TAG cuts loss

Friday, 30 July 2010 Neil Ritchie, New Zealand

NEW Zealand-focused Canadian company TAG Oil has reported a $C2.6 million ($A2.79 million) loss for the June 2010 financial year a vast improvement on the $C18.9 million loss recorded the year before.
Garth Johnson, chief executive of the Vancouver-headquartered company whose only producing asset is the onshore Taranaki Cheal oil field, describes the last financial year as one of significant value creation, growth and high-level achievement in all areas of the company. More importantly, the series of transformational acquisitions completed during fiscal 2010 set the foundation for rapid growth, and has placed TAG into a new tier of emerging international companies, he added.
The Cheal oil field's The 2010 net loss consisted primarily of a write-off of $C1.4 million relating to production station shares in former Cheal field operator Austral Pacific Energy issued to TAG, along with cash, as part of an arrangement to settle a dispute during 2008 with the now bankrupt company.

TAG said highlights of the year included Cheal producing 67,525 net barrels of light oil that was sold at an average price of $C84.50 per barrel. Daily gross production averaged 323 barrels per day and 294 thousand cubic feet (Mcf) of gas per day. Current daily production is 414 barrels of oil and 667Mcf of gas. Revenue from Cheal increased from $C4,923,856 to $C6,527,585, with present production costs, of $C22 per barrel, markedly down on the $C34-plus per barrel of the 2009 financial year. Operating efficiencies continued to improve, and additional production from the recent field optimisation program would also reduce per-barrel production costs. TAG said that over 90% of the 300-hectare Cheal mining lease PMP 38156-S, which it now owns 100% following its buyout of Austral, remained lightly explored, adding low-risk opportunities for additional discoveries to be made. Numerous drill-ready prospects that have been identified on the permit-wide 3D seismic data have been prioritised for step-out drilling, the company said. Early testing of various downhole recovery technologies have already set the stage for boosting production and recovery from the current 9.55 million barrels of original oil in place. In addition, TAG acquired the remaining 66.67% interest, again from Austral, of the exploration lease PEP 38748 (Broadside) located on-trend within the onshore Taranaki Basin discovery fairway that also contains numerous low-risk, high-impact drilling prospects defined by a recent 3D seismic data. TAG said its second transformational move was the December takeover of fellow Canada-listed junior TransOrient Petroleum and that companys conventional prospects and unconventional oil shale prospects in the onshore East Coast Basin. During the 2010 fiscal year, TAG began appraising the historical Waitangi Hill shallow light oil discovery with a stratigraphic well test, with encouraging results. It was also awarded an extension that includes the remaining portion of the very large Kawakawa oil shale prospect. This acquisition further solidified TAG's position in this highly prospective unconventional frontier area, and will be one of several key areas of exploration drilling focus when TAG initiates its East Coast drilling campaign, the company said.

Johnson said TAG was financially strong, debt-free and with working capital of about $C26 million. TAG has 100 per cent interests in all of its assets and can control the process to drive reserve growth, and to exploit and unlock the potential identified within the companys acreage. In the short term, we are focused on building our production and profitability, and adding additional proven reserves in Taranaki. We are also preparing to initiate drilling operations and consider strategic initiatives to explore the major potential in the East Coast Basin in early 2011, targeting the conventional and unconventional prospects, he concluded.