Following a rigorous judging process, TAG Oil was delighted to be a finalist in the prestigious Deloitte Energy Excellence Awards, as one of just four companies in the Overall Energy Company of the Year category.
Chairman of the Judging Panel Richard Westlake said the caliber of entries was extremely high and the finalist selection process had been a tough one. The finalists were:
- Meridian Energy
- TAG Oil
- Shell New Zealand
- Mighty River Power
Although TAG Oil was edged out by global “supermajor” Shell (Shell New Zealand), we got great feedback and support, and are pleased with what we’ve accomplished in New Zealand to date. Said Judge Westlake, "The judging panel was impressed by the depth and quality of the entries and our task certainly hasn't been easy. Some of the entries this year were the best the panel has seen."
|Representing TAG Oil at the blacktie gala were, left to right: Ryan Brown, Carey Davis, Chris Ferguson, Shane Hamnett and Drew Cadenhead.
Now in their fifth year, the Excellence Awards provide an opportunity to recognize excellence and achievement across the electricity, oil, gas and petroleum industries.
“Whether it’s providing New Zealand homes and businesses with a reliable energy supply or exploring the country’s underdeveloped resources, this sector provides exciting opportunities for innovation and investment.
The Deloitte Energy Excellence Awards have been formed to recognise and celebrate excellence across the many disciplines that comprise the sector. “
--- Hon Simon Bridges, Minister of Energy and Resources
As announced last week, shallow development drilling and production in the Taranaki are averaging about 1,959 barrels of oil equivalent (“boe”) per day, 80% of which is oil. So we're on track with the estimates CEO Garth Johnson and COO Drew Cadenhead gave in TAG Oil's last quarterly call. With continued success via the drill bit, the Company expects to meet its May 2014 forecast of an average daily production rate of 2,000 boe per day and cash flow generated from operations of $40 million for FY 2015.
Almost all of the current production comes from TAG Oil’s lightly explored Cheal and Greater Cheal oil and gas fields. When we include our Sidewinder field, we have another 50 shallow, drill-ready prospects identified, and we expect more to come as work continues over the years ahead.
After a drop in gas production in Q3/Q4 2014, daily production rates for the last three quarters have stabilized, with high-net-back oil steadily growing to 78% of the daily production. Growing oil production generates stronger revenues, as seen in Q4/14 and Q1/15: increased oil production has resulted in netbacks increasing from $49 per BOE in Q1/14 to more than $70 per BOE in Q1/15.
Here are a few pictures of our Cheal South permit (TAG Oil: 50% interest), during initial testing of the Cheal-G1 well that may prove to be economic.
As announced back in May, in a 50-50 joint venture with East West Petroleum, TAG drilled four shallow exploration wells and one exploration sidetrack well within the Cheal South and Southern Cross areas. While the other wells on this site were plugged and abandoned, the Cheal-G1 well is currently undergoing production testing as a new discovery.
Site setup for G1 well testing - flare tank (center) lineheater (middle) test separator (right) power fluid (left).
G1 power fluid pump and temporary tanks.
G1 temporary wellhead hookup.
Flaring off exess G1 gas during testing, the only time it’s necessary anymore.
Self-containted well test separator complete with gas, water, and hydrocarbon measurement.
As we bid goodbye to Randy Toone, who returns to North America, we’re happy to welcome, effective September 1, 2014, Max Murray to the TAG Oil team as our New Zealand Country Manager.
Max is a 30-year oil and gas industry veteran with a deep understanding of the New Zealand oil and gas landscape. He’s an excellent person to help TAG continue its evolution from a junior explorer to the busiest integrated explorer and producer of oil and gas in New Zealand.
Over six years with Origin Energy, Max was most recently Manager of Production Upstream E&P and Senior In-Country Manager, accountable for the safe and efficient operation of all producing assets across Australia and New Zealand. Max previously held senior positions with Swift Energy New Zealand, Ras Laffan Liquefied Natural Gas Co. Ltd., and Methanex New Zealand.
What goes into the building of a drill site? When it’s in the undeveloped East Coast Basin, even a small well pad nestled in the hills can take some infrastructure work. As always though, TAG Oil is careful to work within the landscape and keep a small footprint. Here are some photos from the field of our soon-to-be-spud Waitangi
A couple of locals supervise our team.
Prepping the well pad site for the big rig en route.
We built a small bridge over a seasonal stream…
…That flooded from record winter rains. No harm done.
Conductor Pilot Hole Opener assembly, drills 17.5” hole down to a depth of 42m. Later a conductor hole is drilled to 26” size.
Welding a “20” conductor casing that will be cemented in the 26” hole to a depth of 42m.
Taking in the view in the winter sun, enjoying the new fence we built.
