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Tag Oil's New Pipeline Almost Ready To Add Revenue And Reduce Costs

|Includes: TAG Oil Ltd. (TAOIF)

TAG Oil's new pipeline almost ready to add revenue and reduce costs.

A pipeline linking TAG Oil's Cheal-E development area to its main Cheal-A production infrastructure is almost operational.

TAG (NYSE:TAO) (OTCQX:TAOIF), which led the US$3.3 million project, said the pipeline is on budget and ahead of schedule.

Over the next week, the pipeline will move into the commissioning phase after which a three-phase well stream of fluids (oil, gas and water) will be processed through the Cheal-A site production facility said Tag in a statement.

"The new pipeline is an important addition to TAG's overall infrastructure in the Taranaki region…..and allows us to significantly reduce operating costs even while generating additional revenues, and it gives us the ability to quickly monetize future oil and gas wells drilled in the Cheal-E development area," said TAG Oil's New Zealand Country Manager, Max Murray.

TAG is a Canadian-based, development-stage oil and gas company with extensive operations-including production infrastructure-in the Taranaki region of New Zealand. TAG is debt-free and reinvests its cash flow into development and step-out drilling along trend with the Company's existing production.

An 11 kV HV electrical cable and a fibre optic cable have also been installed to improve the power supply and communications between the Cheal-E and the Cheal-A production sites.

"Along with the benefits of increased production revenue from the sale of gas, we are very pleased to eliminate the need to flare the solution gas at Cheal-E onsite," said Murray.

In the first half of April, Cheal produced 1,970 BOE/d (net), an increase of 127 BOE/d (net) over March production.

TAG says that the Cheal oil and gas field, with its long life reserves, will help to sustain drilling and completion costs. These are already on the low side at under US$3 million per well, suggesting just how much upside and economic potential exists within TAG's acreage.

TAG plans to fully develop the Cheal field with its 36 wells drilled to date and where permit-wide 3D seismic coverage has shown that the permit area has over 70 identified and high graded areas.

The Cheal field oil field also contains the Cardiff structure of the deeper Kapuni Group formations, which is geologically similar to the large legacy deep gas condensate fields of the Taranaki Basin.

Disclaimers:

Netbacks:

TAG Oil's netback is the operating margin that it receives from each BOE sold. The method of calculation that was used to determine the netbacks that are disclosed in this release were calculated by subtracting TAG Oil's royalty, transportation, storage and production costs from its revenues.

BOEs:

TAG Oil has adopted the standard of six thousand cubic feet of gas to equal one barrel of oil when converting natural gas to "BOEs." BOEs may be misleading, particularly if used in isolation. A BOE conversion ratio of 6Mcf: 1 Bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.

 

Cautionary Note Regarding Forward-Looking Statements:

Statements contained in this news release that are not historical facts are forward-looking statements that involve various risks and uncertainty affecting the business of TAG. Such statements can be generally, but not always, be identified by words such as "expects", "plans", "anticipates", "intends", "estimates", "forecasts", "guidance", "schedules", "prepares", "potential" and similar expressions, or that events or conditions "will", "would", "may", "could" or "should" occur. All estimates and statements that describe the Company's objectives, goals, forecasts, guidance, production rates, test rates, optimization, timing of operations, increased pace of drilling, statements regarding prospects being drill ready and/or future plans with respect to the drilling and field optimization work in the Taranaki Basin are forward-looking statements under applicable securities laws and necessarily involve risks and uncertainties including, without limitation: risks associated with oil and gas exploration, development, exploitation and production, geological risks, marketing and transportation, availability of adequate funding, volatility of commodity prices, environmental risks, competition from other producers, and changes in the regulatory and taxation environment. Actual results may vary materially from the information provided in this release, and there is no representation byTAG Oil that the actual results realized in the future would be the same in whole or in part as those presented herein.

 

Other factors that could cause actual results to differ from those contained in the forward-looking statements are also set forth in filings that TAG and its independent evaluator have made, including TAG's most recently filed reports in Canada under NI 51-101, which can be found under TAG's SEDAR profile at www.sedar.com. TAG undertakes no obligation, except as otherwise required by law, to update these forward-looking statements in the event that management's beliefs, estimates or opinions, or other factors change.