TAG Oil Blog

Unprecedented hydrocarbon pressures put a lid on Waitangi Valley-1

Posted by Denise della Santina on Oct 6, 2014 8:33:00 AM

For those of you who missed our conference call and press release, we began the process of plugging and abandoning the Waitangi Valley-1 well. This job follows a methodical, carefully planned process, starting with getting the drilling equipment that’s no longer necessary out of the way and back to Taranaki. That takes a couple weeks, then we move in the equipment to P&A the well, which is expected to happen shortly.

There are no guarantees in any business, but based on the amount of homework we do, we always aim for good results. And we always take a safety-first approach to all our operations, regardless of the outcome.

One key point made by COO Drew Cadenhead in our call a few weeks ago bears repeating: “The first thing I want to make perfectly clear…is Waitangi Valley-1 is not a dry hole, it is anything but a dry hole…the indications to date are actually quite positive. “

He went on to say: “We've clearly identified that the hydrocarbon kitchen is definitely working in the Waitangi Valley area. There's no doubt about that. We've also confirmed the over-pressured nature of this part of the basin…. We have very high quality, 50 degree API oil. We've got a naturally fractured reservoir down there. And we have extreme pressures trying to push this stuff out.” 

So why abandon? Again in Drew’s words:

“The problem…is that we have encountered extremely high-pressure hydrocarbon zones at very shallow depths, unprecedented in the world … at such shallow depths according to the mud experts that have been working on the East Coast with us…. So we're going to need a concerted effort from all of our TAG guys, and from a number of worldwide experts that we've involved in our process here to reengineer that well.”describe the image

The details Drew shares about the challenges of capping a well with such intense pressures, and why the multiple casings needed to protect the integrity of the hole in that type of over-pressured situation would have made critical data collection impossible, is fascinating. For anyone who wants to hear a recording of the call or read a transcript you can access it here.

From a financial and business point of view, CEO Garth Johnson opened the call reminding shareholders that TAG hadn’t forecasted any production or cash flow contributions as coming from Waitangi Valley, and the higher risk profile of this type of unconventional exploration is precisely why the Company so carefully manages the balance of its portfolio, and its drilling and exploration program. 

“We conduct these operations knowing the challenges, and with the knowledge that we need to take a long-term approach to these opportunities. Companies exploring in the unproven, unconventional basin need to have the staying power and be prepared to drill a number of wells over many years to truly understand the possibility for commercial success.

To have the staying power you need to build a foundation of reserves, production and cash flow, which we've done, and over the years we need to grow that foundation. This is what we continue to do and that allows our team at TAG to take a few shots each year at some potential game changers.”

We’ll be back to the East Coast when we can once again tackle it on our own terms. But for now, it’s back to our bread-and-butter play, where we have more than 50 new prospects lined up, and many more being added to the list for exploration and development, in Taranaki where oil production continues to be strong.

Topics: East Coast Basin, unconventional oil, tight oil

Year-end, and full speed ahead.

Posted by Denise della Santina on Jul 14, 2014 2:24:00 PM

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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!

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Topics: East Coast Basin, Financials, unconventional oil, Taranaki, Cheal Oil Field, Cardiff Deep Gas

Strategy stays the course, even as new plans take shape

Posted by Denise della Santina on May 21, 2014 11:05:00 AM

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.

Looking ahead

While there are no guarantees in this business, we see every reason to continue setting our4734035818 e888d30cde z 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.

Topics: East Coast Basin, Taranaki, Kapuni gas/condensate, Cheal Oil Field, Sidewinder Discovery, Cardiff Deep Gas, Kaheru

Report confirms Ng-1 oil generated from Whangai unconventional rocks

Posted by Denise della Santina on Feb 19, 2014 5:08:00 PM

We've been not so patiently awaiting the results of the independently conducted Reservoir Characterization Study (RCS) on TAG Oil's East Coast Basin, unconventional Ngapaeruru-1 well, and it has finally arrived. 

oil-rich Whangai shaleThis RCS study provides the first true unconventional data set ever acquired in the East Coast Basin, and the quality of this state-of-the-art data set provides the first specialized interpretation necessary to unlock the major oil and gas potential of TAG's East Coast Basin unconventional play.

As our team had hoped, the study confirms that oil is being generated in the Whangai source rocks, as well as a number of critical positives showing the Whangai to be a viable unconventional oil target. Not that it's a surprise to us, but independent confirmation is always good. (This is a studio shot of our oil-rich Whangai shale, above.)

