TAG Oil Ltd. V.TAO

TAG Oil Announces Year-End Financial Results

[kanerfalk]

TAG Oil Announces Year-End Financial Results and Operating Highlights
VANCOUVER, Jul 29, 2010 (Canada NewsWire via COMTEX News Network) --
TAG Oil Ltd., (TSX-V, trading symbol: "TAO") a Canadian-based production and exploration company with operations in New Zealand, reported financial results and operating highlights today. TAG reports that it has filed these results along with its Annual Information Form with the Canadian Securities Administrators as well as NI 51-101-compliant reserves disclosure for the period ended March 31, 2010. Copies of these documents can be obtained electronically at www.sedar.com or through the Company's website: https://tagoil.com/financial-reports.asp.

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Year-End Highlights
- Production revenue for 2010 increased to $6,527,585, compared to
$4,923,856 in 2009.
- TAG produced 67,525 net barrels of light oil in fiscal 2010, which
was sold at an average price of $84.50 per barrel. Daily production
averaged 323 gross barrels of oil per day and 294 mcf gas per day.
Current daily production is 414 barrels of oil and 667 mcf of gas.
Production costs for fiscal 2010 were $22 per barrel; operating
efficiencies continue to improve, and additional production will also
reduce per-barrel production costs.
- TAG acquired the remaining 69.5% interest in the Cheal Mining Permit,
which contains the producing Mt. Messenger oil and gas discovery and
the bypassed Urenui discovery currently under appraisal. The
acquisition also included the Cheal treatment and production
facilities and related infrastructure. Over 90% of the 7487-acre (11
section) permit is lightly explored, adding low-risk opportunity for
additional discoveries to be made. Numerous drill-ready prospects
that have been identified on the permit-wide 3D seismic data have
been prioritized for step-out drilling. Early testing of various
downhole recovery technologies have already set the stage for
boosting production and recovery from the current 9.55 million
barrels of original oil in place within the 608-acre area attributed
to discovered resources.
- TAG acquired the remaining 66.67% interest in a 7910-acre (12
section) exploration permit, PEP 38748. The permit area contains
numerous low-risk, high-impact drilling prospects defined on the
permit-wide 3D seismic data, and is located on trend within the
onshore Taranaki Basin discovery fairway.
- TAG's 2P reserves increased by 450% to 651,000 barrels in the Cheal
Mining Permit (PMP 38156-S) per the Company's independent assessment
of reserves effective as of March 31, 2010. The increases result from
a number of factors such as recovery factors, oil prices and
projected future well performance. TAG's initial optimization program
and success from initial testing of recovery technology seeks to
build upon these reserve increases in the near future. The success of
this initial program has set the stage for a more aggressive approach
to develop the Cheal field, and has provided support for the
significant upside potential of the Cheal area.
- TAG completed a second transformational acquisition of Trans-Orient
Petroleum's conventional prospects and unconventional oil shale
prospects in the onshore East Coast Basin. This acquisition
positioned TAG with a 100% interest in over 2 million onshore acres
in a lightly explored rift basin. This basin was independently
estimated in September 2008 to have a total hydrocarbon potential
with a best-estimate volume of 12.6 billion barrels of undiscovered
hydrocarbon-in-place within the Waipawa Black Shale and Whangai Shale
oil and gas source rock formations. The acreage also contains a
number of drill-ready conventional prospects estimated in September
2007 to have a total hydrocarbon potential with a best-estimate
volume of 1.7 billion barrels of undiscovered hydrocarbon-in-place.
During the 2010 fiscal year TAG began appraising the historical
Waitangi Hill shallow (250m) light oil discovery with a stratigraphic
well test, with encouraging results. A thin pressurized oil zone was
intersected. Tests confirm that the oil generated in this zone was
generated from the underlying shale formations, as was oil sampled
from the historical Waitangi-1 wellbore, providing evidence of the
maturity of the shale formations and their viability as source rocks
and reservoir targets.
- TAG was awarded a 100% interest in a 61,900-acre permit extension
that includes the remaining portion of the very large Kawakawa oil
shale prospect located onshore in the East Coast Basin. This
acquisition further solidified TAG's position in this highly
prospective unconventional frontier area, and will be one of several
key areas of exploration drilling focus when TAG initiates its East
Coast drilling campaign.
- TAG is financially strong, with net working capital as at March 31,
2010 of $9.57 million. TAG's working capital as of July 29, 2010 is
approximately $26 million; the Company is completely debt free, and
has maintained the integrity of its share structure.
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TAG Oil CEO Garth Johnson commented, "Fiscal 2010 was a year of significant value creation, growth and high-level achievement in all areas of the Company. More importantly, the series of transformational acquisitions completed during fiscal 2010 set the foundation for rapid growth, and has placed TAG into a new tier of emerging international companies. TAG has 100% interests in all of its assets and can control the process to drive reserve growth, and to exploit and unlock the potential identified within the Company's acreage."
Liquidity and Financial Summary
The Company recorded a net loss for the year of $2.6 million, compared to a loss of $18.9 million for the year ended March 31, 2009. The 2010 net loss consisted primarily of a write-off of $1.4 million related to Austral Pacific Energy Ltd. shares that were issued to TAG, along with cash, as part of an arrangement to settle a dispute with Austral Pacific Energy Ltd. in 2008. Additional contributions to the net loss were other non-cash items: depletion, stock-based compensation, and a write-down of inventory totaling $1.38 million.
On May 5, 2010 TAG issued 7.7 million shares at $2.60 per common share to Canadian institutions, private funds and investors for net proceeds of $18.7 million. TAG also issued 3.85 million warrants to these investors, exercisable at $3.60 per share until November 5, 2011. This financing was conducted by a syndicate led by GMP Securities L.P. and including Cormark Securities Inc. TAG currently has 37,646,608 common shares outstanding and 43,566,060 common shares outstanding on a fully diluted basis.
Capital Expenditure
Capital expenditures during fiscal 2010 totaled $6,415,189, compared to $2,128,790 during 2009. Major capital expenditure items during 2010 related to the acquisition of a 69.5% interest in Petroleum Mining Permit 38156-S, containing the Cheal oil and gas discoveries, which brought TAG's interest to 100%. In addition, the Company incurred costs related to acquiring Trans-Orient Petroleum Ltd. and the tie-in of the Cheal-A7 well to the Cheal production facility, long-lead items and costs associated with exploration in the East Coast Basin.
TAG will soon begin a multi-well exploration and development drilling campaign in Taranaki while also conducting new optimization operations consisting of additional fracture treatments to existing Cheal wells, further implementation of downhole heating technologies to unlock the significant potential in the bypassed Urenui discovery, and the Cheal field's first horizontal well with multi-stage fracture treatments into the proven Mt. Messenger area.
"In the short term we are focused on building our production and profitability, and adding additional proven reserves in Taranaki. We are also preparing to initiate drilling operations and consider strategic initiatives to explore the major potential in the East Coast Basin in early 2011, targeting the conventional and unconventional prospects," Johnson concluded.