Sunday, May 18, 2014

Tag Oil update

I recently listened to the Tag Oil fiscal year 2015 development plan that Tag Oil had on 5/14/14. Overall I am still holding Tag as a speculation on the upcoming east coast drilling that could lead to the discovery of a massive new unconventional oil resource.

Reasons why I like the company:

  • Currently producing around 2000 BOE/d
  • Debt Free
  • Profitable and growing cashflow
  • $60 million dollar exploration and development plan for FY 2015 (funded 100% from cashflow)
  • Low share float
  • Multiple high reward drilling opportunities that could be company makers
  • Assessing one drilled east coast prospect and drilling two more east coast wells
  • Offshore well to be drilled  (possible 17 million in reserves to Tag)
  • Continued development of low risk opportunities at Taranaki
The stock recently got rocked with the perceived bad news that the Cheal 3 well was a duster. In fact the well targeted three zones and the bottom zone (K3E) had the issues. Nobody in New Zealand has ever produced from this zone. The other two zones, which have not been tested yet, will be targeted for completion when a completion rig becomes available. The upper two zones have produced in other wells and there is a good chance they could produce here also. Part of the problem with this company is that things move slow in New Zealand. This is not Texas where you can make a call and have any kind of gear or crew on site tomorrow. In addition the permitting process is slow and cumbersome. There is a resistance among the locals to oil and gas development so companies like Tag must proceed slowly and cautiously so as not to antagonize the local population. The good news is that the second east coast well is getting ready to drill. Remember the size of the prize is an estimated 14 billion barrels of original oil in place.

Pretty good review here and here.

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