A few highlights include:

- Analysis places the Whangai source rocks in the oil/condensate window, correlating well with the 50-degree API oil seeps in the basin

- The hydrocarbon-filled porosity exceeds the minimum standard thresholds for unconventional reservoirs

- Permeabilities exceed standard unconventional reservoir thresholds

- The Whangai Formation has very low clay content, indicating fracture stimulation can be highly effective

In order to prove the viability of moveable hydrocarbons from within these source rocks and the economic viability of this unconventional play, TAG can now move on scheduling perforation and production testing of Ngapaeruru-1.

For more detailed information, see our recent Q3 press release. And stay tuned for what happens next!

Topics: exploration well, East Coast Basin, unconventional oil, drilling

100% compliance on the Ngapaeruru-1 well

Posted by Denise della Santina on Aug 12, 2013 2:15:00 PM

We’re happy to report the positive findings in a report by Horizons Regional Council, which tracks and manages the land, air, and water for a large portion of New Zealand’s north island.

Horizons visited TAG’s Ngapaeruru-1 site 11 times to monitor compliance during construction and drilling activities, and to take ground and surface water samples with each visit to test the different phases of well activity. Visits and water analysis showed no incidents – essentially giving TAG and the well site a clean bill of health.

TAG’s operating goal is to achieve 100% compliance during all activities of its drilling programs, whether it affects worker or environmental safety, and we thank our team for their care and commitment.

More about Horizons Regional Council

The Council focuses on biosecurity and biodiversity, and “works to identify potential hazards and risks to people, property, infrastructure, environment and the local economy.” The area they oversee:

  • Covers 22,215 sq km of land
  • Includes 160 km of coastline, with the Tasman Sea to the west and Pacific Ocean to the east
  • Extends 12 nautical miles out to sea
  • Is home to more than 220,000 people

More about Ngapaeruru-1

We continue to analyze the very encouraging drilling data, and our team expects to make a decision on future activities in the coming months. 

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Topics: exploration well, East Coast Basin, third-party reports, unconventional oil

Oil and gas exploration as (responsible) economic engine

Posted by Denise della Santina on May 26, 2013 10:19:00 PM

There’s been a lot of good, constructive dialogue in New Zealand recently between industry, indigenous populations and local government, most recently in the East Coast Basin where TAG Oil is actively exploring and the Ngati Kuhungunu iwi live.

As reported recently in the online FW+, iwi members are supporting economic development in addition to tending to environmental concerns.

describe the imageTAG is 100% committed to observing blue-chip standards of operation, and we take our responsibility to the environment very seriously. Over the past 15 years, we’ve developed resources in the safest way possible -- with the most sophisticated methods available -- doing our utmost to not compromise New Zealand’s rich beauty or natural resources. We’ll continue to do so, and we very much appreciate it when our professionalism and care are acknowledged and respected as much as we respect the concerns of our neighbors.

We live here too, with our children and grandchildren. We’re also engineers, scientists and business people who apply substantial resources to due diligence and the search of facts and knowledge. An open, informed and measured discussion on balancing economic and environmental concerns is critical, and we look forward to continuing the conversation.

“The iwi wanted to help the whole community into work. Oil and gas exploration could help achieve that….” To link to the full FW+ article, please click here: http://bit.ly/Z3p9u4

Topics: East Coast Basin, unconventional oil, New Zealand, Canterbury Basin

Intersecting oil & gas shows in our East Coast Basin source rock

Posted by Denise della Santina on May 20, 2013 10:29:00 AM

Our team is happy to report that our Ngapaeruru-1 exploration well successfully drilled through the Waipawa and Whangai source rock formations in permit 38349, an area we call Boar Hill. Early mud-log analysis returned predominantly wet gas and oil indications – meaning the presence of gas zones or soluble gas in oil – which is incredibly exciting.

This was our first unconventional target in the East Coast Basin, and New Zealand’s first test directly targeting the naturally fractured Waipawa and Whangai formation source rocks, which have been estimated to contain a significant oil and gas resource. While we encountered tricky drilling conditions, everything went smoothly. 

Now on to analysis.

During drilling we cut and recovered sidewall cores over several intervals within the 155 meters of potential unconventional oil and gas pay, sampled total organic content (TOC) and acquired gas analysis at depth. Our team, as well as independent labratories, are now undergoing a detailed evaluation and analysis to determine source rock quality, fracture identification, geochemistry, and more. This data will not only help us better understand the long term feasibility of our East Coast Basin opportunity, but it will guide our technical team to the best completion method and production testing of the well. 

