Vancouver, B.C. – February 16, 2016 – TAG Oil Ltd. (TSX: TAO) and (OTCQX: TAOIF), is pleased to report the third quarter results for the fiscal year ending March 31, 2016, in which the Company was able to increase its average net daily oil production by 2% to 945 bbl/d from the previous quarter. This increase is primarily due to the Cheal-A1, B5 and B1 wells returning to production during the quarter following the completion of the workover program. Oil and gas production remains relatively stable following the quarter with average daily gross production having reached as high as 1,811 BOE/d (71% oil) in January, and has recently averaged above 1,500 BOE/d.
TAG continues to take steps towards more efficient operations, in light of the continued uncertainty in commodity prices, mainly by deferring the majority of its exploration focused capital program. TAG has also relinquished several existing permits that had either large commitments or were no longer core to the Company’s plan. In addition, management remains committed to reducing operating and administrative costs wherever possible.
Toby Pierce, TAG Oil’s CEO, commented, “Despite a very weak oil price in Q3, we managed to offset the drop in revenues somewhat through growth in production. We are planning minimal capex spend in Q4 and are now working on the budgeting process for next year. Our primary goal is to preserve our capital through the low oil price environment, and we are on track to exit fiscal 2017 with at least C$10 million in cash on hand. Our production has held up, but with much lower oil prices we expect Q4 revenues and cash flow to be lower. Further, with the significant drop in commodity prices our reserves will likely be materially lower this fiscal year as well. Despite this, I am very comfortable with our asset base, our portfolio of opportunities and our strong balance sheet. TAG is committed to protecting shareholder value and positioning the Company for the return of higher commodity prices. Finally, I’d like to thank our team for working safely and diligently with a limited budget and for focusing on reducing costs across the business.”
THIRD QUARTER FINANCIAL AND OPERATING HIGHLIGHTS
- At December 31, 2015, the Company had $15.9 million in cash and cash equivalents and $22.3 million in working capital.
- Average net daily production decreased by 6% for the quarter to 1,263 BOE/d (75% oil) from 1,341 BOE/d (69% oil) for the quarter ended September 30, 2015. A breakdown of net production is as follows:
- – Average net daily oil production increased by 2% to 945 bbl/d compared with 930 bbl/d for the previous quarter. The increase is primarily due to Cheal-A1, B5 and B1 wells returning to production during the quarter following the completion of the workover program.
- – Average net daily gas production decreased by 23% to 1.9 MMSCFD compared with 2.5 MMSCFD for the previous quarter. The decrease is primarily due to lower gas volumes from the Sidewinder mining permit (PMP 53803) due to the gas wells shut-in for extended build up.
- Due to the sale of the electricity generation business, the assets and liabilities relating to Opunake Hydro Limited (“OHL”), a wholly owned subsidiary of Coronado Resources Ltd. (“Coronado”), have been classified separately as assets or liabilities held for sale, with operating results classified as discontinued operations totalling a net loss for the nine months ended December 31, 2015 of $7.2 million. This includes revenue of $4.9 million, production costs of $5.1 million, other costs of $1.6 million and property impairment of $5.4 million.
- Revenue from oil and gas sales decreased by 11% for the quarter ended December 31, 2015 to $5.1 million from $5.7 million for the previous quarter. The 11% decrease is due to a 7% decrease in average Brent oil prices and 6% decrease in oil and gas sales volumes.
- Operating netback decreased by 31% for the quarter to $13.57 per BOE compared with $19.75 per BOE for the previous quarter. The decrease is attributable to the 7% decrease in average Brent oil prices and a 14% increase in production costs per BOE due to the repairs and maintenance workover of the Cheal-A1 well and operating costs associated with pressure data gathering in support of the pressure maintenance and water-flood program.
- Capital expenditures totalled $3.2 million for the quarter compared to $2.8 million for the previous quarter. The majority of the expenditure in Q3 2016 related to the workovers of the Cheal-B5 and B1 wells.
- On December 4, 2015, the Company submitted notice to New Zealand Petroleum and Minerals (“NZP&M”) of the surrender of PEP 38349 (Boar Hill). All associated costs related to the permit have been expensed as at December 31, 2015.
RECENT DEVELOPMENTS
- On February 5, 2016, the Company submitted notice to NZP&M of the surrender of PEP 38748 (Sidewinder B). All associated costs related to the permit have been expensed as at December 31, 2015.
