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 November 16, 2015 - 9:00 AM EST
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TAG Oil Reports Increased Cash Position in Q2 Results

VANCOUVER, Nov. 16, 2015 /PRNewswire/ - TAG Oil Ltd. (TSX: TAO) and (OTCQX: TAOIF), is pleased to report the second quarter results for the fiscal year ending March 31, 2016. The Company managed to increase its cash position by $0.9 million to $21.4 million, compared to $20.5 million for the previous quarter ended June 30, 2015, and remains committed to reducing operating and administrative costs wherever possible.

As a result of the ongoing challenges posed by the economic climate and low oil prices that have stretched beyond a year now, TAG's operational vison is focused on low-risk, low-capital, incremental production increases. The Company will continue to adapt where required and make use of its expertise to further the development of its core producing acreage in the Cheal field, while reducing its risk exposure on exploration drilling. However, where appropriate and on improvement in commodity prices, TAG is prepared to utilize its operating cash flows and balance sheet to diligently pursue strategic acquisitions and exploration opportunities to enhance shareholder value.

Toby Pierce, TAG Oil's CEO, commented, "Despite lower production numbers and sustained low commodity prices, TAG managed to reduce costs and capital expenditures substantially in Q2.  Our focus continues to be on reducing our capital commitments, balancing our capital spending and positioning TAG in the best manner possible to weather the sustained low oil price environment."

SECOND QUARTER FINANCIAL AND OPERATING HIGHLIGHTS

  • TAG had $21.4 million in cash and cash equivalents and $25.5 million in working capital at September 30, 2015, with no debt and 62,212,252 common shares outstanding.
  • Average net daily production decreased by 21% for the quarter to 1,341 BOE/d (69% oil) from 1,689 BOE/d (73% oil) for the previous quarter ended June 30, 2015.
  • Total revenue decreased by 29% for the quarter to $7.4 million from $10.4 million for the previous quarter ended June 30, 2015. The decrease is mainly due to a 41% decrease in oil revenues due to a 24% decrease in average Brent oil prices and a 23% decrease in oil sales volumes.
  • Operating netbacks decreased for the quarter to $19.75 per BOE from $35.61 per BOE for the quarter ended June 30, 2015. The decrease is attributable to the 24% decrease in average Brent oil prices and 21% decrease in production volumes.
  • Cashflow provided from operating activities decreased by 3% for the quarter to $3.2 million from $3.3 million for the quarter ended June 30, 2015.
  • Capital expenditures totaled $2.8 million for the quarter compared to $2.9 million for the quarter ended March 31, 2015. 
  • On September 8, 2015, the Company submitted a change of condition application to New Zealand Petroleum and Minerals ("NZP&M") for PEP 54877 (Cheal 'E' - TAG 70% interest) for a 12 month extension on the year 3 exploration well commitment.

RECENT DEVELOPMENTS

  • On October 1, 2015, the Company announced that its Chief Operating Officer, Frank Jacobs, had resigned to pursue other opportunities.
  • On October 30, 2015, the Company received confirmation from NZP&M of the surrender of PEP 38348 (Waitangi Valley).
  • On November 5, 2015, the Company received confirmation of the change of condition application from NZP&M for PEP 54879 (Cheal 'G' - TAG 50% interest). The granted application includes the acquisition of 3D seismic over the permit and deferral of the year 4 exploration well commitment.
  • On November 5, 2015, the Company received confirmation from NZP&M of the surrender of PEP 52589 (Canterbury) and has written off all costs associated with this permit as of September 30, 2015.
  • TAG recently reported a reduction in forward guidance and a reduced capital spending program. This is in direct response to the continuing low commodity price environment and the Company's focus on preserving a strong working capital position and debt free balance sheet.
  • During the quarter, the Company successfully executed workovers on the Cheal-A12 and Cheal-B5 wells to return them to production.
  • The Cheal-A12 well was successfully re-completed, upgrading the artificial lift system with a rod pump allowing the Company to free up power fluid capacity, reduce well life cycle operating costs, and improve reliability and reservoir drawdown over the previous jet pump system.  The workover was completed safely, ahead of schedule and below budget. The Cheal-A12 well has been online since October 16, 2015, and is expected to resume post workover rates of 70 BOE/d following well cleanup. 
  • The Cheal B5 Electrical Submersible Pump (ESP) repair project was also successfully executed safely, ahead of schedule and below budget.  The well has been online since October 12, 2015, and is expected to resume post workover rates of approximately 90 BOE/d following well cleanup and ESP performance testing. 
  • The Rival-1 service rig will resume operation on TAG's Cheal A-Site in Mid-November 2015 to repair the Cheal-A1 down hole pump, then move over to the Cheal B-Site to recomplete the Cheal-B1 well, upgrading the artificial lift from a jet pump to a rod pump. The Cheal-A1 and B1 wells are expected back on line in December 2015, resuming production of approximately 100 BOE/d.

