TAG's Cheal field reserves up four-fold

Friday, 9 July 2010 Neil Ritchie, New Zealand

NEW Zealand-focused Canadian company TAG Oil has increased reserves at its Cheal oil field by more than 400%, after acquiring 100% equity in the lease late last year and starting an optimisation program for the onshore Taranaki field.
The Vancouver-headquartered junior completed its buyout of former operator Austral Pacific Energy last December, acquiring the bankrupt companys 69.5% stake, and subsequently announcing a program aimed at boosting production and reserve recovery rates, reducing production costs and establishing a new production horizon. The independent assessment of reserves in PMP 38156 by Canadas Sproule International, has assigned remaining net proved and probable (2P) reserves of 651,000 barrels of oil, plus associated gas of 258 million cubic feet, as at March 31 this year. It also assigns a net present value of $US29.43 million (about $A33.58 million) to the field.

The Cheal oil field's production station

Sproules previous annual review conducted when TAG owned only 30.5% of Cheal indicated TAGs 2P reserves were about 154,000 barrels of oil and 60MMcf of gas, with an NPV of about $US2.18 million. Besides the increased stake, the increase in value and reserves were based on increased field recovery factors, revised projected future well performance and revised oil price forecast. "We are very pleased with this early increase in proven and probable reserves, given TAG only acquired 100 per cent control of the Cheal mining permit in December 2009, TAG chief executive Garth Johnson said. More importantly, the strong performance after the fracture treatment of the Cheal A-7 well clearly demonstrates further increases to both flow rates and reserves are possible within the defined proven reserve area in the Mount Messenger Formation. Cheal presently produces solely from the Miocene-aged Mt Messenger sands but TAG is investigating producing from the shallower Urenui Formation also. Based on the success at the Cheal-A7 well which earlier this year achieved a significant increase in production from the companys first horizontal fracture program TAG said it was proceeding with additional fracture treatments at other Cheal wells and starting a horizontal drilling campaign. This would include multi-stage fracture treatments targeting 2P reserve areas. Initial flow testing at Cheal-A7 increased daily production rates by about 365% to 292 barrels of oil equivalent per day. TAG also said the goal of this program was to significantly boost recovery factors from the already defined 10 million barrels of oil originally in place. The company also plans to drill a series of step-out exploration wells to test numerous multi-zone prospects defined on the permit-wide 3D seismic set and test numerous additional fault blocks within the lightly explored Cheal acreage area. Activities at Cheal have been concentrated in just an 8% area of the 300-hectare Cheal permit area. TAG plans to initiate permit-wide exploration with a goal to capture new reserves in multiple zones, Johnson said. It is understood that TAGs first step-out exploration well will be Broadside-1 in the adjoining lease PEP 38748 that is likely to spud in September.