What better way to bookend TAG Oil’s 2014 fiscal year than with great panoramic shots of two exploration drill sites: above is the Taranaki Basin at Southern Cross, and below is our upcoming Waitangi Valley-1 well drilling pad in the East Coast Basin.
It was a good year at TAG, with active step-out drilling and approximately 893,000 BOE of new gross reserves to date. New discovery area production has been consistent and that success has opened up several new, promising, development drilling locations.
On the other side of the island is the Waitangi Valley-1 drill site. This exploration prospect is TAG's second unconventional well, this time targeting the source rocks in a deeper basinal setting than the Ngapaeruru-1 well. It also includes possible conventional discovery potential, as we drill through a number of Miocene-age sands similar to what we produce from in Taranaki.
At Cardiff-3 we are planning an uphole completion once the drilling data has been further analyzed and our team has determined the best way to complete the well.
Meanwhile, sticking to plan and equipment availability, we move on to development drilling within TAG’s 100%-owned, proven Cheal field, the newly discovered Greater Cheal area, and two new step-out wells targeting the oil potential in our lightly explored Sidewinder field acreage, neighbor to the successful Ngatoro field, which has been producing high netback oil for more than 25 years.
Company finances remain strong, and so does our commitment to the community, as we fund a Stratford High School scholarship (hats off to this year’s winner Anna England, who will be studying Geology at Victoria University), sponsoring the Taranaki Rugby Football Union, the New Plymouth Surf Life Saving Club, donating a new kitchen to the Ngaere School, and much more.
There’s much to do and we’re all energized!
TAG Oil’s second new video (2 minutes and 21 seconds) shows the contributions natural resources make in New Zealand. In two parts, the first section focuses on economics: the positive economic benefits of oil and gas in terms of GDP and employment, what TAG Oil contributes, and some of the potential still to be explored. From our perspective, this can be done safely and responsibly, taking great care to respect the land, leave a small footprint, and co-exist in harmony with our neighbors.
The second part of the video shows some of the unexpected places petroleum products show up in our daily lives. Fuel, paint and tires, we know, but solar panels? Canoes? Smartphone components? Toys? And yes, even beauty products. We take these things as much for granted in modern life as we do the fresh New Zealand air that we breathe and the clean water we drink.
Conservation helps every single one of us. But the next time you grab your surfboard and drive to the beach, recognize that we’re all also consumers. Here’s to a good balance!
TAG Oil in New Zealand from TAG Oil on Vimeo.
TAG Oil CEO Garth Johnson and COO Drew Cadenhead took to the phone lines last week to discuss recent drilling announcements and the new fiscal year’s operational plans. Typically forthright, forthcoming and realistic, they outlined the Company’s plans and answered participant questions.
TAG’s vision remains in focus, to:
- Grow baseline reserves, production, and cash flow in Taranaki
- Build a steady stream of long-term predictable cash flow from production
- Continue to pursue high-impact Taranaki exploration in deep Kapuni and the offshore Kaheru
- Unlock the vast potential of unconventional East Coast basin assets
- Focus on maintaining balance sheet strength.
Said CEO Johnson: “Our approach to our business plan has always been to start off with an understanding of what we can afford to do. We high-grade our prospects that we have in inventory. We analyze our commitments to maintain permits in good standing. And we agree what the acceptable risks are versus the potential returns with each drill prospect, and then we execute our plan.
We always consider the amount of value that can be created by a variety of potential programs as part of our process. So we ensure we choose the right program that provides an opportunity for large-scale success without putting the Company at risk financially….
Can we guarantee success? No. But we set our sights high. We work hard. We study our data. We learn from our mistakes. We manage the risks and we stick to our business plan, which gives us the best shot at success.”
Specific details of the CapEx program
TAG has defined a $60 million CapEx program for the fiscal year, fully funded through forecasted cash flow and working capital on-hand. The investments break down as follows:
- $31 million invested in onshore shallow Taranaki, to:
- Drill five low-risk Cheal wells and two higher risk Sidewinder B oil wells
- Acquire new seismic
- Complete plant, facility and well optimization work
- $5 million slated for offshore Taranaki in preparation to drill the Kaheru prospect (40% interest)
- $3 million for an uphole completion at Cardiff-3, once the data has been studied
- $1 million to drill a well in the frontier Canterbury basin, where oil and gas seeps onshore and discoveries offshore have confirmed the hydrocarbon system is working
- $20 million to drill and test East Coast unconventional wells:
- Drill the new Waitangi Valley-1 well
- Drill the new Boar Hill-1 well
- Test the Ngapaeruru 1 well at the same time
On recent challenges
- Sidewinder Miocene gas BOEs declined rapidly early on, but are now steady at 150 BOEs a day.
- While Cardiff’s deepest K3E zone wasn’t immediately successful, the data confirms the zone is filled with hydrocarbons: gas, oil and condensate. We just have to figure out how best to unlock it.
