TAG Oil Ltd. confirms that ERC Equipoise Ltd. (“ERCE”), a qualified reserves evaluator in accordance with National Instrument 51-101 (“NI 51-101”) and the Canadian Oil and Gas Evaluation Handbook, has completed its independent reserves assessment on the Company’s producing oil and gas assets within the Cheal (PMP 38156), Cheal East (PMP 60291) and Sidewinder (PMP 53803) permits in New Zealand. This report is dated and is effective as at March 31, 2019.
ERCE has assigned a pre-tax net present value of $98.7 million (FY2018: $97 million), using a 10% discount rate to the Company’s net working interest proven plus probable (“2P”) reserves.
Reserves summary by field*
ERCE’s gross 2P reserves estimates at March 31, 2019, were 3,988 Mboe (91% oil) compared to 4,079 Mboe (94% oil) gross 2P reserves reported by TAG at March 31, 2018. The decrease in the Company’s reserves of approximately 2.2% is attributable to the following factors:
- An approximate 10% decrease due to 391 Mboe produced over the 12-month period in fiscal year 2019.
- An approximate 8% increase in annual 2P reserves revisions of 300 Mboe, which is primarily due to technical revisions and economic factors.
Reconciliation to prior years
ERCE also provided TAG with its first NI 51-101 compliant independent reserves assessment on the Company’s Bennett oil field held in the PL-17 permit of the Surat Basin, Queenslandand is effective as at March 31, 2019. Current production from Bennett is approximately 10 bbl/d of light, sweet crude that is sold at the wellhead.
ERCE has assigned a pre-tax net present value of $0.6 million, using a 10% discount rate to the Company’s 100% working interest 2P reserves.
TAG has a number of potential lower risk options to increase production on the PL-17 licence and will look at pursuing these later in the year.
The primary focus in Australia for TAG at present is the farm-out and/or sales process of its coal seam gas rights that lie across a portion of the PL-17 acreage.
PL-17 reserves summary
An evaluation of the contingent resources at the Bennett field was also provided by ERCE based on bypassed pay and infill drilling locations of the Bennett-1 and Bennett-4 wells. TAG will continue to evaluate further opportunities at PL-17 and will look to implement a modest capital program in 2019 in an attempt to monetize some of its resources.
Toby Pierce, CEO commented, “TAG continues to deliver solid reserves results in New Zealand. Further, this is the first year that we have completed an independent reserves assessment in Australia. Based off ERCE’s work, the Company has identified several lower risk opportunities on PL-17 to potentially add resources and reserves in the future. Furthermore, TAG continues to work toward closing its transaction with Tamarind on or around July 15, 2019.”
About TAG Oil
TAG Oil Ltd. (https://tagoil.com/) is an international oil and gas explorer with established high netback production, development and exploration assets, including production infrastructure in New Zealand and Australia. TAG Oil currently has 85,282,252 shares outstanding.
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Cautionary Note Regarding Forward-Looking Statements and Disclaimer
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. All estimates and statements that describe the Company’s 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. TAG undertakes no obligation, except as otherwise required by law, to update these forward-looking statements if management’s beliefs, estimates or opinions, or other factors change.
Disclosure provided herein in respect of boe (barrels of oil equivalent) may be misleading, particularly if used in isolation. A boe conversion ratio of 6 Mcf:1bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.
Reserves are estimated remaining quantities of oil and natural gas and related substances anticipated to be recoverable from known accumulations, as of a given date, based on analysis of drilling, geological, geophysical and engineering data, the use of established technology, and specified economic conditions, which are generally accepted as being reasonable, and shall be disclosed.
Reserves are classified according to the degree of certainty associated with the estimates. Proved reserves are those reserves that can be estimated with a high degree of certainty to be recoverable. It is likely that the actual remaining quantities recovered will exceed the estimated proved reserves. Probable reserves are those additional reserves that are less certain to be recovered than proved reserves. It is equally likely that the actual remaining quantities recovered will be greater or less than the sum of the estimated proved plus probable reserves. Possible reserves are those additional reserves that are less certain to be recovered than probable reserves. It is unlikely that the actual remaining quantities recovered will exceed the sum of the estimated proved plus probable plus possible reserves.
The qualitative certainty levels referred to in the definitions above are applicable to “individual reserves entities”, which refers to the lowest level at which reserves calculations are performed, and to “reported reserves”, which refers to the highest level sum of individual entity estimates for which reserves estimates are presented. Reported reserves should target the following levels of certainty under a specific set of economic conditions:
- at least a 90 percent probability that the quantities actually recovered will equal or exceed the estimated proved reserves;
- at least a 50 percent probability that the quantities actually recovered will equal or exceed the sum of the estimated proved plus probable reserves; and
- at least a 10 percent probability that the quantities actually recovered will equal or exceed the sum of the estimated proved plus probable plus possible reserves.
The reserve estimates contained herein are estimates only and there is no guarantee that the estimated reserves or resources will be recovered. The estimates of reserves for individual properties may not reflect the same confidence level as estimates of reserves for all properties, due to the effects of aggregation.
Where discussed herein “NPV 10%” represents the net present value (net of capital expenditures) of net income discounted at 10%, with net income reflecting the indicated oil, liquids and natural gas prices and initial production rate, less internal estimates of operating costs and royalties. It should not be assumed that the future net revenues estimated by TAG Oil’s independent reserve evaluators represent the fair market value of the reserves, nor should it be assumed that TAG Oil’s internally estimated value of its undeveloped land holdings or any estimates referred to herein from third parties represent the fair market value of the lands.
Contingent resources are those quantities of petroleum estimated, as of a given date, to be potentially recoverable from known accumulations using established technology or technology under development, but which are not currently considered to be commercially recoverable due to one or more contingencies. There is no certainty that it will be commercially viable to produce any portion of the resources.
Exploration for hydrocarbons is a speculative venture necessarily involving substantial risk. The Company’s future success in exploiting and increasing its current reserve base will depend on its ability to develop its current properties and on its ability to discover and acquire properties or prospects that are capable of commercial production. However, there is no assurance that the Company’s future exploration and development efforts will result in the discovery or development of additional commercial accumulations of oil and natural gas. In addition, even if further hydrocarbons are discovered, the costs of extracting and delivering the hydrocarbons to market and variations in the market price may render uneconomic any discovered deposit. Geological conditions are variable and unpredictable. Even if production is commenced from a well, the quantity of hydrocarbons produced inevitably will decline over time, and production may be adversely affected or may have to be terminated altogether if the Company encounters unforeseen geological conditions. The Company is subject to uncertainties related to the proximity of any reserves that it may discover to pipelines and processing facilities. It expects that its operational costs will increase proportionally to the remoteness of, and any restrictions on access to, the properties on which any such reserves may be found. Adverse climatic conditions at such properties may also hinder the Company’s ability to carry on exploration or production activities continuously throughout any given year.
The significant positive factors that are relevant to the resource estimates are: proven production in close proximity; proven commercial quality reservoirs in close proximity; oil and gas shows while drilling wells; and calculated hydrocarbon pay intervals from open hole logs. The significant negative factors that are relevant to the resource estimates are: tectonically complex geology could compromise seal potential; and seismic attribute mapping can be indicative but not certain in identifying proven resource.