Vancouver, B.C. – June 9, 2016 – TAG Oil Ltd. (TSX: TAO and OTCQX: TAOIF) confirms that Sproule International Limited (“Sproule”), a qualified reserves evaluator in accordance with NI 51-101 and the COGE Handbook, has completed its independent reserves assessment on the Company’s interests within the Cheal oil and gas producing permits, dated March 31, 2016. Sproule has assigned a pre-tax net present value of $45.9 million (FY2015: $114.7 million), using a 10% discount rate to net working-interest proven + probable (“2P”) reserves.
Sproule’s gross 2P reserves estimates at March 31, 2016 were 3,619 MBOE (93% oil), which reflect TAG’s 100% interest in PMP 38156 and 70% interest in PEP 54877, compared to 5,180 MBOE (90% oil) at March 31, 2015. The decrease in the Company’s reserves of approximately 30% is attributable to the following factors:
- An approximately 10% decrease is due to production of the 507 MBOE that the Company produced over the 12-month period of FY2016.
- An approximately 20% decrease is due to an annual reserves revision of 1,054 MBOE, which is primarily due to the reclassification of existing wells into the no reserves assigned (“NRA”) category:
- A significant component of the reclassification is due to the conversion of producing wells to water injection wells as per TAG’s field development and water-flood plan (Cheal-B3, E7, and A8ST1 wells). As the wells converted to water injectors became classified as NRA status, and the remaining associated reserves were written off the well. With the implementation of the water-flood plan in the Cheal field that will continue through to 2017, TAG anticipates that the overall field recovery and field reserves will increase. The overall field increase is expected to be greater than the write down associated with the injection conversions.
- The remaining NRA reclassification is attributed to shut-in wells that have not produced since 2015, which were identified as becoming uneconomic or having contingencies preventing production (Cheal-E2, E5, E6, B7, and G1 wells).
- Also, as part of TAG’s effort to adapt its field development plan to the low oil price environment, various drilling and recompletions have been deferred by approximately one to four years.
Reserves summary by field
|
Permit |
Field |
TAG WI |
1P |
2P |
3P |
|||
|
|
|
% |
Total |
NPV10 |
Total |
NPV10 |
Total |
NPV10 |
|
38156 |
Cheal |
100% |
1,216 |
$11.3 |
3,226 |
$44.9 |
4,448 |
$71.5 |
|
54877 |
Cheal E |
70% |
129 |
($0.8) |
393 |
$1.0 |
709 |
$8.0 |
|
Total |
|
1,345 |
$10.5 |
3,619 |
$45.9 |
5,156 |
$79.5 |
|
Reconciliation to prior years
|
|
|
FY2016 |
FY2015 |
FY2014 |
|
Opening 2P reserves |
MBOE |
5,180 |
5,898 |
6,112 |
|
Production |
MBOE |
(507) |
(677) |
(682) |
|
2P Reserves net additions |
MBOE |
(1,054) |
(41) |
468 |
|
Closing 2P reserves |
MBOE |
3,619 |
5,180 |
5,898 |
|
2P year end valuation (NPV 10% before tax) |
mmCdn$ |
$45.92 |
$114.70 |
$196.22 |
|
2P year end valuation (NPV 10% after tax) |
mmCdn$ |
$45.92 |
$108.71 |
$193.04 |
|
Future capital expenditure included in 2P valuation |
mmCdn$ |
$54.63 |
$65.50 |
$50.06 |
Toby Pierce, CEO commented, “TAG’s reserves numbers and valuations are lower than the previous year, however they are satisfactory given that the price decks used in 2016 versus 2015 were substantially lower due to lower commodity prices and reduced capex. Further, we expect reasonable resource additions in fiscal 2017 from workovers, our water-flood program, and exploration drilling which are expected to comfortably offset production. Production remains above guidance with a net daily average of 1,225 BOE/d (over the previous five days) along with our current average sales price of US$53/BOE (US$45/BOE forecast) and our cash position. I continue to remain confident that TAG is in an excellent position as prices recover and we begin to execute on a more extensive work program.”
TAG Oil Ltd.
TAG Oil Ltd. (https://tagoil.com/) is a development-stage Australasian focussed oil and gas production and exploration company with extensive operations and production infrastructure in the Taranaki Basin region of New Zealand. As one of New Zealand’s leading operators, TAG is positioned for reserve-based growth with high impact exploration upside in the lightly explored Taranaki discovery fairway. As a low cost, high netback oil and gas producer, TAG is debt-free and reinvests its cash flow into development opportunities and exploration 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: https://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, 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 with respect to operations 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 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.