Vancouver, B.C. – June 29, 2016 – TAG Oil Ltd. (TSX: TAO and OTCQX: TAOIF) is pleased to report the results for the fiscal year ending March 31, 2016, in which the Company has successfully implemented and adjusted its growth strategy in light of low oil pricing. TAG has preserved capital, reduced costs, substantially strengthened its technical and operating capability, while also maintaining consistent revenue and stable production with a focus on low cost field optimizations.
Capital expenditures for FY2016 were cut back significantly as TAG Oil focused on its core producing operations, deferred the majority of its exploration focused capital program, and relinquished several existing permits that had either large commitments or were no longer pertinent to TAG’s strategy. Meanwhile, oil and gas production remains relatively stable and above guidance with a current net daily average rate of 1,252 BOE/d (79% Oil) over the previous five days.
TAG Oil CEO Toby Pierce commented, “Having completed the first year as TAG’s CEO, I am pleased with the milestones we’ve achieved within our operations responding to a low price environment. During this reporting period, we’ve scaled back on capital expenditures, withdrawn from high-risk exploration, and focused on de-risking and preserving the long-term value of our core Taranaki Basin assets. Near term operational focus will be on our water-flood implementation program and prioritizing which opportunities to pursue as oil prices improve, such as the development of our recently acquired 70% interest in the Puka permit. We also look forward to TAG’s new COO, Henrik Lundin, guiding our operations through the next phase of growth, and bringing strong operational leadership to the Company as we strategically expand. One thing remains unchanged: the hard work and dedication that our staff has shown throughout the year. It’s a testament to their character and a strong indication that TAG is in an excellent position for the fiscal 2017 year and beyond. A heartfelt thanks to them, as always.”
FY2016 FINANCIAL AND OPERATING HIGHLIGHTS
- At March 31, 2016, the Company had $16.8 million (March 31, 2015: $27.1 million) in cash and cash equivalents and $22.1 million (March 31, 2015: $27.8 million) in working capital, no debt, and 62,212,252 common shares outstanding.
- Total 2P reserves at March 31, 2016 reflecting the Company’s 100% interest in PMP 38156 and 70% interest in PEP 54877, are estimated at 3.6 mmboe (93% oil) compared with 5.2 mmboe (90% oil) at March 31, 2015.
- Average net daily production over fiscal 2016 decreased by 25% to 1,386 BOE/d compared with 1,856 BOE/d in fiscal 2015.
- Revenue decreased by 50% to $24.8 million compared with $49.4 million in fiscal year 2015 as a result of a combination of lower production and weaker commodity prices.
- Capital expenditures for fiscal 2016 totalled $11.8 million compared to $49.6 million for fiscal year 2015.
FY2017 OUTLOOK AND GUIDANCE
TAG’s near-term focus is on low-expenditure, in-field production optimization opportunities, and other necessary activities core to increasing production. In addition, the Company has identified opportunities through an extensive geotechnical and engineering review of TAG’s Taranaki development and exploration acreage with a view to initiate further drilling on the Cheal and Sidewinder acreage later in the 2017 fiscal year.
TAG’s capital budget for FY2017 is CDN$7.6 million, which will be fully funded by forecasted cash flow and existing working capital. The capital budget may be revised to include an additional CDN$4.6 million of discretionary activity that is being continuously reviewed and revised, depending on the results of activities below, economic analysis, and changing economic conditions if oil prices improve materially.
The FY2017 capital budget will focus on the following activities:
- Optimization of In-Field Opportunities: TAG staff has identified over 50 potential optimization opportunities including solvent squeezes, well re-perforations, well clean-outs, pump optimization, and more. The Company is focused on its top 11 opportunities over the next year that include well stimulation activities on Cheal-E4 and B8 wells, and additional perforations on Cheal-E7 and E1 artificial lift enhancements. TAG may look to add further activities to this list if commodity prices improve during the year.
- Production: Geotechnical and engineering reviews continue to refine the Company’s full field development plan in an attempt to increase returns from existing assets. Key activities include the Cheal North East water-flood project planned for FQ2/17 and capital workovers utilizing different completion technologies.
- Shallow Miocene Exploration: TAG is preparing to drill one exploration well at Sidewinder North (PEP 57065) in FQ4/17 targeting oil-prone prospects in the Miocene-aged, Mt. Messenger formation to a depth of approximately 2,000 meters. The Sidewinder North acreage may provide TAG with a potential opportunity to develop another oil field similar to Cheal and the adjacent 60 million barrel Ngatoro/Kaimiro oil field.
