focus on preserving capital, continuing with a reduced workover program and reducing costs.
Guidance and Outlook for the Remainder of Fiscal Year 2016
- TAG is reducing its 2016 average production guidance down from 1,900 barrels of oil equivalent per day (boepd) to 1,400 boepd and expects to exit its fiscal 2016 year-end at approximately 1,400 boepd
- TAG is reducing its 2016 forecast capital expenditures down from $17.8 (CAD 23 million) to approximately $10 million (CAD 13 million) with $4.6 million (CAD 6 million) already spent
- Full year 2016 operating cash flow is expected to be approximately $10 million (CAD 13 million) versus the $17 million (CAD 22 million) forecast at the beginning of the year
- TAG is now budgeting and running all of its economics based off of a $45 per barrel Brent oil price for the remainder of the fiscal year
- TAG will continue to focus on lower cost workovers, artificial lift optimization and re-perforations of certain intervals. To preserve capital, these programs have been prioritized over drilling new wells. Additional programs will include a water-flood pilot study
- TAG expects to end fiscal 2016 with at least $11.6 million (CAD 15 million) in cash and cash equivalents assuming $45 per barrel Brent oil price for the remaining six months of operations
Current Production, Cash Balances and Planned Activity
TAG currently has $14.7 million (CAD 19 million) in cash and cash equivalents and $17.8 milllion (CAD 23 million) in working capital at Oct. 14, with no debt and 62,239,052 common shares outstanding.
Average net daily production is currently 1,300 boepd (75 percent oil).
In order to meet TAG’s revised goals for fiscal 2016 TAG recently commenced a portion of the multi-well workover program with the Rival-1 service rig. Results include:
- The workover program commenced on July 17 to return the Cheal-A1 rod pump well to production. The workover was successfully completed and restored approximately 50 boepd of production
- The A12 well is expected back online within the next 10 days and is forecast to resume producing 70 boepd
- The workover rig recently finished up at Cheal B5 and TAG expects to restore 90 boepd back on production in the next few weeks. The rig is expected to resume operations in November to workover several additional Urenui and Mt. Messenger wells
TAG recently completed surface casing repairs on two wells to ensure continued safe operations going forward. In addition, TAG expects to optimize its artificial lift (pumping) at Cheal E during 3Q, to perforate some bypassed pay, and to re-perforate several zones of interest in the Urenui and Mt. Messenger Formation.
TAG will continue to focus on the following goals during the remainder of the 2016 fiscal year:
- Maintain baseline reserves, production, and cash flow in the Taranaki Basin via low-risk workovers and re-completion of bypassed zones in existing wells
- Seek partners to joint venture or farm-out a significant portion of the Kaheru joint venture acreage in the Taranaki Basin
- Obtain joint venture partners for the East Coast and Canterbury acreage, or relinquish if unsuccessful
- Identify and hire a new Chief Operating Officer to assist in guiding our operational team through pressure maintenance and water-flood programs, and other operational matters
Despite lower oil prices and a reduced appetite for risk in global equity markets, TAG Oil is financially strong and well positioned for the future.
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