Tag Modifies February Drilling Schedule

Tag Oil Ltd. announced on January 10, 2007, that the Ratanui-1 well, located in PEP 38741 onshore Taranaki (TAG 45%) is scheduled for a February spud date using Ensign Drilling Rig #19 and that the Kate-1 exploration well in PEP 38260 in onshore Canterbury, New Zealand is expected to commence a drilling program this month. While the Ratanui-1 well is currently being drilled to reach total depth, the Kate-1 exploration well will no longer be drilled by Tag.

Tag's partner in the Kate drilling, New Zealand-based Green Gate Limited, has purported to cancel its Agreement with Tag and revoke Tag's authority to explore in the permit area, claiming Tag is in default of its obligations. These claims have not been substantiated and are strongly disputed by Tag, who is taking legal advice and is considering its options.

Tag said that it has at all times been prepared to honor its obligations under its Agreement with Green Gate, and has already completed all necessary seismic work and arranged drilling contracts and pre-drilling construction work. Nevertheless, as a result of the circumstances, Tag's management has been forced to not execute a drilling contract it was about to sign for the drilling of Kate, to avoid exposure to substantial drilling penalties under such contract if the Kate drilling program was not completed as scheduled.