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Company update - special addition

By Neil Ritchie

New Zealand Oil & Gas has joined its former senior partner Aussie listed AWE in selling their respective stakes in the offshore Taranaki Tui Area oil field to Malaysian company Tamarind Management.

Tamarind is paying NZOG $US750,000 in exchange for all shares in its Tui holding company Stewart Petroleum. In December Tamarind announced the now completed agreement to purchase the 57.5 percent interest of former Tui operator AWE.

Stewart Petroleum’s assets and liabilities include a 27.5 percent stake in the Tui field, and inventory of $US$4.7 million of oil. Working capital of $NZ6 million will be transferred to Tamarind, which will also assume all field decommissioning obligations. The effective date of the transaction is January 1, 2017.

Company chief executive Andrew Jefferies believes the sale of its Tui interest “allows NZOG to realise the present value of remaining Tui reserves while reducing exposure associated with the uncertain end of field cessation costs and timing”.

He adds that NZOG has analysed the Tamarind offer “and finds it compelling based on Tamarind’s specialist end-of-field-life capability, including optimising late stage production and abandonment operations”.

Tamarind managing director Ian Angell believes “this acquisition is a logical next step in our investment in New Zealand and in the Tui Area.

“By acquiring this additional stake, we will be able to move quickly and in a focused manner to bring our field life extension plan to fruition. While there is much discussion about field decommissioning, Tamarind is confident with the strength of the Tui operating team in New Plymouth, this area will have many years of remaining production.

“Tamarind is confident of our ability to bring innovation in terms of technologies and methodologies for field retirement.”

The date when production ends will depend on expected oil prices, lease costs and field production rates.

“New Zealand Oil & Gas is entering a new stage in its life. Having sold our legacy producing assets we are looking for opportunities to deploy our cash by acquiring new producing assets with a preference for gas in markets we understand," Jefferies adds.

The last remaining Tui partner, Aussie listed Pan Pacific Petroleum, is also "selling" its 15 percent stake in the Tui fields to Tamarind by making a net payment of $US5.45 million in cash and inventory, making Pan Pacific no longer liable for its part of decommissioning of the field that could cost about $US100 million.

Meanwhile, Canadian listed junior TAG Oil continues increasing its overall oil and gas production, sales revenue and operating netbacks, as well as its reserve and production growth through exploration and commercialisation of the Cardiff gas-condensate discovery.

TAG’s latest quarterly results show average net daily production (of both oil and gas) increased by one percent from 1176 barrels of oil per day (boepd) (with 81 percent of that being oil) for the September 2016 quarter to 1185 boepd for the December 2016 quarter (80 percent oil). And so far production for the month of February is also above guidance, with a current net daily average rate of 1293 boepd (79% oil).

Revenue from oil and gas sales increased by just over 15 percent -- from $C5.2 million for the September quarter to $C6.0 million for the latest quarter, due to a 14 percent increase in average Brent oil prices.

Operating netbacks (an important production indication) increased by 28 percent from $C18.61 per boe for the September quarter to $C23.86 per boe for the December quarter, with the increase due to the 14 percent increase in Brent oil prices, partly offset by a seven percent increase in production costs per boe.

And TAG, which is largely focused on onshore Taranaki, is planning to start drilling again, with the Supplejack-A2X well, in the exploration licence PEP 57065 (Waitoriki) due to spud in early March.

TAG Oil’s chief executive Toby Pierce says the company’s operations continue to remain active, with workovers at the core Cheal and Sidewinder fields delivering incremental production, while well tests at both Supplejack and Cardiff have demonstrated near-term development opportunities. Preliminary results from the Cheal B wellsite waterflood project (testing the shallow Miocene-aged Mount Messenger Formation) are encouraging and TAG will extend work that to the Cheal A and Cheal E wellsites.

He adds that the next phase of reserve and production growth through exploration, exploitation, and commercialising the deep (Eocene-aged) Cardiff gas-condensate discovery -- one of TAG’s premier gas assets – will be a priority.

“Going forward we expect to shift back towards a more growth oriented trajectory focusing on drilling and exploiting our exceptional higher impact exploration inventory.”

TAG remains financially sound, with $C10 million in cash and cash equivalents, as well as $C17.5 M in working capital.