TAG Oil Blog

Denise della Santina

Recent Posts

Protest leaflet gives TAG the opportunity to address misinformation

Posted by Denise della Santina on Jan 10, 2014 2:28:00 PM

A group protesting TAG Oil’s plans to explore for a potential new gas field near Mt. Taranaki recently distributed a leaflet with incorrect and misleading information that our team felt compelled to address. While we know that oil and gas exploration – and energy consumption in general – can be a very polarizing topic, we’re still disappointed that the protesters chose to inflame the conversation rather than to have an informed discussion.

The call to protest was made by Climate Justice Taranaki and Frack Free Kapiti and Beyond – which published a brochure, Don’t Frack With Our Mountain.

COO Drew Cadenhead said he was happy to speak with the protestors, but it was clear that they had no intention of engaging in a measured conversation. “We respect the right of people to protest, express their views and take an active part in the debate. However, we think any debate should be based on empirical science-based information. [This brochure] is a disservice to those that may rely on this information.”

While TAG doesn’t want to lend credence to inaccurate information, we do want to engage in a dialogue with concerned groups and the larger Taranaki community, in order to facilitate open communication and eliminate misinformation. Therefore, here is our rebuttal to some of the claims made in the leaflet about TAG’s plans to explore for gas in PEP 54873.

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Claim one: Drilling will take place 220 metres off the park boundary.

Response: The drill site is in a farmer’s paddock within permit boundaries set by the New Zealand Government. A condition of the permit is that any drilling must stay inside the permit boundary: There will be no drilling into the National Park. The actual surface location is over 300m from the Park Boundary, the well will go almost straight down, nearly 5000m, and actually end up a little further from the Park Boundary at total depth than it is at the surface.

Claim two: TAG Oil has plans to develop a heavily industrialised worksite.

Response: “Heavily industrialised” is an exaggerated description of a site that, at its biggest, will be no bigger than any of the manufacturing and processing complexes in New Plymouth’s industrial park at Bell Block. The drilling pad is approximately 190m X 90m (1.7 hec) where we will drill one well to start with.

Claim three: Eight oil and gas wells will be drilled.

Response: Our consent allows us to drill up to eight wells, but only if the initial drilling and testing demonstrates the field might be commercially viable. If it is not commercially viable there will be no more drilling. We calculate our chance for success with this first well is about 30%. 

Claim four: Heavy vehicle movements and noise will become the new norm.

Response: Heavy vehicles will operate sporadically only during the mobilization and de-mobilization of the drilling rig – approximately two weeks on either end. Other than that, large truck movements on the roads around the wellsite would be less than is presently the situation with milk tankers, etc. in Taranaki. Furthermore, speed of trucks on the road to the well site will be limited to 30 kph. 

Claim five: Toxic chemicals will pollute groundwater beyond repair.

Response: This is a deliberately inflammatory statement that is not supported by any empirical scientific evidence. On the contrary, Taranaki Regional Council testing of water around all of TAG’s oil and gas sites last year found no trace of hydrocarbons in any water samples. Our consents for this site mainly deal with rainwater discharge from the site: No industrial liquids are discharged at the site, they are dealt with at an approved and consented facility.

Claim six: Contaminated waste will lay in pits, be pumped into deep injection wells or spread on land.

Response: Any rock cuttings or drilling fluid will only be disposed of in a manner approved in the conditions of our resource consent. Land farms are a proven safe and controlled way to use drilling mud and cuttings to rehabilitate marginal land. Some water may be pumped back into the well, and absolutely no contaminated water will lay in pits.

Claim seven: A large flare will burn from a pit; it will sound like jet engine overhead, light up the night sky and release dangerous pollutants into the clean mountain air.

Response:  If TAG makes a discovery we’ll want to sell the gas, not flare it. While a minor amount of gas may be flared for a short time as a safety measure, it would be flared into an approved enclosed container, not into an open pit—TAG Oil doesn’t use flare pits any longer as one way of reducing noise and waste. In regard to discharge, natural gas is regarded as the cleanest burning of all fossil fuels.

Claim eight: TAG Oil hopes to make use of this site for the next 30 years.