FINANCIAL RESULTS SUMMARY  






2016

2015


2014

Canadian $000s, except per share or BOE

Q2

Q1

Q4

Q3

Q2

Q1

Q4

Q3

Net production volumes (BOE/d)

1,341

1,689

1,837

1,991

1,845

1,750

1,486

1,527

Total revenue

7,359

10,385

9,705

12,282

16,179

15,571

14,025

12,939

Operating costs

(5,130)

(5,562)

(5,281)

(5,806)

(6,213)

(5,721)

(5,706)

(4,579)

Foreign exchange

810

553

757

(344)

1,206

(312)

2,246

(167)

Share-based compensation

(403)

(896)

(380)

(586)

(356)

(44)

(175)

(377)

Other costs

(4,571)

(6,165)

(7,120)

(6,490)

(5,669)

(5,804)

(4,663)

(4,830)

Exploration impairment

(2,740)

(715)

(71,714)

-

-

-

101

(15)

Property impairment

-

-

(9,182)

-

-

-

-

-

Net (loss) income before tax

(4,675)

(2,400)

(83,216)

(944)

5,147

3,690

5,828

2,971

Basic (loss) income $ per share (BT)

(0.08)

(0.04)

(1.30)

(0.01)

0.08

0.06

0.09

0.05

Diluted (loss) income $ per share (BT)

(0.08)

(0.04)

(1.30)

(0.01)

0.08

0.06

0.09

0.05

Capital expenditures

2,755

2,916

10,465

16,655

11,126

11,370

22,767

20,959

Operating cash flow (1)

1,263

3,071

2,826

3,968

9,702

7,715

6,774

6,101

(1)

Operating cash flow is a non-GAAP measure. It represents cash flow from operating activities before changes in working capital.

 

OIL AND NATURAL GAS PRODUCTION PRICING AND REVENUE






2016

2015

Six months ended

Daily production volumes (1)

Q2

Q1

Q2

2016

2015

Oil (bbl/d)

930

1,234

1,437

1,082

1,367

Natural gas (BOE/d)

411

455

408

433

431

Combined (BOE/d)

1,341

1,689

1,845

1,515

1,798

% of oil production

69%

73%

78%

71%

76%







Daily sales volumes (1)






Oil (bbl/d)

958

1,250

1,447

1,104

1,364

Natural gas (BOE/d)

300

254

176

277

189

Combined (BOE/d)

1,258

1,504

1,623

1,381

1,553







Natural gas (MMcf/d)

1,798

1,522

1,056

1,660

1,134







Product pricing






Oil ($/bbl)

56.89

74.94

110.09

67.01

113.45

Natural gas ($Mcf)

4.22

3.47

5.32

3.88

5.08







Oil and natural gas revenues (3)  - gross ($000s)

5,713

9,006

15,008

14,719

29,383

Oil & natural gas royalties (2)

(484)

(805)

(1,361)

(1,288)

(2,636)

Oil and natural gas revenues  - net ($000s)

5,229

8,201

13,647

13,431

26,747







(1)

  Natural gas production converted at 6 Mcf:1BOE (for BOE figures).

