TAG Oil invests millions, seeing promise in Taranaki onshore prospects
A $25.7 million investment in Taranaki land shows promise in oil and gas.
Canada-based TAG Oil has announced a capital expenditure of C$27.4m (NZ$28.9m) on exploration, production and work-over projects during the 2018 fiscal year.
While about C$3m (NZ$3.16m) will be spent in Australia on seismic surveying, the onshore Taranaki operation plans to explore five wells in the Inglewood and Stratford areas, New Zealand country manager Max Murray said.
"The bulk of it (investment) will be exploration in Taranaki," he said. "Drilling these wells means we're meeting our work obligations and we like what we see."
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Of the five wells to be explored will be the Pukatea-1, which is located within the Puka prospect and planned to commence drilling in June.
The Pukatea prospect is a high impact exploration opportunity and will target Tikorangi Limestone, Murray said.
The prospect, which is jointly owned (30 per cent) with Melbana Energy Ltd (MEO) Australia, promises an estimate 1.3 to 40m barrels, with an optimistic estimate of 12.4m barrel of oil equivalent (boe).
TAG said the chance for success sits at 19 per cent.
"The Pukatea prospect is proximal to existing infrastructure and has several low-cost alternative development paths," the company said.
The Douglas-1, an adjacent Tikorangi Limestone formation, has produced more than 23 million barrels of oil.
While global oil prices have caused some companies to pause production or divest completely, TAG has pushed forth.
Daunting oil prices has forced the company to lower production costs and increase reserve and production growth through work-overs, TAG said.
"We remained conservative, but as oil sentiment shifts into high gear, we're more than ready to get back to exploring," the company said.
And Murray said the company had work obligations to meet.
He explained when the Crown grants a permit, under the Crown Minerals Act 1991, exploration and prospects become a requirement.
"You have to make a decision and look to 12 months in the future and make a call."
But there's been a shift. Interest in offshore exploration has waned and interest in land-based exploration has grown.
Last year, the company and their partners New Zealand Oil and Gas had surrendered their drill permit for the proposed Kaheru-1 well, which was about 12 kilometres offshore Patea.
However TAG has turned around and bid for blocks on Taranaki land.
Murray said the company had been awarded five acreage in three different blocks and only good things were to come.
"It will have a direct impact on the community," he said.
Though next year's workload will increase, no new jobs would be on offer.
The company estimates an annual revenue to be about C$28m (NZ$29.5), with production pulling in about 1400 b/d, and expects to increase production to 19000 boe/d by March 2018.
Of this, 75 per cent would be oil.
"TAG currently has a break-even point of US $34 per barrel," the company said.
"With Brent crude sitting at an average of $55 a barrel this year, we're doing ok."