TAG Encouraged by Results at NZ Oil Shale Prospect

TAG Oil announced that the first stratigraphic well in TAG's initial three-well Waitangi Hill program has been drilled to a total depth of 171m. The results, including "free oil" in core samples, further indicate Waitangi Hill as an area of active oil and gas generation and expulsion. The Waitangi Hill-2 well is located within TAG's 530,000-acre permit area in the northern East Coast Basin of New Zealand, where TAG is pursuing both conventional and unconventional fractured oil shale prospects.

The objective of these Waitangi Hill stratigraphic wells is to begin collecting the modern data needed to enhance the Company's ability to appraise a conventional development of the historical Waitangi Hill shallow oil discovery, and more importantly, to further assess the viability of the underlying Waipawa Black Shale and Whangai Shale source rock formations as unconventional targets.

TAG Oil Chief Executive Officer Garth Johnson commented, "We are extremely encouraged by the positive results of this well, which has now proven the Waitangi Hill area has an active light oil and gas generating system in place. It has further de-risked and validated the prospectivity and significant potential of the underlying unconventional fractured oil shale play."

The Waitangi Hill-2 well experienced a strong "oil-wet" gas kick combined with significant pressure at 149m, which was addressed prior to continuance of drilling. Drilling then continued to 171m, where a conventional sandstone reservoir was encountered and core was retrieved that exhibited streaming "free oil."

Considering the significantly pressured "oil-wet" gas kick encountered and the core confirmation of light gravity oil generation at this location, the well was suspended at 179m for safety reasons. Gas, oil and core samples retrieved while drilling have been sent to labs for further analysis prior to planning the next two Waitangi Hill wells, which will use equipment more capable of handling these anomalously pressured shallow oil and gas zones.

"At each stage of exploration thus far, we have continued to confirm the key attributes that support a significant unconventional oil-shale play within the Waipawa Black Shale and Whangai Shale source rocks," Mr. Johnson further commented.

Key Attributes of the Waipawa Black Shale and Whangai Shale Source Rocks:

  • High-quality light sweet crude has been generated and is being expelled;
  • The 50-degree API oil has been geochemically typed to these shales;
  • The shales are naturally-fractured; they are mature; and they are accessible at shallow depths due to recent uplifting;
  • A smectite-rich clay formation located immediately above the shales exhibits all the attributes of a competent seal;
  • Over-pressures have been noted in the East Coast Basin due to both competent seals and rapid uplift in this area;
  • Oil and gas seeps throughout TAG's 2.4 million acres confirm the Waipawa Black Shale and Whangai Shale formations are widespread.

"We are pursuing the unconventional fractured oil-shale play through phased operations designed to de-risk the play safely and cost-effectively," Mr. Johnson added.