RE: Oil and GasWhatismoney,
Nice post. I believe that tag oil will definately meet their year-end-goal with 1500 barrels of oil per day. I think they might even manage to get 2000. They are expecting each well with horisontal drilling with fraccing will yield about 1000 barrels a day, and they are making 4 of them in this drilling campaign I belive. And on top of that will continue with stimulation on existing wells.
They might not be able to get all of these new wells on stream, but cumulative production ffrom the wells (connected or not) will surely be at least 2000 barrels of oil per day.
When that is put onstream, the production facility will have reached its current maximum. How much it will cost to expand that would be really interesting to know, but unfortunately I have no clue. I think that the company will continue the drilling campaign on the west coast next spring as well (depending on what they will find this autumn/winter).
When I bought the share at 2.7, I did it because according to my calculation I got the amazing potential on the east coast for free becaouse the west coast alone could carry the enterprize value when producing 1500 barrels a day. If (when) the company reaches about 3000 barrels a day, the current market cap is carried as well. And by carried I mean that the ev/op cashflow is about 6. Not that high at all. And that puts zero value on east coast, which is ofcourse absurd.
It should not be long now before the company presents results from the first horisontal well with fraccing in Cheal. I am guessing that the risk för a disappointment is very low since they have already fracced a vertical well with great success. Later this autumn they will drill a horisontal well with fraccing through the Urenui formation. That one is ofcourse a bit more risky, but they managed to get at least conventional production from that formation when they tested it this summer. If they succeed with this, the company has great opportunities to expand their reserve base considerably since the Urenui formation is present in all wells drilled in the Cheal area.
So I beleive that the "seatbelt" for investing in Tag Oil ist still there becouse of taranaki. The potential rocketfuel for the stock on the eastcoast is still very risky. But hey, as long as its "free", why not buy the stock? :-)
The conventional Boar Hill prospect on the east coast will probably be drilled in March, and two Shallow wells must be drilled in Watangi hill in April. Especially the Watangi Hill prospects are probably pretty low risk since they have found oil there in last April's drilling. Boar hill is more risky, and I am not sure that the company will drill down all the way down to the Shales in March, but wait with that a bit longer. Time will tell.
The management of Tag is really oldfashioned, they build their company slowly and focuses on cashflow first. That might not be too sexy, but in the long run it will make each share much more valuable since it will not be as diluted.
Now we just wait for the production results on the their new reservoir broadside and the horisontal well.