TAG Oil Ltd. V.TAO

Unrisked 225$ per share...GMP

[greatemailslob]

Tag Oil recently completed a financing and it was quarter backed by GMP Securities. Peter Nicol of GMP put out a

very intriguing report on Tag Oil so why don’t we reprint some of what they wrote.

Under Top Three Reasons to own Tag Oil they wrote this:

“Prospective Acreage and Billions of Barrels of Oil in

Place. On very conservative numbers we estimate that TAG

will have a core NAV post the raise of C$1.44/sh which consists

of C
.74/sh cash and proven and probable reserves/

resources of
.77/sh. These reserves are currently on production.

In addition, in attempting to test the conventional

reservoirs in the East Basin on the Waitangi Hill acreage the

well started to flow on them at 179 m depth indicating that

some of the 10mmboe net risked resources we carry at

C$2.95/sh risked are present. Our risked value per share of

TAG is C$14.82/sh post the raise and our unrisked value per

share is worth over C$225/sh if TAG can unlock the potential

of its unconventional oil shale plays. The oil is there—it’s a

matter of unlocking it.”

“Wide varied portfolio from low risk development to

higher risk exploitation and exploration. From its recompletions

and workovers on Cheal to boost production

and potentially reserves for low cost to a large multi-stage

fracturing pilot on its unconventional oil shales TAG has a

wide range of opportunities to target which will provide

short term cash-flow and catalysts. It also has the large

upside potential and varied portfolio of a company 3-4 times

its size and footprint. Finally, it’s operating in a stable democratic

nation and can easily sell its assets, farm-out its

acreage and/or move at its own pace which provides a large

amount of flexibility for TAG and ultimately shareholders.”

“Upcoming Activity. With an extensive work-over program,

optimization of wells at Cheal, testing of upper

zone and several proposed step-out wells the Cheal development

will provide several catalysts alone.

TAG also plans to drill at least one well on the Winchester

Permit (maybe more) in 2010, drill and test the Waitangi

structure to test the conventional resources on the block

(the well that flowed oil to surface from 179 m). Further in

the next 12-18 months, TAG also plans to drill a well into

the Boar Hill structure to test the upper conventional potential

and the deeper unconventional (which would involve

a multi-stage frac).

Okay folks so those are the three main reasons and

now we get into a touch of daydreaming, we’re taking high

risk/high reward to the extreme. Look at the numbers that

are used here for potential value per share on a risk and

an unrisked basis. You might want to ask your accountant

what that means and basically you are playing with numbers.

You have no idea at this point how big this play

might be so how much of all these dreamed up numbers

should you actually give credibility to?

Well somebody has got to come up with some number

so these are the numbers that GMP has used. When we

did our first interview with Clive Stockdale and he came up

with $50 a share, people thought that was outrageous, well

here you go again.

Nicol’s of GMP came up with the top 3 risks facing the

company in the next 6 months and they are the following

(and you should be aware of that):

“Exploration failures and dry holes: there is significant

potential for TAG's acreage, however if the company were

to have several exploration failures in its initial program it

could affect its ability to raise capital and/or farm out its

acreage going forward.

“Access to infrastructure and markets: in the near

term there is a relatively small local market that could

utilize oil or gas from a large discovery. If TAG Oil were

to discover gas or a large oil accumulation it may prove

difficult to monetize in the near term.”

“Execution Risk: TAG’s business model is based on

finding undeveloped assets and bringing them into production.

As the business grows this inevitably entails

growing the operational capabilities of the business and

overseeing and managing a growing number of projects.”

Meanwhile not all the analysts are totally smitten by

TAG Oil. One analyst whose name we cannot use has

had a look at the data and suggests that if the stock was

cheaper it actually might be a good speculation but at

this level of market capitalization he emphasizes the

size of the risk, and suggests that there is simply too

little data and science to base some of these lofty targets

on. He also points out that there are several Bakken

like plays around the world that some people

thought were slam dunks and it turned out that they

weren’t.

Bottom line is that the TAG Oil over the next year will

probably remain the ultimate high-risk, emphasis on

high risk/high reward.

david pescods edition

Debbie Lewis
Licensed Sales Assistant
Canaccord Wealth Management
Suite 2700 Manulife Place
Edmonton, AB T5J 3S4
Phone:[phone]
Fax: [phone]
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