Tag Oil lucky in Taranaki

JAMES WEIR
Last updated 05:00 03/07/2012

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Small oil company Tag Oil is growing up fast in Taranaki, with proven and probable reserves up 300 per cent to more than 6.6 million barrels of oil.

Production revenues from its Taranaki wells jumped from C$13m to C$43m in the latest year. The company has its headquarters in Vancouver, Canada.

Tag said net income was almost C$19m in the past year compared with just under C$1.3m in the previous year. It has now drilled 15 successful wells in a row in Taranaki. Once it has upgraded its production facilities, as well as more production from new wells drilled, Tag Oil will be poised to increase its Taranaki oil and gas production to the equivalent of more than 5000 barrels a day.

Tag also plans to drill up to another 30 shallow prospects in Taranaki, at a cost of $2m to $3m each, at its Sidewinder and Cheal permits. Deeper gas wells would cost up to $10m each, targeting the Cardiff and Hellfire prospect.

The company is now debt free with about C$105m in cash on the balance sheet, in part from a share issue to raise about C$46m.

In its March-year report, Tag Oil said proven and probable reserves had risen from 1.68 million boe last year, to 6.624m boe this year, with 82 per cent of that in oil and the balance in gas.

Tag's shares last traded at C$7.37 on the Canadian market, up 15 per cent, but down from a recent peak above C$10 a couple of months ago.

The latest reserves assessment is confined to shallow formations in Taranaki at less than 2000 metres deep, within just 24 per cent of Tag's Cheal acreage and only 2.5 per cent of Tag's Sidewinder acreage.

The reserves don't include "higher impact", deep liquids-rich gas prospects Tag planned to drill in the next year.

That includes deep gas plays such as Cardiff and Hellfire, with an independent "resource" potential estimated by Sproule International to contain undiscovered gas and condensate in Cardiff alone of 214.5 BCF and 12.8m barrels of oil respectively.

Early in June, Tag received consent to drill four new wells within its Sidewinder permit, which was appealed against by one opponent, and could take up to six months to resolve.

Earlier last year, Apache Corporation agreed to spend up to C$100m to carry out exploration and possible development in the East Coast Basin, in conjunction with Tag.

The partners have done 2D seismic testing on the East Coast and are now consulting local groups about the planned drilling of four wells targeting the Whangai and Waipawa source rocks.

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- BusinessDay.co.nz

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