Financially secure to wait out low oil prices

A recent analyst report accurately highlights where we at TAG Oil feel we sit amidst our industry’s current turmoil. The fact that we remain debt free with $26.1 million of positive working capital, and that we’re generating positive cash flow even in this low oil price environment, reflects the company’s stability and long-term positioning.

That means despite low oil prices, TAG Oil does not need to raise additional capital to fund its current or future operations. We can continue to weather the low oil price environment and will adjust capital spending budgets as needed to ensure we maintain our strong working capital position and balance sheet.

The report goes on to document the high quality of TAG’s light oil production and the excellent fiscal terms in New Zealand, but to those who know our New Zealand operations, that goes without saying. While quarterly results were slightly below projections, they weren’t materially so, and so we remain a recommended “Hold.”

In the short term, TAG is focused on low-risk, low-cost optimization operations funded with cash flow that maintains production growth. We’ve commenced our planned workovers, and expect production to average 1,900 boe/d in FY 2016, which should generate about $22 million.

TAG Oil recently stress-tested our economic assumptions and ran economics on our activities at $45/b Brent pricing. While we would much rather have higher pricing, we’re encouraged that the economics are still profitable on our workovers at the $45/b Brent level. We’ll keep running scoping economics, and will be ready to adjust operations as needed.

The table below shows some of what’s been keeping our New Zealand team busy, as they work to optimize production in TAG’s Taranaki fields.

TAG Oil Q1 activities