(2)

  Relates to government royalties and includes an ORR of 7.5% royalty related to the acquisition of a 69.5% interest in the Cheal field.

(3)

  Oil and Gas Revenue excludes electricity revenue related to Coronado Resources Ltd.

 

OPERATIONS UPDATE AND OUTLOOK FOR FISCAL YEAR 2016

TAG will continue to focus on the following goals during the remainder of the 2016 fiscal year:

  • Maintain its baseline reserves, production, and cash flow in the Taranaki Basin via low-risk workovers and re-completion of bypassed zones in existing wells;
  • Evaluate acquisitions in New Zealand and Australia to increase the Company's portfolio of exploration and production opportunities;
  • Seek partners to joint venture or farm-out a significant portion of the Kaheru joint venture acreage in the Taranaki Basin; and
  • Identify and hire a new Chief Operating Officer to assist in guiding our team through a pressure maintenance and water-flood program and operational activities on the ground in New Zealand.

Going forward, TAG's management will continue to focus on production, appraisal and exploitation, as well as maintaining a disciplined approach to exploration opportunities where appropriate. Management is prepared to adapt where necessary to changing commodity prices and shareholder appetite for risk. At the same time, TAG continues to focus on the future and will:

  • Continue to generate its development, exploration program and workover prospects;
  • Focus on its shallow Taranaki drilling program to grow production;
  • Deploy enhanced oil recovery techniques in the Cheal mining licence;
  • Review potential acquisitions of overlooked/undervalued opportunities in New Zealand;
  • Continue to assess acreage growth via the New Zealand Government's blocks offer program;
  • Consider select opportunities for international expansion in Australasia; and
  • Manage its capital and balance sheet as effectively as possible while focusing on shareholder returns. 

Despite lower oil prices and a reduced appetite for risk in global equity markets, TAG is financially strong and well positioned for the future. 

TAG also anticipates that the operator of the offshore Kaheru permit (New Zealand Oil & Gas), upon which TAG holds a 40% interest, is pursuing an extension from the current commitment to drill in the summer of 2016. As a result of the state of the global energy market, the impact of this decision to pursue an extension of the work commitments under the permit fits well with TAG's current operational strategy to conserve capital spending on exploratory operations and focus on development activity. For additional information on the extension of the Kaheru permit, visit the Offshore Kaheru Prospect page of our website.

TAG's CEO, Toby Pierce, commented, "I joined TAG approximately six months ago and have become increasingly confident that TAG has the team and assets to perform as commodity prices recover.  We have a great platform to build from and remain committed to creating shareholder value over the medium to long term.  Finally, I'd like to thank our team for ensuring safe and efficient operations and for its focus on delivering results in a capital constrained environment."

About TAG Oil Ltd.

TAG Oil Ltd. (http://www.tagoil.com/) is a development-stage oil and gas company with extensive operations, including production infrastructure in the Taranaki Basin region of New Zealand. As one of New Zealand's leading operators, TAG is positioned for long-term reserve-based growth with attractive exploration activities in the lightly explored Taranaki-region discovery fairway. As a low cost, high netback oil and gas producer, TAG is debt-free and reinvests its cash flow into development and step-out drilling along trend with the Company's existing production.

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, identified by words such as "expects," "plans," "anticipates," "intends," "estimates," "forecasts," "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 growth in baseline reserves, future guidance on production and cashflow, expected results of development drilling, resource potential, new production and discoveries and other objectives, goals, production rates, test rates, hydraulic fracture operations, optimization, infrastructure capacity, timing of operations, work-over results, and or future plans with respect to the drilling at TAG's various permits in the Taranaki, Canterbury and East Coast Basins 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 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.

SOURCE TAG Oil Ltd.


Source: PR Newswire (November 16, 2015 - 9:00 AM EST)

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