Vancouver, B.C. – August 17, 2015 – TAG Oil Ltd. (TSX: TAO) and (OTCQX: TAOIF), is pleased to report the first quarter results for the fiscal year ending March 31, 2016. The Company achieved revenue of $10.4 million during the quarter, a 7% increase compared to $9.7 million for the previous quarter ended March 31, 2015.
Changes in the economic climate and low oil prices over the last year have brought about a shift in TAG’s near and long-term focus towards low-risk, low-expenditure, in-field production optimization opportunities that have been identified to increase production. As a result, TAG Oil continues to focus its operations on developing oil and gas production from its core Taranaki Basin fields, which have proven over an extended period of years to consistently generate solid production performance. The shallow Miocene oil development portion of this field has been substantially de-risked through extensive 3-D seismic coverage and the drilling of 36 wells to date.
TAG’s focus on reducing costs also includes farming out higher risk prospective acreage or entering joint ventures where appropriate, to ensure TAG Oil remains financially strong and well positioned to navigate the current low oil price environment.
Toby Pierce, TAG Oil’s CEO commented, “Despite a weak oil price market, our Q1 results were slightly ahead of expectations and we continue to maintain cash flow positive operations. Going forward, we expect Q2 revenues and cash flow to be below expectations due to lower oil prices, as well as some lower production numbers. The lower production is due to several wells that are offline, and we’ve shut in a moderate amount of production for safe operations while conducting our workover program.”
Pierce continued, “As we focus on our workover program over the next several months we expect production to increase into Q3 and Q4. Further, Q2 pricing has been below our forecasted US$60 per barrel Brent price so we have made the decision to defer some of the larger capital expenditures until later in the year and/or until we see better oil pricing. Overall, TAG is in an excellent position to weather this downturn and I continue to gain confidence in both the strength of the assets and the recovery of the oil markets. Finally, I would like to take this opportunity to thank the TAG Oil team for their continued safe operations and hard work over the last quarter.”
FIRST QUARTER FINANCIAL AND OPERATING HIGHLIGHTS
- TAG had $20.5 million in cash and cash equivalents and $26.1 million in working capital at June 30, 2015, with no debt and 62,314,052 common shares outstanding.
- Average net daily production decreased by 8% for the quarter to 1,689 BOE/d (73% oil) from 1,837 BOE/d (77% oil) for the previous quarter ended March 31, 2015.
- Total revenue increased by 7% for the quarter to $10.4 million from $9.7 million for the previous quarter ended March 31, 2015.
- Operating netbacks increased for the quarter to $35.61 per BOE from $33.46 per BOE for the quarter ended March 31, 2015.
- Cashflow provided from operating activities decreased by 38% for the quarter to $3.3 million from $5.3 million for the quarter ended March 31, 2015.
- On May 12, 2015, TAG announced the appointment of Mr. Frank Jacobs as its Chief Operating Officer.
- On May 16, 2015, the Cheal E to A pipeline was commissioned and exported gas to the market 29 days ahead of schedule. During the quarter the pipeline has moved an average of ~1.5 MMSCFD (1.1 MMSCFD net to TAG) of gas to Cheal A-Site for further processing and sales. The pipeline allows TAG to significantly reduce operating costs while generating additional revenues, giving TAG the ability to quickly monetize future oil and gas wells drilled in the Cheal E-Site development area.
- On June 1, 2015, TAG announced the appointment of Mr. Toby Pierce as its Chief Executive Officer and a Director.
- On June 16, 2015, TAG announced the appointment of Mr. Henrik Lundin as a Director.
- Capital expenditures totaled $2.9 million for the quarter compared to $10.5 million for the quarter ended March 31, 2015.
RECENT DEVELOPMENTS
- In order to meet TAG’s goal for fiscal 2016 with production averaging 1,900 BOE/d (BOE/d: 77% oil), TAG has recently commenced a multi-well workover program with the Rival-1 service rig that aims to restore production and to add production from by-passed zones.
- The workover program commenced on July 17, 2015 to return the Cheal-A1 rod pump well to production. The workover was successfully completed and restored approximately 50 BOE/d of production. The rig was subsequently mobilized on July 27, 2015 to commence the Cheal-E5 workover.
