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TAG Oil's Cheal Infrastructure Expansion Complete Paving Way For Continued Oil & Gas Production Growth In Taranaki

VANCOUVER, April 4, 2013 /PRNewswire/ - TAG Oil Ltd. (TSX: TAO) and (OTCQX: TAOIF), is pleased to report that the Company's Cheal infrastructure expansion project in the Taranaki region of New Zealand has been completed. Together with TAG's existing production infrastructure and pipeline network, the Company now has the capacity to fully commercialize the successes (past and future) of its onshore Taranaki Basin assets.

This major expansion establishes TAG Oil as a completely independent processor, transporter, and marketer of the gas the Company discovers, extracts and produces, opening significant new opportunities to supply the thriving Taranaki natural gas market.

Shut-in wells now being placed into long-term production

With this completed infrastructure expansion, previously shut-in wells from TAG's successful 2012 shallow drilling program are now being placed into long term production. The Company will continue to identify areas of the new infrastructure that requires optimization, as final commissioning work continues in the coming weeks. TAG's total production capability from tested shallow wells and the new liquids potential of the expanded gas plant is in excess of 5000 barrels of oil equivalent per day.

TAG Oil CEO, Garth Johnson commented, "I congratulate our entire team who have worked tirelessly to finish this project on time and on budget and they've done so to the highest safety and environmental standards. Even more impressive is the fact that during this complex infrastructure project, the team continued our unprecedented rate of successful new well drilling in Taranaki. With control of this critical infrastructure, TAG Oil is poised to grow even stronger, including new opportunities to leverage our natural gas assets."

New Zealand market drives value of TAG's oil up to 30% and gas up to 100% higher than Q1 2013 North American prices.

One component of the Company's strategic focus on New Zealand - and a driver of the Cheal infrastructure expansion - is the high relative value of the oil and gas TAG produces. In addition to enjoying oil prices which, in February 2013, averaged CDN$30/bbl higher than West Texas Intermediate, TAG's contracted gas price (NZ$5.40/mcf) is more than double the 2012 Canadian gas price average.

In contrast to the oversupply of natural gas in North America, the Taranaki region of New Zealand is undersupplied, with further imbalance between gas supply and demand ( http://www.tagoil.com/production.asp#) forecasted for the long term.

March 27 th, 2013 was a milestone day for TAG Oil as the valve connecting the newly expanded Cheal Processing Facility to New Zealand's primary natural gas transmission pipeline was opened for the first time, providing the Company the ability to market and sell Cheal gas to interested parties looking for a long-term supply of gas.

TAG's $100 million state-of-the-art infrastructure expands processing capacity with a focus on safely producing oil and gas for years to come.

The original Cheal facility, which was constructed at a cost of approximately $25 million by the previous operator, now has expanded oil processing capability, gas-liquids' extraction capabilities, and a new 11km pipeline to New Zealand's primary gas transmission pipeline, all at an additional cost of ~$30 million. Including the Sidewinder Production Facility, TAG now controls approximately $100 million in critical infrastructure, which positions TAG as a prominent New Zealand producer with a strong competitive edge to pursue the attractive opportunities identified within the Company's Taranaki portfolio.

This expansion ensures future wells - including high deliverability gas condensate wells - can be quickly commercialized. In addition, it delivers:

  • Increased oil lifting capacity;
  • Increased gas compression capacity;
  • Increased electricity generation capability;
  • A new gas plant capable of stripping liquid hydrocarbons for sales and creating New Zealand spec gas from solution gas;
  • Maximized marketability of TAG's gas production via new pipelines tying the Cheal-C site to the Cheal-A site, and a new 11km pipeline from Cheal to New Zealand's open-access gas transmission line.

"Over the coming months," said TAG Chief Operating Officer Drew Cadenhead, "we'll be monitoring initial flush production rates and analyzing plant performance. Where necessary, we'll optimize production configuration to ensure we're operating at maximum efficiency while still following oilfield production best-practices. We're very pleased to have completed this major project slightly ahead of schedule: This was a very complex program using a variety of skills, and since we kept drilling while construction proceeded, an immense amount of planning and communication was required to insure these concurrent operations were completed safely and efficiently. Our team did a great job."

TAG Oil Ltd.

TAG Oil Ltd. http://www.tagoil.com/) is a Canadian-based production and exploration company with operations focused exclusively in New Zealand. With 100% ownership over all its core assets, including extensive oil and gas production infrastructure, TAG is enjoying substantial oil and gas production and reserve growth through development of several light oil and gas discoveries. TAG is also actively drilling high-impact exploration prospects identified across more than 2,984,171 net acres of land in New Zealand.

In the East Coast Basin, TAG will explore and potentially develop the major unconventional resource potential believed to exist in the tight oil source-rock formations that are widespread over the Company's acreage. These oil-rich and naturally fractured formations have many similarities to North America's Bakken source-rock formation in the successful Williston Basin.

TAG Oil has adopted the standard of six thousand cubic feet of gas to equal one barrel of oil when converting natural gas to "BOE's". 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.

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