TAG Oil believes there are billions of barrels of undiscovered oil on just a fraction of the East Coast land it is permitted to explore.
Investors have responded with enthusiasm to the news that the Taranaki-based Canadian company has concluded its farmout agreement with international oil company Apache Corp.
TAG announced last month that Apache had pulled out of a deal under which it had agreed to spend up to NZ$120 million to explore and drill within TAG’s permitted areas around Gisborne, Te Karaka and Hawke’s Bay.
This week the withdrawal was finalised, with Apache paying a lump sum to TAG to “satisfy its obligations” related to funding phase 1 of the exploration.
Under the deal, TAG retains all assets developed under the agreement — including seismic and technical work already carried out — and holds on to its full ownership of the permits involved.
The finalisation of Apache’s withdrawal was seen as good news for TAG investors.
“Tag ends up with money for nothing and now has 100 percent of the rights back,” said one.
“That is excellent news,” said another. “At this point, even if the East Coast consents are delayed Tag will be flush with cash to accelerate West Coast/Taranaki prospects.”
TAG Oil chief executive Garth Johnson said the company remained “highly enthusiastic” about the future of the East Coast prospects.
“All the work completed to date as a result of our phase 1 activities strengthens our belief in the potential of TAG Oil’s East Coast Basin holdings,” he said.
“We’re also pleased to have full control back over the project, with funding in place.”
The TAG/Apache partnership was granted approval to establish a drilling platform at Punawai, Te Karaka last year and has been seeking consent to drill.
Gisborne District Council environment and policy group manager Hans van Kregten said the council was expecting extra information from TAG next week. Once it was received, the council would decide whether to publicly notify the application or not.
Assuming consent was approved, TAG planned to use the lump sum from Apache to fund the drilling of up to four East Coast Basin wells, as planned in the original phase 1 work programme.
“The wells will test several high-impact play objectives including the Waipawa and Whangai source rocks that have independently been confirmed to be generating 50 degree API oil,” Mr Johnson said.
“Additionally, these naturally fractured, high-quality source rocks are believed to be widespread across TAG’s acreage. Independent assessments have concluded that there are approximately 14 billion barrels of undiscovered original-oil-in-place potential within less than a fifth of TAG’s total land holdings on the East Coast.”
Drilling of the first East Coast wells was expected to start in late March or early April, “subject to receipt of the necessary consents,” said Mr Johnson.
“We will utilise conventional vertical drilling techniques, similar to those used by TAG Oil over many years in its successful Taranaki Basin operations.”
Though disappointed at Apache’s withdrawal, the partnership had proved fruitful, he said.
“Our work together provided important geotechnical and operational related work, which has confirmed our belief in the major potential of this project and advanced it to drill-ready status.”
TAG was committed to engaging with East Coast stakeholders throughout the course of the project, said Mr Johnson.
“We are heartened by the support and encouragement to continue with our exploration programme that we have received from the vast majority of East Coast Basin stakeholders and also from many other New Zealanders we have spoken with,” he said.
“They seem genuinely interested in hearing how safe and well-planned drilling operations can be conducted using the latest technologies to minimise the impact to the environment and reduce the footprint of drilling operations.”