Credit Suisse has initiated coverage of TAG Oil, citing the company’s “layers of success” that include its portfolio of assets, location of operations, strong balance sheet and successful track record and demonstrated ability to execute.
What they specifically highlighted:
- The 5,000 boe/d in behind pipe production that TAG is set to bring in by Q1/13 will contribute cash flow to a strong net cash balance of C$106 million at FQ1/13. That, plus the lack of long-term debt, will enable the Company to continue to self-fund its growth.
- TAG’s proven success in the Taranaki Basin, and the Basin’s multiple layers of prospective hydrocarbon zones: the shallow basin plays of Cheal and Sidewinder which are fueling growth and profitability now, as well as the deeper condensate- rich plays of Hellfire and Cardiff, which will drive midterm growth in FY 2013 and 2014.
- The potential of long-term tight oil: As exploration with Apache Corp continues in the East Coast Basin, the value generation potential of 13 billion barrels OOIP estimated in TAG Oil’s permit assets could be significant.
- New Zealand operations provide a low geopolitical risk, operating and transportation costs are lower cost than many North American oil and gas producers, and there are no seasonal considerations that impede many Canadian drilling operations.