TAG looking to fill its coffers

Thursday, 22 April 2010 Neil Ritchie, New Zealand

NEW Zealand-focused Canadian junior TAG Oil is aiming to raise over $C17 million ($A18.3 million) to fund its onshore Taranaki and East Coast exploration and development programs over the next 12-18 months.
The company announced last night that it had entered into an agreement with a syndicate of underwriters to raise $C17,420,000 by selling 6.7 million units, at $C2.60 per unit. Each unit consists of one common company share and half a warrant with each warrant entitling the holder to acquire one common share at $C3.60 during the 18 months following the closing of the offering. There will be provision for an over-allotment option of up to 15% of the additional units and/or warrants purchased. Chief operating officer Drew Cadenhead told PetroleumNews.net this morning that about 90-95% of the funds raised would be designated for onshore Taranaki and the East Coast, with the remainder being used for working capital and general corporate purposes. He said TAG was now cash flow positive, after some periods of sustained losses, and had about $C10 million in the bank. However, the public offering was seen as the best way of raising the necessary finance to further focus on the relatively low-risk onshore Taranaki Cheal oil field and nearby exploration licence PEP 38748 (Winchester) , as well as the higher-risk East Coast conventional petroleum and shale oil plays. Cadenhead said about 75% of the money raised should be spent in onshore Taranaki over the next 12-18 months. Following the completion of the current Cheal optimisation program, TAG planned further optimisation and exploration at Cheal that would probably include more in-fill wells after geological and geophysical modelling. TAG might also drill two wells in the Winchester lease, one of which might be a deep well targeting Eoceneaged sandstones and the other targeting the shallower Miocene-aged Mount Messenger sands from which the Cheal fields flows. Cadenhead said TAG would also continue its active East Coast program that included further wells at Waitangi and Boar Hill, targeting the Waipawa Black Shale and Whangai Shale source rock and reservoir rock formations. Last month TAG said it encountered a strong oil-wet gas kick and some significant downhole pressure during drilling of its first of three scheduled wells appraising the shallow historic Waitangi Hill oil seeps, while last October former fellow listed Canadian junior Trans-Orient Petroleum encountered encouraging signs while drilling the first stage of its Boar Hill-1 wildcat well. TAG took over Trans-Orient last December and has exclusive rights to explore, develop and produce oil or gas from the onshore East Coast leases PEP 38348 (Waitangi Hill), PEP 38349 (Boar Hill) and PEP 50940 (Nicks Head). TAG expects its public offering the first since taking over Trans-Orient to close on or about May 7, subject to certain customary conditions and regulatory approvals, including the approval of the TSX Venture Exchange.