Tuesday, September 16, 2014

Tag Oil abandons east coast well

Stock drops over the last few days as it is obvious news leaked out:

Tag Oil reports the Company has agreed that after encountering extreme drilling conditions, including high pressure shallow hydrocarbon zones, in the interest of safety, the surface section of the Waitangi Valley-1 well, located in Petroleum Exploration Permit 38348, will be plugged and abandoned.

CEO Garth Johnson commented; "Waitangi Valley-1 encountered very high hydrocarbon zone pressures at shallow depths that cannot easily be compared to anywhere else in the world. We understood this program would be challenging and we encountered extremely difficult drilling conditions in the first 856m of drilling. After consulting with worldwide drilling experts and considering all data ourselves, we have made a difficult decision to plug and abandon Waitangi Valley-1 before reaching the intended total depth of 3600m, to maintain the safety and integrity of the operation. The well will be abandoned following all regulatory requirements and with no environmental issues encountered to date. The Company's previous guidance for fiscal year 2015 did not include any anticipated production or cash-flow from the Waitangi Valley-1 well."

The bad news is that they are abandoning and plugging this east coast well. The good news in my view is that this well encountered high pressures at shallow depths and it is not a "dry hole" and the indications are "quite positive". You can listen to the call where they discuss what happened. So they are moving the rig back to the west coast to drill out some more Cheal and Sidewinder wells to maintain cashflow while they re-evaluate how they will drill again on the east coast. So the market did not like this but the CEO was clear, and as I have said in the comments recently, this is going to take a few years.

1 comment:

Anonymous said...

Thanks for the update, I'm selling TAG now as a tax loss sale and hop to get back in when others do their tax loss selling next month.

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