TAG Oil Blog

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

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

Drilling Deep in the Taranaki Basin

Posted by Denise della Santina on Sep 19, 2013 8:27:00 AM

The team spudded the Cardiff-3 well on September 2nd, and we expect it will take six weeks total to reach its projected depth of 4,900 meters. As of yesterday, we were at about 1,000 meters.

This is the kickoff to our high impact, deep drilling campaign in Taranaki, which will run over the next six months, and it’s the first well to target one of our Kapuni Formation prospects. 

Kapuni, below the surface

The Kapuni Formation, comprised of the deep Oligocene and Eocene strata, is responsible forScreen Shot 2013 09 18 at 5.43.50 PM several major discoveries where 2P (proven and producing) reserves of 6.9 TCF gas and 372 mmbls oil/condensate have been discovered so far. This includes Shell’s nearby Kapuni Field, which has produced 1.5 TCF gas and 65 million barrels of condensate to date.

The Cardiff structure has been identified as a large anticlinal trap, some 12 km long by 3 km wide, with a number of potential pay zones within the Kapuni Sands Formation. The Cardiff gas/condensate discovery has the potential to become a substantial onshore resource, situated on trend and among several sizable deep gas/condensate discoveries in the Taranaki.

Gas with rich condensates was discovered at Cardiff within the upper Kapuni zone, which encountered 12m of net pay and flowed at over 3 million cubic feet and 100 barrels of condensate (light oil) per day with improving rates observed on long-term testing. This zone can be identified on 3D seismic to be a prospective target across the span of the Cardiff structure. And even greater resource potential exists in the deeper K1A and K3E zones, where strong gas shows were encountered over a gross 600m interval. This will be a primary target in the Cardiff-3 well.

And the big picture above the ground

More as this well, and our expanded Taranaki program as a whole, progress. We’ve got two drill rigs actively operating, and a third rig that will begin operating on our permit shortly, all within Taranaki’s main discovery fairway.

Things are rocking and rolling, and we’ll do our best to keep you informed!

Cardiff-3 deep well

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

New Zealand awards TAG acreage in the Taranaki discovery fairway

Posted by Denise della Santina on Dec 12, 2012 9:39:00 AM

2012 Block Offer Imagery 21A very pleased Garth Johnson (TAG Oil CEO) poses for a photo with New Zealand Minister of Energy and Resources Phil Heatley at the 2012 Block Offer awards ceremony.

At the ceremony, TAG Oil was awarded four onshore Taranaki Basin exploration blocks, expanding our acreage by another 37,000 gross acres. More importantly, it’s acreage that sits in the main Taranaki oil and gas discovery trend. TAG has extensive 2D and proprietary 3D seismic over much of the acreage, which indicates several new prospects that we look forward to drilling. The awards initially add at least 10 drilling prospects plus the numerous leads in close proximity to the producing Cheal oil field and infrastructure.

TAG will operate the new permits and JV partner East West Petroleum will fund four wells within PEP 54876, 54877 and 54879 in 2013, earning East West a 50% interest in PEP 54876 and PEP 54879 and a 30% interest in PEP 54877.

PEP 54873 (100% TAG) provides several shallow drilling leads along with significant exploration upside via a drill-ready deep gas and condensate prospect that has similar geological features to the adjacent Kapuni gas/condensate field.

Topics: Taranaki, Announcements, Kapuni gas/condensate, Cheal Oil Field