Response: If we find no gas we’ll use the site for a couple of months to drill the first test well, then reclaim the site. If we are fortunate enough to make a discovery, then it may provide gas and jobs and revenue for the country for many years. The potential benefits for the region and the nation are significant. During that time TAG will continue to manage its holdings responsibly, safely, following all regulations, and openly. And after gas exploration and any production are finished the site will be restored to how it was.

Claim nine: Decisions were made behind closed doors and without the knowledge of the Mountain Iwi and the wider community.

Response: On the contrary, New Zealand Petroleum and Minerals (the Government regulator) consulted with iwi late in 2012 about this permit before it was awarded to TAG. TAG has made numerous attempts to discuss the permit with iwi and hapu and will continue to do so.

Claim 10: TAG Oil operates only in New Zealand and recently raised $25 million and employed two US fracking experts in its evaluation of a 2,720,358 acre prospecting area.

Response: TAG Oil is listed on the Toronto Stock Exchange and has its head office in Vancouver, and yes, all of its operations are in New Zealand. To date TAG has spent approximately $250 million in New Zealand and has not taken a cent out of the country. And indeed, the $25m recently raised from investors who consider TAG to be a well-run company with strong prospects in New Zealand, will also be spent in New Zealand.

TAG recently employed two unconventional oil experts—one whose expertise is in environmental management. Both are to work out of TAG’s new East Coast office on the Company’s East Coast permits. Fracking may be required to release some of the oil and gas known to lie below the ground on the East Coast, however, it is too soon to know whether it can or will be used there. Regardless of the technique, TAG Oil will continue to operate responsibly and conscientiously.

Topics: Taranaki

A quick update on Cardiff's deep gas/condensate well

Posted by Denise della Santina on Dec 10, 2013 10:12:00 AM

To wrap up our excitement on drilling our first deep gas well...

Drilling of Cardiff-3, targeting the high-impact Kapuni formation is nearing completion. As reported, the early signs are positive and we'll be likely carrying out a full testing program over the next few months. We didn't want you to think that no news was anything but good news, it's just that photos from the lab and office are a little less exciting than photos from the field. 

The consent process for the Heatseeker well is now underway: By the end of this year we'll have drilled 13 production and exploratory wells, all adding to our future reserve potential and success.

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Topics: Taranaki, Kapuni gas/condensate, Cardiff Deep Gas

Exchange approval for continued share buyback

Posted by Denise della Santina on Dec 9, 2013 9:26:00 AM

Via press release on Friday (and here for those of you who missed it) TAG announced its intention to acquire up to 6,073,339 of its common shares for cancelation through the Toronto Stock Exchange, subject to TSX acceptance. 

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TAG's share buyback program is based on our belief that the market price of the Company's shares don't reflect their underlying value. Purchasing and cancelling shares will increase the proportionate interest of remaining shares, which is to the advantage of shareholders. To follow the progress please click here: http://canadianinsider.com/node/7?menu_tickersearch=tao

The common shares that may be repurchased over a twelve-month period represent approximately 10% of TAG's 60,733,391 outstanding common shares in the public float. There have been 867,000 common shares purchased and cancelled under a normal course issuer bid by TAG within the past 12 months at an average weighted purchase price of $3.83 per common share. Now back to drilling for oil and gas!

Topics: Financials, Announcements, TAG shareholders

Ngati Ruanui kaumatua Ngapari Nui and TAG Oil sow the seeds of respect

Posted by Denise della Santina on Dec 6, 2013 12:28:00 PM

In early October we were delighted to sign a formal partnership agreement with Ngati Ruanui, whose traditional tribal lands extend from Hawera to Stratford, in the Taranaki. This was a high priority for TAG, and we worked diligently to get here, as it forms the foundation for a long, strong and mutually beneficial relationship for years to come.

Garth Johnson

The agreement is based on a number of critical guiding principles that recognize the aspirations of both TAG and Ngati Ruanui. As CEO Garth Johnson has said, “We

want many of the same things: to be economically successful but never to the detriment of high environmental standards.” One practical example is Ngati Ruanui’s environmental team having archaeological oversight and monitoring rights for any earthworks TAG carries out in the region.

Again, Garth Johnson: “This agreement is based on mutual trust, respect, and quality of life. To me, it means we have each others’ backs.”

