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TAG Oil boosts fiscal Q3 production 30% year-on-year

Last updated: 20:08 17 Feb 2015 GMT, First published: 21:08 17 Feb 2015 GMT

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TAG Oil (TSE:TAO) (OTCQX:TAOIF) said its fiscal third quarter production jumped 30 percent from a year earlier and 8 percent from the previous quarter due to successful development drilling and optimization at its core Cheal operations in New Zealand.

The oil and gas producer reported Tuesday its fiscal third quarter results for the three months ending December 31, posting average daily production of 1,991 barrels of oil equivalent.

The company said that growing production from its core Taranaki Basin oilfield area will continue to be a priority, focused specifically on shallow Miocene drilling, which it says will help fuel its reserve-based growth in the zone.

It is also expecting to grow from success on drilling its shallow and deep formation prospects along trend from existing discoveries in the Taranaki, TAG said.

The Canadian company achieved record net oil production volumes during the latest period, averaging 1,543 barrels per day --- a 44 percent increase over the same time frame last year.

It also booked revenues of $12.28 million, on a net loss of $944,000, or 1 cent per share. Operating cash flow, which is an adjusted measure, came to $3.97 million.

As commodity markets have weakened considerably over the last year, product pricing unsurprisingly declined, to a price of $77.29 per barrel of oil and $3.60 per mcf for natural gas. This compares to $112.74 per barrel and $5.43 per mcf in the third quarter last year.

TAG in November already reduced its fiscal year 2015 budget to $43 million, and said today that further reductions are being considered as part of an ongoing review of capital programs.

The company was named one of the top picks for 2015 earlier this year by M Partners, which said the oil and gas producer is well positioned to ride out the current storm given its solid financial footing. TAG, which has assembled a New Zealand-focused land package totaling 2.8 million acres over three basins, is now in the process of bringing additional production onstream at its Cheal-E field.

Over the next 18 months, the company has postponed several higher-risk drilling efforts, and has cut back about $3.5 million from its previously allocated Cheal development drilling budget. It has also applied for necessary approvals to extend commitments on certain exploration properties.

"I commend the TAG Oil team for achieving a good result over the quarter, while reducing costs and identifying optimization opportunities," said chairman Alex Guidi. 

"Although we are reducing the level of high-risk capital expenditure, TAG controls a quality, long-term development-stage asset, producing premium-priced (Brent) light oil with substantial remaining development, appraisal and exploration upside in multiple proven producing formations. 

“When oil prices improve, should markets become more favorable, or should other opportunities arise, TAG is in position to increase the level of exploration activity."

The company, which ended the period with $31.1 million in cash and equivalents and $32.9 million in working capital, said it anticipates moderate growth of its production and reserves over the coming quarters as it funds a "conservative development drilling program over its core producing properties."

For the first nine months of fiscal 2015, TAG's cash flow from operating activities increased 9 percent year-over-year to $23.3 million, and operating netback climbed 4 percent to $59 per barrel of oil equivalent.

Separately, TAG, which announced the departure of its CEO and COO earlier this month, said Brad Holland will join its board of directors on March 1, replacing Douglas Ellenor, who has resigned for personal reasons. Holland has over 30 years of experience in the management of oil and gas projects, including 18 years as senior project engineer for Saudi Aramco.

Disclaimers:

Netbacks:

TAG Oil's netback is the operating margin that it receives from each BOE sold. The method of calculation that was used to determine the netbacks that are disclosed in this release were calculated by subtracting TAG Oil's royalty, transportation, storage and production costs from its revenues.

BOEs:

TAG Oil has adopted the standard of six thousand cubic feet of gas to equal one barrel of oil when converting natural gas to "BOEs." BOEs may be misleading, particularly if used in isolation. A BOE conversion ratio of 6Mcf: 1 Bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.

Cautionary Note Regarding Forward-Looking Statements:

Statements contained in this news release that are not historical facts are forward-looking statements that involve various risks and uncertainty affecting the business of TAG. Such statements can be generally, but not always, be identified by words such as "expects", "plans", "anticipates", "intends", "estimates", "forecasts", "guidance", "schedules", "prepares", "potential" and similar expressions, or that events or conditions "will", "would", "may", "could" or "should" occur. All estimates and statements that describe the Company's objectives, goals, forecasts, guidance, production rates, test rates, optimization, timing of operations, increased pace of drilling, statements regarding prospects being drill ready and/or future plans with respect to the drilling and field optimization work in the Taranaki Basin are forward-looking statements under applicable securities laws and necessarily involve risks and uncertainties including, without limitation: risks associated with oil and gas exploration, development, exploitation and production, geological risks, marketing and transportation, availability of adequate funding, volatility of commodity prices, environmental risks, competition from other producers, and changes in the regulatory and taxation environment. Actual results may vary materially from the information provided in this release, and there is no representation by TAG Oil that the actual results realized in the future would be the same in whole or in part as those presented herein.

Other factors that could cause actual results to differ from those contained in the forward-looking statements are also set forth in filings that TAG and its independent evaluator have made, including TAG's most recently filed reports in Canada under NI 51-101, which can be found under TAG's SEDAR profile at www.sedar.com. TAG undertakes no obligation, except as otherwise required by law, to update these forward-looking statements in the event that management's beliefs, estimates or opinions, or other factors change.

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