TAG Oil Ltd. (“TAG Oil” or the “Company”, TSXV: TAO and OTCQX: TAOIF) is pleased to announce that it was formally awarded a petroleum services agreement (the “PSA”) on September 11, 2022 by Badr Petroleum Company (“BPCO”) to develop the unconventional Abu Roash “F” reservoir (“ARF”) in the Badr Oil Field (“BED-1”), a 107 km2 (26,000 acres) concession located in the Western Desert of Egypt.
Over the last several months, TAG Oil completed an evaluation of the data package provided by the Egyptian General Petroleum Corporation (“EGPC”) for BED-1. After extensive negotiations with EGPC, the Company submitted its final letter of intent on May 29, 2022 (the “Letter of Intent”) to develop the ARF formation in the BED-1 concession.
The Company received a confirmation letter on August 24, 2022, referencing the Letter of Intent, which confirmed that EGPC had commissioned BPCO to conclude the PSA with TAG Oil. The final draft of the PSA has been completed and initialed by all parties, and the Company anticipates that it will become effective shortly upon TAG Oil posting a performance letter of guarantee for US$6.0 million.
The Badr Oil Field was discovered in 1982 by a joint venture between Shell Oil and EGPC (Bapetco). There has been significant historical production across the concession from conventional reservoirs of light oil and associated natural gas through primary development of the Kharita, Bahariya and certain Abu Roash sandstone formations. The ARF reservoir produced conventionally from some wells with considerable initial oil rates but has declined rapidly as this is the nature of such tight reservoirs.
TAG Oil has conducted a detailed technical analysis of the geologic, geophysical and well production data of the target ARF zone, which is a deep, tight, low porosity, low permeability carbonate reservoir with varied fluid characteristics across BED-1. TAG Oil has determined that there is a high probability for successful commercial development of the ARF reservoir by applying proven technologies including long-reach horizontal wells, hydraulic fracture stimulation and potentially other enhanced oil recovery production techniques. These methodologies have been successfully implemented by TAG Oil’s management team expertise in the past in reservoirs in Canada, Albania and Egypt, and by other operators in analogous properties in Canada and the USA.
The data provided to TAG Oil by EGPC indicates that the ARF contains significant volumes of oil in place in the BED-1 concession and tested medium gravity crude oil without stimulation. Production profiles from these wells demonstrated high initial rates with rapid decline consistent with the nature of primary depletion in tight, low porosity reservoirs. The ARF zone has not been commercially developed under conventional completion technology by previous operators. To verify the resource potential of the oil in place volumes and assess TAG Oil’s proposed development plan for this play, the Company has engaged the services of an independent engineering firm, RPS Energy Canada, to evaluate the oil resources associated with the ARF zone in the BED-1 area.
Accordingly, the Letter of Intent includes a proposal to develop the ARF reservoir unconventionally in 3 phases.
Phase 1: Evaluation Period, which is considered as a pilot development stage.
Phase 2 & 3: Commercial Production stages that will be commenced once the pilot stage is successful.
Production Revenue Entitlement Fee. BPCO shall pay the Company a service fee, which is a percentage of the gross revenues generated from the project, to compensate the Company for assuming 100% of the capital and operating expenditures required for the ARF development at BED-1. The Company shall receive an entitlement fee for all production established and sold during the term of the PSA, including the piloting period.
Abdel Fattah (“Abby”) Badwi, Executive Chairman of TAG Oil said, “We are pleased to have reached our first important agreement in Egypt to develop this significant project. While the agreement contemplates a piloting period to prove its concept, the type of reservoir and anticipated development plan has previously delivered successful results in more challenging oil and gas reservoirs in Canada and the USA.” He added, “TAG Oil is strategically well positioned to pursue other oil and gas exploration and development opportunities that are currently being investigated in Egypt and other areas of the Middle East. The Company will keep you apprised of its progress in these initiatives as they arise.”
Further details of the project are included in a presentation available on the Company’s website.
About TAG Oil Ltd.
TAG Oil (http://www.tagoil.com/) is a Canadian based international oil and gas exploration company with a focus on opportunities in the Middle East and North Africa.
For further information:
Toby Pierce, Chief Executive Officer
Phone: 1 604 609 3355
Chris Beltgens, Vice President, Corporate Development
Phone: 1 604 682 6496
Neither the TSX-V nor its Regulation Services Provider (as that term is defined in the policies of the TSX-V) accepts responsibility for the adequacy or accuracy of this release.
Forward-Looking Statements and Disclaimer
Statements contained in this release that are not historical facts are forward-looking statements that involve various risks and uncertainty affecting the business of TAG Oil. 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 statements that describe the Company’s plans relating to operations and potential strategic opportunities are forward-looking statements under applicable securities laws. These statements address future events and conditions and are reliant on assumptions made by the Company’s management, and so involve inherent risks and uncertainties, as disclosed in the Company’s periodic filings with Canadian securities regulators. As a result of these risks and uncertainties, and the assumptions underlying the forward-looking information, actual results could differ from those currently projected, and there is no representation by TAG Oil that the actual results realized in the future will be the same in whole or in part as those presented herein. The Company does not assume the obligation to update any forward-looking statement, except as required by applicable law.
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.