- Deep Eocene Exploration (Cardiff): TAG may pursue exploration drilling to establish production within the deep Kapuni Formation in Taranaki. TAG is completing a review of engineering, design and associated planning to potentially recomplete and fracture stimulate a series of other Kapuni group (deep) formations identified within the Cardiff wellbore. The Company is also looking at several other options to best test the potential of the Eocene.
TAG’s premium pricing for its oil (Brent benchmark), combined with low operating costs, allows for high netbacks, which often results in higher cash flow from production operations than what can be achieved by North American producers. Further, given the excellent fiscal terms in New Zealand, TAG often generates higher operating margins versus some of its international peers.
TAG is estimating FY2017 cash flow from operations will be approximately $7.5 million, with production averaging approximately 1,200 barrels of oil equivalent per day (BOE/d: 83% oil). This guidance is based on TAG’s planned shallow development wells and existing production; additional success on the Company’s current and ongoing exploration programs could have a positive impact on this guidance. This guidance also assumes commodity prices of US$45 per bbl based on Brent pricing and NZ$4.75 per GJ for natural gas. Exchange rates of CDN$1.35 to US$1.00 and CDN$0.91 to NZ$1.00 are assumed.
TAG believes that a properly executed development plan, combined with a moderate amount of exploration drilling, will allow for an increase in daily production rates, cash flow, reserves and reserve values during FY2017. Maintaining a high working interest and ownership of all facilities and associated pipeline infrastructure in the Taranaki Basin on TAG’s operated Cheal and Sidewinder oil and gas fields ensures the Company can commercialize further discoveries and developments expeditiously, as well as potentially offer third party processing to other companies in the basin.
“TAG has established a very strong oil and gas platform for long-term growth, and I’m happy to report that our organization has been notably strengthened corporate wide, financially, technically, and operationally this year, while at the same time, substantially reducing costs across all areas of the business. This makes TAG a much more capital efficient and technically capable company,” commented Alex P. Guidi, founder and Chairman of TAG Oil Ltd. “TAG is in a unique position relative to its peers, wielding a strong balance sheet and a low cost production base, allowing us to pursue a “land and expand” strategy, capitalizing on distressed asset sales during low oil prices.”
“Furthermore, TAG is poised to ramp up production in a higher price environment with a large inventory of de-risked field development locations, step out drilling and attractive high impact exploration prospects in a lightly explored and prolific oil discovery trend. We’ll pursue these opportunities as appropriate – and with greater intensity – in an oil price recovery.”
FY2016 Conference Call Reminder
TAG Oil will host a discussion of its Q4 fiscal 2016 financial results on Tuesday, July 5, 2016, at 1:00 pm Pacific Daylight Time. Please call in ten minutes before the conference call starts and stay on the line (an operator will be available to assist you should you have questions of management during the call). In addition, questions can be forwarded by e-mail in advance to [email protected].
Interested parties may access the conference call using the information below:
Date July 5, 2016
Time 1:00 PM Pacific Daylight Time
Toll-Free Dial-in # 1 844 513 7160
Secondary Dial-in # 1 508 637 5604
Conference Passcode 3725 2434
E-mail questions to [email protected]
Replay will be available on TAG Oil’s blog following the conference call at https://tagoil.com/media-center/tag-oil-blog/
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:
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 6 Mcf: 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.
Analogous Information and Cautionary Note Regarding Forward-Looking Statements:
Certain information in this release may constitute “analogous information” as defined in NI 51-101, including, but not limited to, information relating to areas with similar geological characteristics to the lands held by TAG. Such information is derived from a variety of publicly available information from government sources, regulatory agencies, public databases or other industry participants (as at the date stated therein) that TAG believes are predominantly independent in nature. TAG believes this information is relevant as it helps to define the reservoir characteristics in which TAG may hold an interest. TAG is unable to confirm that the analogous information was prepared by a qualified reserves evaluator or auditor and in accordance with the COGE Handbook. Such information is not an estimate of the reserves or resources attributable to lands held or to be held by TAG and there is no certainty that the reservoir data and economics information for the lands held by TAG will be similar to the information presented therein. The reader is cautioned that the data relied upon by TAG may be in error and/or may not be analogous to TAG’s land holdings.
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.