- Meanwhile, the upper two, previously proven zones, are our next target, as soon as we have a rig free.
- The only economical rig in New Zealand is the Nova 1 rig, which is booked for two Cheal-B wells starting next week, then one East Coast deep well at Waitangi Valley. So we're looking at three to six months before that rig returns to Taranaki.
- While the actual operational aspects of the completion and testing are quick, the pre-operational setup steps for fracking in New Zealand are long and involved, and also fairly new. These include specific consents both on regional district council consents, water consents, and much more.
- Because we have to mobilize an entirely different set of equipment over to the east coast to test wells, we made a strategic / economic decision to delay further testing of the Ngapaeruru well until we had two or three wells to test back to back, if warranted.
While there are no guarantees in this business, we see every reason to continue setting our sights high. TAG Oil is excellent at reading its data, managing its risks, and sticking to its business plan. And operationally, we’re still looking ahead to another big surprise well like Cheal E1 or B5, cracking Cardiff, branching out into Kaheru offshore, and establishing a new oil and gas zone in the East Coast Basin, or maybe even the Canterbury Basin. We’re counting on our quality team, the data, excellent acreage, and sound fundamentals, but only time will tell for sure.
Read or listen to the full transcript of the FY15 Operations call here.
Timing is everything. With growing attention and focus allocated back into the natural resources sector, investment reporter Tim Shufelt of The Globe and Mail (Canada's most widely read newspaper) recently included TAG Oil Ltd. in its list of "Tempting Takeover Targets."
And why wouldn’t it be? TAG Oil is profitable with an attractive valuation, on track to achieve record financials, and with a share price trading near four-year lows. In The Globe's own words, here's how they compiled the list:
"The primary criterion we screened for was an attractive ratio of enterprise value (EV) to earnings before interest, taxes, depreciation and amortization (EBITDA). (EV is the market value of all its shares plus the company’s net debt.) Also known as the “takeover multiple,” a low EV/EBITDA ratio could signal that a company is undervalued. We limited our search to stocks with an EV/EBITDA of eight or lower. We also wanted to weed out the smaller companies, so market capitalization had to be at least $100-million. Next, we filtered out stocks that had a debt-to-equity ratio of greater than 50 per cent. Finally, to help identify stocks that might be underpriced, we screened for those that were priced at least 30 per cent lower than their 52-week highs."
See the full list of companies here: http://bit.ly/Globe_TAG-tempting-takeover-target
Above and beyond those numbers, TAG is heading into FY2015 with a plan to invest $60 million into exploration by targeting low-risk development, high-impact, and unconventional drilling. All CAPEX will be fully funded by cash flow and available working capital. Listen to a recording of Wednesday's call with our CEO and COO delving into those details, on the TAG Oil website.
Oh, and one last thing. While we're pleased to be recognized as a great value, we still have too much exploration work to complete, and hopefully a lot more oil to find!
With all our recent financial news and Cardiff’s deep drilling updates, shallow oil and gas developments at Cheal and Sidewinder have gone under-reported lately. This post should bring you up to date!
Even as flow rates have stabilized, development and step out drilling are delivering excellent results. The Cheal-E1 step out well, which was placed on production last November, defined TAG’s newest producing oil site. The addition of Cheal E substantially extends the oil-saturated area of TAG’s Cheal field, and to date has produced about 90,000 bbls of oil. Current stabilized production is about 650 bbls/d of oil per day (455 bbls/d net), plus solution gas from three wells.
In the current 2015 fiscal year, TAG is slated to drill five more shallow development wells within the Cheal and Greater Cheal area. Four of these wells will be drilled with a 100% interest; one well drilled will be at a 70% interest in the new Cheal-E site acreage.
AtCheal South and Southern Cross, a 50-50 joint venture with East West Petroleum in a non-core operating area, TAG has already drilled four shallow exploration wells and one exploration side-track well. Three of them are being plugged and abandoned, while one, the Cheal-G1 well, is currently planned for production testing as a potential new discovery…we’ll keep you posted!
Over at Sidewinder, we have two exploration wells planned in the Sidewinder-B site, which target 3D seismically defined anomalies, which we interpret to be oil-prone prospects. Our exploration team has made the decision to focus this next round of wells on oil, based on the decline rates of Sidewinder’s gas wells. Again, we’ll let you know how things proceed. [Photo: Loading arm to fill Sidewider oil tanks.]
All of the seven wells mentioned here were identified from TAG’s proprietary 3D, and we consider five of them to be the lowest possible risk in our portfolio. So while we’re casting a bigger net to pull some higher-risk, higher-potential prospects into our drilling portfolio in FY 2015, our
low-risk shallow drilling strategy to fund our other activities remains in place.