FINANCIAL RESULTS SUMMARY
|
|
2016 2015 |
2014 |
||||||
|
Canadian $000s, except per share or BOE |
Q1 |
Q4 |
Q3 |
Q2 |
Q1 |
Q4 |
Q3 |
Q2 |
|
Net production volumes (BOE/d) |
1,689 |
1,837 |
1,991 |
1,845 |
1,750 |
1,486 |
1,527 |
2,100 |
|
Total revenue |
10,385 |
9,705 |
12,282 |
16,179 |
15,571 |
14,025 |
12,939 |
15,885 |
|
Operating costs |
(5,562) |
(5,281) |
(5,806) |
(6,213) |
(5,721) |
(5,706) |
(4,579) |
(4,826) |
|
Foreign exchange |
553 |
757 |
(344) |
1,206 |
(312) |
2,246 |
(167) |
(1,012) |
|
Share-based compensation |
(896) |
(380) |
(586) |
(356) |
(44) |
(175) |
(377) |
(559) |
|
Other costs |
(6,165) |
(7,120) |
(6,490) |
(5,669) |
(5,804) |
(4,663) |
(4,830) |
(5,914) |
|
Exploration impairment |
(715) |
(71,714) |
– |
– |
– |
101 |
(15) |
(1,132) |
|
Property impairment |
– |
(9,182) |
– |
– |
– |
– |
– |
– |
|
Net (loss) income before tax |
(2,400) |
(83,216) |
(944) |
5,147 |
3,690 |
5,828 |
2,971 |
2,412 |
|
Basic (loss) income $ per share (BT) |
(0.04) |
(1.30) |
(0.01) |
0.08 |
0.06 |
0.09 |
0.05 |
0.04 |
|
Diluted (loss) income $ per share (BT) |
(0.04) |
(1.30) |
(0.01) |
0.08 |
0.06 |
0.09 |
0.05 |
0.04 |
|
Capital expenditures |
2,916 |
10,465 |
16,655 |
11,126 |
11,370 |
22,767 |
20,959 |
14,466 |
|
Operating cash flow (1) |
3,066 |
2,826 |
3,968 |
9,702 |
7,715 |
6,774 |
6,101 |
8,562 |
(1) Operating cash flow is a non-GAAP measure. It represents cash flow from operating activities before changes in working capital
OIL AND NATURAL GAS PRODUCTION PRICING AND REVENUE
|
|
2016 Q1 |
2015 Q4 |
2015 Q1 |
|
Daily production volumes (1) |
|
|
|
|
Oil (bbl/d) |
1,234 |
1,422 |
1,296 |
|
Natural gas (BOE/d) |
455 |
415 |
454 |
|
Combined (BOE/d) |
1,689 |
1,837 |
1,750 |
|
% of oil production |
73% |
77% |
74% |
|
Daily sales volumes (1) |
|
|
|
|
Oil (bbl/d) |
1,250 |
1,415 |
1,282 |
|
Natural gas (BOE/d) |
254 |
157 |
202 |
|
Combined (BOE/d) |
1,504 |
1,572 |
1,484 |
|
Natural gas (Mcf/d) |
1,522 |
942 |
1,213 |
|
Product pricing |
|
|
|
|
Oil ($/bbl) |
74.94 |
63.94 |
118.57 |
|
Natural gas ($/Mcf) |
3.47 |
6.14 |
4.93 |
|
Oil and natural gas revenues (3) – gross ($000s) |
9,006 |
8,660 |
14,375 |
|
Oil & natural gas royalties (2) |
(805) |
(687) |
(1,275) |
|
Oil and natural gas revenues – net ($000s) |
8,201 |
7,973 |
13,100 |
(1) Natural gas production converted at 6 Mcf:1BOE (for BOE figures)
(2) Includes a 7.5% royalty related to the acquisition of a 69.5% interest in the Cheal field
(3) Oil and Gas Revenue excludes electricity revenue related to Coronado Resources
OPERATIONS UPDATE AND OUTLOOK FOR FISCAL YEAR 2016
TAG will focus on the following goals during the 2016 fiscal year:
- Grow baseline reserves, production, and cash flow in the Taranaki Basin via low-risk workovers and re-completion of bypassed zones in existing wells, deploying enhanced oil recovery techniques across producing acreage, as well as performing ongoing shallow development drilling;
- Evaluate acquisitions in New Zealand and the rest of Australasia to increase the Company’s portfolio of exploration and production opportunities;
- Seek potential joint venture or farm-in partners to help pursue high-impact exploration and establish production within the deeper Kapuni Formations in the Taranaki Basin; and
- Seek partners to joint venture or farm-out a significant portion of the Kaheru joint venture acreage in the Taranaki Basin.
TAG can internally fund its adjusted 2016 fiscal year capital expenditure program of CDN$23 million. The Company estimates fiscal year 2016 cash flow from operating activities of approximately CDN$22 million (based on US$60 per barrel Brent price), with production averaging approximately 1,900 BOE/d. This guidance is based on TAG’s shallow development wells and existing production; additional success associated with the Company’s current and ongoing exploration programs could have a positive impact on this guidance. At the same time, TAG continues to focus on the future and will:
- Continue to progress its development, exploration program and workover prospects;
- Focus on its shallow Taranaki drilling program to grow production;
- Deploy enhanced oil recovery and artificial lift techniques in the Cheal mining license;
- Review potential acquisitions of overlooked/undervalued opportunities in New Zealand;
- Continue to assess acreage growth via the New Zealand Government’s blocks offer program;
- Consider select opportunities for international expansion in Australasia; and
- Manage its capital and balance sheet as effectively as possible while focusing on shareholder returns.
Despite lower oil prices and a reduced appetite for risk in global equity markets, TAG Oil is financially strong and well positioned for the future.
About TAG Oil Ltd.
TAG Oil Ltd. (https://tagoil.com/) is a Canadian-based development-stage oil and gas company with extensive operations, including production infrastructure, in the Taranaki region of New Zealand. As one of New Zealand’s leading operators, TAG is poised for long-term, reserve-based growth, and is positioned with attractive exploration activities in the lightly explored Taranaki Basin discovery fairway. As a low cost, high netback oil and gas producer, TAG is debt-free and reinvests its cash flow into development and step-out drilling along trend with the Company’s existing production.
For further information:
Ashley Garnot, General Manager
Phone: 1-604-682-6496
Email: [email protected]
Website: https://tagoil.com/
Blog: www.tagoil.com/media-center/tag-oil-blog/
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, identified by words such as “expects,” “plans,” “anticipates,” “intends,” “estimates,” “forecasts,” “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 growth in baseline reserves, future guidance on production and cashflow, expected results of development drilling, resource potential, new production and discoveries and other objectives, goals, production rates, test rates, hydraulic fracture operations, optimization, infrastructure capacity, timing of operations, work-over results, and or future plans with respect to the drilling at TAG’s various permits in the Taranaki, Canterbury and East Coast Basins 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 by TAG 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.