FINANCIAL RESULTS SUMMARY
|
|
2016 2015 |
2014 |
|||||||
|
Canadian $000s, except per share or BOE |
Q3 (2) |
Q2 (2) |
Q1 (2) |
Q4 (2) |
Q3 (2) |
Q2 (2) |
Q1 (2) |
Q4 (2) |
|
|
Net production volumes (BOE/d) |
1,263 |
1,341 |
1,689 |
1,837 |
1,991 |
1,845 |
1,750 |
1,486 |
|
|
Total revenue |
5,078 |
5,713 |
9,006 |
8,660 |
11,333 |
15,008 |
14,375 |
12,896 |
|
|
Operating costs |
(3,607) |
(3,428) |
(4,133) |
(3,928) |
(4,790) |
(5,222) |
(4,630) |
(4,551) |
|
|
Foreign exchange |
(279) |
810 |
553 |
757 |
(344) |
1,206 |
(312) |
2,246 |
|
|
Share-based compensation |
(218) |
(403) |
(896) |
(380) |
(586) |
(356) |
(44) |
(175) |
|
|
Other costs |
(4,668) |
(4,495) |
(5,600) |
(6,654) |
(6,276) |
(5,605) |
(5,291) |
(4,797) |
|
|
Exploration impairment |
(2,104) |
(2,740) |
(715) |
(71,714) |
– |
– |
– |
101 |
|
|
Property impairment |
– |
– |
– |
(9,182) |
– |
– |
– |
– |
|
|
Net (loss) income from discontinued operations |
(6,472) |
(132) |
(615) |
(775) |
(281) |
16 |
(408) |
108 |
|
|
Net (loss) income before tax |
(12,270) |
(4,675) |
(2,400) |
(83,216) |
(944) |
5,147 |
3,690 |
5,828 |
|
|
Basic (loss) income $ per share (BT) |
(0.20) |
(0.08) |
(0.04) |
(1.30) |
(0.01) |
0.08 |
0.06 |
0.09 |
|
|
Diluted (loss) income $ per share (BT) |
(0.20) |
(0.08) |
(0.04) |
(1.30) |
(0.01) |
0.08 |
0.06 |
0.09 |
|
|
Capital expenditures |
3,266 |
2,755 |
2,916 |
10,465 |
16,655 |
11,126 |
11,370 |
22,767 |
|
|
Operating cash flow (1) |
(1,540) |
1,263 |
3,071 |
2,826 |
3,968 |
9,702 |
7,715 |
6,774 |
|
- Operating cash flow is a non-GAAP measure. It represents cash flow from operating activities before changes in working capital. See non-GAAP measures for further explanation.
- Due to the sale of the OHL business the operations are considered discontinued and results exclude the related electrical generation operating segments and are know included in net (loss) income from discontinued operations.
OIL AND NATURAL GAS PRODUCTION PRICING AND REVENUE
|
|
2016 |
2015 |
Nine months ended December 31, |
|||
|
Daily production volumes (1) |
Q3 |
Q2 |
Q3 |
2016 |
2015 |
|
|
Oil (bbl/d) |
945 |
930 |
1,543 |
1,036 |
1,426 |
|
|
Natural gas (BOE/d) |
318 |
411 |
448 |
395 |
437 |
|
|
Combined (BOE/d) |
1,263 |
1,341 |
1,991 |
1,431 |
1,863 |
|
|
% of oil production |
75% |
69% |
77% |
72% |
77% |
|
|
|
|
|
|
|
||
|
Daily sales volumes (1) |
|
|
|
|
|
|
|
Oil (bbl/d) |
922 |
958 |
1,536 |
1,043 |
1,422 |
|
|
Natural gas (BOE/d) |
256 |
300 |
208 |
270 |
195 |
|
|
Combined (BOE/d) |
1,178 |
1,258 |
1,744 |
1,313 |
1,617 |
|
|
|
|
|
|
|
|
|
|
Natural gas (MMcf/d) |
1,536 |
1,798 |
1,248 |
1,619 |
1,172 |
|
|
|
|
|
|
|
|
|
|
Product pricing |
|
|
|
|
|
|
|
Oil ($/bbl) |
52.94 |
56.89 |
77.29 |
62.84 |
100.36 |
|
|
Natural gas ($Mcf) |
4.16 |
4.22 |
3.60 |
3.97 |
4.55 |
|
|
|
|
|
|
|
|
|
|
Oil and natural gas revenues (3) – gross ($000s) |
5,078 |
5,713 |
11,333 |
19,797 |
40,717 |
|
|
Oil & natural gas royalties (2) |
(485) |
(484) |
(1,070) |
(1,773) |
(3,706) |
|
|
Oil and natural gas revenues – net ($000s) |
4,593 |
5,229 |
10,263 |
18,024 |
37,011 |
|
- Natural gas production converted at 6 Mcf:1BOE (for BOE figures).
- Relates to government royalties and includes an ORR of 7.5% royalty related to the acquisition of a 69.5% interest in the Cheal field.
- Oil and Gas Revenue excludes electricity revenue related to Coronado.
OPERATIONS UPDATE AND OUTLOOK FOR FISCAL YEAR 2016
TAG will continue to focus on the following goals during the remainder of the 2016 fiscal year:
- Maintain its baseline reserves, production, and cash flow in the Taranaki Basin via low-risk workovers and re-completion of bypassed zones in existing wells;
- Evaluate acquisitions in New Zealand and Australia to increase the Company’s portfolio of exploration and production opportunities;
- Seek partners to joint venture or farm-out a significant portion of the Kaheru joint venture acreage in the Taranaki Basin; and
- Identify and hire a new Chief Operating Officer to assist in guiding our team through a pressure maintenance and water-flood program and operational activities on the ground in New Zealand.
Going forward, TAG’s management will continue to focus on production, appraisal and exploitation, as well as maintaining a disciplined approach to exploration opportunities where appropriate. Management is prepared to adapt where necessary to changing commodity prices and shareholder appetite for risk. At the same time, TAG continues to focus on the future and will:
- Focus on its shallow Taranaki drilling program to grow production;
- Deploy enhanced oil recovery techniques in the Cheal mining licence;
- 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 remains financially strong and well positioned for the future.
About TAG Oil Ltd.
TAG Oil Ltd. (https://tagoil.com/) is a development-stage oil and gas company with extensive operations, including production infrastructure in the Taranaki Basin region of New Zealand. As one of New Zealand’s leading operators, TAG is positioned for long-term reserve-based growth with attractive exploration activities in the lightly explored Taranaki-region 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 generally, but not always, be 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 objectives, goals, or future plans relating to operations are forward-looking statements under applicable securities laws and necessarily involve risks and uncertainties. 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 will 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 National Instrument 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.