We’ll keep you updated!

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 Sunset over the groundbreaking Ngapaeruru-1 exploration well.

Topics: exploration well, East Coast Basin, unconventional oil, tight oil

Targeting first oil & gas discovery potential in the ECB

Posted by Denise della Santina on May 2, 2013 1:56:00 PM

Here's one of the first photos to come in from TAG Oil's Ngapaeruru-1 wellsite, spudded on April 22nd. Our exploration team is targeting the Waipawa Black Shale and Whangai source rock formations at an anticipated depth of 1,800 meters to test the unconventional discovery potential in this portion of New Zealand's East Coast Basin.

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This is another step in TAG's long-term strategic plan: to leverage the success -- and cash flow -- of the Company's lower risk conventional assets in the Taranaki Basin, in order to intelligently pursue higher impact exploration opportunities elsewhere in New Zealand.

The Waipawa Black Shale and Whangai formations are oil-and gas-rich source rocks present throughout most of TAG's million-acre East Coast Basin land holdings. Oil sampled from seeps on TAG's East Coast permits proved to be from the Waipawa Black Shale and Whangai formations, and high-quality live oil recovered from shallow wells drilled in 2011 was also confirmed to be generated from these source rocks

Extensive geotechnical work on TAG's East Coast acreage, including proprietary 2D and 3D seismic, have confirmed that the source rock parameters compare favorably to commercial unconventional tight oil and gas plays throughout the world, comparable in total organic carbon content and oil and gas maturity levels, for example, to North Dakota's Bakken shale. 

Topics: exploration well, East Coast Basin, unconventional oil, Technical team, tight oil

TAG's East Coast Basin Exploration: Onward and Upward!

Posted by Denise della Santina on Feb 5, 2013 7:43:00 AM

TAG Oil has experienced heavy trading activity recently, with over 13 million shares traded in January. This is due in part to the news that Apache has exited our East Coast Basin joint venture as part of their global corporate repositioning.

We have strong support from analysts following TAG, and the entire TAG team including large shareholders are delighted to take back 100% control of the project, sending out positive feedback to the investment community.

We're happy to move forward with the strong technical work that TAG and Apache accomplished together in the East Coast Basin, and are ready to begin exploration drilling in this frontier blanketed with conventional and unconventional oil and gas opportunities.

Says MPartners, "We view the quick, cash settlement with Apache positively." 

Says Credit Suisse, "We maintain our Outperform rating and raise our TP to $9.50."

Says Casimir Capital, "TAG back in the driver's seat...Recommendation: Strong Buy."

Says National Bank Financial, "Reiterate Outperform Rating...We continue to like the stock at these levels."

Topics: East Coast Basin, third-party reports, Financial coverage, Apache Corp

High-impact frontier exploration in New Zealand’s East Coast & Canterbury Basins

Posted by Denise della Santina on Oct 11, 2012 11:48:00 AM

describe the imageAmong all the infrastructure upgrades underway to open the throttle on yield and production in the Taranaki Basin, we never lose sight of our major exploration potential: We have had great exploration success thus far but we still have bigger aspirations!

East Coast Basin activities with partner Apache Corp -- which has agreed to spend up to $100 million to conduct a multi-phased exploration, appraisal and potential development program -- are progressing well. If the necessary drilling consents are obtained from district and regional councils in a timely manner, TAG and Apache anticipate well-site construction to begin in the first quarter of calendar 2013, followed shortly by drilling operations.

To increase the Company’s high-impact opportunities in under-explored areas, TAG has also been actively seeking and acquiring rights to other strategic permits.

First is TAG’s summer acquisition of two new East Coast Basin permits totalling 842,000 onshore acres, which will become a focus of exploration work in the coming years.

We also recently acquired over a million acres of frontier exploration permits situated both offshore and onshore in New Zealand’s Canterbury Basin, an under-explored high potential area with geological similarities to Taranaki. In this South Island acreage, TAG is currently planning an 80 km 2-D seismic program to identify new leads and prospects.

Offshore drilling scheduled for 2013 and 2014 by majors like Anadarko, will allow TAG to focus onshore initially, while holding considerable upside related to its near-shore acreage directly updip of their scheduled deep water offshore wells.

Topics: East Coast Basin, unconventional oil, tight oil, Canterbury Basin