Topics: Taranaki, Announcements

Q2 2014 continues exciting times for TAG

Posted by Denise della Santina on Nov 21, 2013 6:46:00 AM

Here’s an excerpt from TAG Oil’s Q2 conference call, conducted by Chief Executive Officer Garth Johnson and New Zealand Country Manager Randy Toone on November 14th. You can listen to the full podcast and see the Q2 financials here, or here's a highlight for those of you who don’t want to listen to the whole recording. 

The transcript is from Thompson Reuters.

In which normally unflappable CEO Garth Johnson, allows himself to get a little bit excited…

describe the image“I don't believe that there is a peer company out there that could compare to TAG’s potential. We are creating value right now. We are fully funded to achieve our goals with over $70 million in the bank. We have no debt. We have strong cash flow from daily production. Cash flow is expected to keep growing over many years with the program we have under way. In early results we announced today at our Cheal-E site, the testing program continues to build our confidence.

Taking an optimistic view of what's in front of us at TAG is an exciting thing right now because we have a fully funded drilling program underway. With the resource potential being targeted, in the next 12 months, a 477 Bcf and 49 million barrels of oil and condensate on p50 basis. That includes prospects ranging from shallow Taranaki, deep Taranaki and shallow offshore Taranaki.

It's an amazing program for TAG. And added to that is the advancement of the East Coast unconventional play that has the potential to eclipse everything else combined if we prove it to be a commercial play. We have a lot of work to do in the East Coast but it's underway….

TAG’s always been a first-mover. We are confident we can continue to safely achieve our goals. And that will create significant value for our employees, our community, and of course our shareholders as we strive to unlock New Zealand's potential and become the number one oil and gas producer in New Zealand. 

At the same time, we have a duty to all our stakeholders to consider all potential outcomes of our programs underway. We expect success and we have the people to make it happen. But what TAG offers now that other companies our size can't do is we could also mitigate downside risk. We can do so with our reliable and growing shallow oil reserves. We have reliable and growing cash flow and we have a low risk shallow prospect inventory that can allow drilling to continue in the Taranaki production fairway for the next five to 10 years, while also combining this lower risk drilling activity with numerous potentially game-changing wells being drilled when it's smart for us to do so.

This is what we've strived to achieve for TAG for many years, that's why we remained committed to New Zealand. And recently I have been speaking to many of our shareholders and a common opinion from those discussions became apparent. And that is that for an investor it doesn't get much better than owning TAG right now, with the fully funded, potentially game-changing opportunity to participate in major upside potential while also having downside risk being mitigated.”

Topics: Financials

Plant news: Lifters lag, but Cheal E up and running in record time

Posted by Denise della Santina on Nov 20, 2013 9:28:00 AM

TAG committed to its Cheal E facility after drilling the E1 well, and less than two months later, the new oil-handling facility is in place: designed, constructed and commissioned in record time…and we’re flowing oil through this new facility today. All successful E site wells can now be tied straight into this permanent plant. 

In the past, New Zealand companies would use temporary interruptible test facilities for two to three years before committing to a permanent facility. But we now have the track record and data to understand the technical and economical aspects of these plays to know when it’s economical to commit to a permanent facility. In fact, based on the E1 well alone, we’re already adding additional oil storage facilities, and restricting the well with a 1/4” choke until they’re in.

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Lagging Oil Lifters: Working well now, but we're always looking for improvements

Over at the original Cheal A facility we had some reliability issues with our new power fluid pump system that resulted in reduced production rates last quarter.

We’ve got those taken care of and are back on track, but because of the importance of the oil lift pumps, we're testing some alternate production methods to reduce reliance on power fluid lift. When a pump going down can lead to a loss of five to seven wells’ worth of production, it’s good to look at other long-term backup solutions. Results to date are encouraging, but we continue to test. And we've now got a team in place that's always looking to optimize production. 

Topics: Cheal Production Facility, Cheal Oil Field, oil and gas production

Cheal-E individual well testing underway

Posted by Denise della Santina on Nov 18, 2013 9:41:00 AM

Cheal-E continues to provide good news, with three wells cased as potential oil wells – one of which is being flow tested – and Cheal-E 4 now drilling ahead.

Image 4To ensure more reliable production forecasting on future wells, we’re following a protocol of initially testing each well individually: with each flowing for approximately 15 days, and then shut in temporarily to conduct pressure and temperature analysis. During this shut-in period, the next well will be placed on a 15-day production test until all new wells at the site have been individually tested and build-up analysis completed.

During its initial 5-day flush period Cheal-E1 was testing at 600 BOEs a day, about 90% of that oil, flowing naturally without the aid of artificial lift. We know that will settle down to a more typical Mt. Messenger well average over the course of the next year, but considering the fact that Cheal E represents a substantial extension of our known oil saturation area at Cheal, we’re fully pleased with the results, and happy to be getting the proceeds from the sale of all that oil.

Topics: Mt. Messenger, Taranaki, Cheal Oil Field, drilling

Cardiff-3 deep gas drilling: One zone at a time, so far so good...

Posted by Denise della Santina on Nov 15, 2013 10:28:00 AM

Patience is the watchword with Cardiff-3, which hit 4,300 meters this morning. 

We've got strong gas shows in the target formations penetrated to date – as expected – with strong mudlog shows of up to 85% total gas readings in the top sections of the Kapuni Formation. But we need to be patient with this play, and are moving ahead slow and steady, trusting our experienced team as we drill through the lower K2 formation towards our final target at about 4,700m.

We're looking at three separate zones that may warrant completion: we're well into two of them so far, but still headed for the K3E Sands, our primary target. Then we’ll decide if interpreted data supports completing and production testing the well. Each zone will be evaluated independently and analyzed to determine if commercial production is a reality, starting with un-stimulated testing for a minimum 30-day flow period, then shut in for a pressure / temperature build-up, and then maybe a fracture stimulation of the well in early 2014.

This play has the potential to increase TAG’s corporate NPV by three to four times if we're successful, so as New Zealand Country Manager Randy Toone says, “We're not going to hurry anything just to try and create market excitement.” One step at a time, so far so good!

Perforation action shots at the Cheal-E2 site

Posted by Denise della Santina on Oct 25, 2013 2:33:00 PM
While our deep prospects have been dominating the news, the team is moving ahead methodically drilling TAG's shallow oil and gas prospects at Cheal. They took a minute to send some shots from the field of a recent perforation at Cheal-E2, as well as modeling some of the new equipment that's in place to move the oil and gas.

001 Full WidthTaking the cap off of E-2, and getting ready to perforate.
 

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Randy Toone on the ladder about to
drop the bar to perforate.

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Smile for the camera...

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And there she goes! Jack starts the
clock: it should take about 3.5
minutes to land on the firing pin at
the Urenui zone.

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Hands on the well head to feel the
guns fire: 2.5 minutes... 3 minutes...
Boom! Successful perforation.
 

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Shane already has concrete pads
poured for the permanent production
facility at the Cheal E-Site.
 

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And he models the line heater,
already built and installed, that will heat power fluid.
 

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Instrumentation is already in place,
waiting to be connected.

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Shane explains how the power fluid
pumps will sit right on the pads.

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Out the back of the facility, this is
where the pipe rack will carry gas
down to the flare tank in the distance.

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Steve Webling working on the flare
stack.

Topics: Cheal Oil Field, Technical team

30-Days' Deep on Cardiff-3 Drilling

Posted by Denise della Santina on Oct 25, 2013 2:31:00 PM

Cardiff-3 has reached a depth of 3,918 meters on day-30 of its drilling, and we expect it will take another two weeks to hit our projected depth of 4,900 meters. At that point, we should know whether to proceed with hydraulic fracturing stimulation or not, depending on the total meters of net gas pay, permeability, and the volume of original gas in place that we think we can access with this well bore.

If fracturing is required (the Taranaki Regional Council has granted consent, should it be called for), careful study has shown the formations we're targeting to be completely sealed by more than 4 kilometers of impermeable rock. And TAG will only use the new generation plant-based fracking fluids, which will be contained in a closed system along with the water used. 

On a mid-case (P-50) basis, the prospective resource estimate at Cardiff-3 is 160 BCF gas and 5.49 million barrels of condensate. Now only time...and a little more drilling...will tell.

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Topics: exploration well, Cardiff, Cardiff Deep Gas