TAG Oil Announces Short-Form Prospectus Offering To Raise Up To $10 million to Accelerate Development Activities and High Impact Drilling Program

NOT FOR DISTRIBUTION TO U.S. NEWS WIRE SERVICES OR DISSEMINATION IN THE UNITED STATES.

Vancouver, B.C. – February 15, 2017 – TAG Oil Ltd. (the “Company” or “TAG Oil”) (TSX: TAO and OTCQX: TAOIF) is pleased to announce that it has entered into an agreement with Mackie Research Capital Corporation and Pareto Securities Ltd. acting as co-lead agents and joint bookrunners on behalf of a syndicate of agents (collectively, the “Agents”), in connection with an agency offering on a commercially reasonable basis for aggregate gross proceeds up to C$10,000,250 (the “Offering”).

The Offering will consist of the offering for sale of 15,385,000 units (“Units”) of the Company at a price per Unit of C$0.65 (the “Offering Price”). Each Unit will consist of one common share of the Company (“Common Share”) and one-half of one Common Share purchase warrant (each whole warrant a “Warrant”). Each Warrant shall be exercisable into one Common Share (a “Warrant Share”) at a price of C$0.90 for 24 months following the Closing Date (defined below) of the Offering. The Company will make an application to list the Common Shares, Warrants and Warrant shares on the Toronto Stock Exchange.

In addition, the Company has granted the Agents an option (“Over-Allotment Option”) to purchase up to an additional 15% of the number of Units sold under the Offering at the Offering Price to cover over-allotments, if any. The Over-Allotment Option shall be exercisable by the Agents, in whole or in part, at any time up to 30 days following the Closing Date.

Members of the Company’s board and management will be participating in the Offering alongside investors for a minimum of $2.5 million of Units.

Closing of the Offering is expected to occur in mid-March 2017 and is subject to certain  conditions including, but not limited to, the receipt of all necessary approvals including  the approval of the Toronto Stock Exchange and the securities regulatory authorities.

The Units will be offered by way of a short form prospectus to be filed in all of the provinces of Canada (other than the Province of Québec) pursuant to National Instrument 44-101 – Short Form Prospectus Distributions and in the United States on a private placement basis pursuant to an exemption from the registration requirements of the United States Securities Act of 1933, as amended (the “U.S. Securities Act”). This press release is not an offer of securities for sale in the United States. The Units will not be registered under the U.S. Securities Act and may not be offered or sold absent registration requirements of the U.S. Securities Act. The Units may also be offered in the U.K. and Europe pursuant to the appropriate exemptions and registration requirements.

USE OF PROCEEDS

The net proceeds of the Offering will be used for general corporate purposes, which will include the following appraisal and development activities(1):

  • In follow-up to the successful testing of the Supplejack-1 well, which tested at a rate of 1,200 boe/d over an initial 7 day period (see press release dated November 8, 2016), drilling of the Supplejack-A2X appraisal well (Q1 2017).
  • Completion and testing program to evaluate bypassed pay zones in the Cardiff-2 appraisal well geared towards unlocking a best estimate prospective resource of 160 bcf of gas and 5.5 MMbbls of natural gas liquids across three separate sand intervals in the Kapuni formation (Q2 2017), of which TAG Oil has a 100% working (2)
  • Ongoing testing of gas/condensate from the Cardiff-3 well (Q2 2017).
  • Drilling of either a Cheal exploration well or to farm-in to an existing high impact exploration opportunity in New Zealand on already identified opportunities (second half of 2017).
  • Drilling of two appraisal wells at Sidewinder East (Q1 2018).
  • Production optimization and waterflood activities across the Company’s Cheal oil fields area where the Company has identified an inventory of lower risk recompletions and development locations, which could substantially increase TAG Oil’s corporate base production.
  • TAG Oil (70% working interest) also plans to drill its high impact Pukatea well during second half of 2017 with its partner Melbana Energy Limited (30% working interest) using internal cash flow or its existing cash resources on hand. The Pukatea prospect underlies the Puka field in the Tkiorangi Limestone formation and is adjacent to the Waihapa oil field, which has produced 23 mmbbls of oil to date from the Tikorangi
  1. Timing is approximate and is subject to regulatory approval, equipment availability and
  2. Pursuant to the Sproule Report, as defined

 PRODUCTION GROWTH AND BALANCE SHEET

TAG Oil expects to exit fiscal 2017 (March 31, 2017) with production of between 1,250 and 1,300 boe/d slightly ahead of guidance. Further, during the last six months, TAG Oil took five of its wellbores offline with productive capabilities of approximately 250 boe/d in aggregate. These  wells produce mainly natural gas and were shut-in to ensure best reservoir management practices.

Excluding production growth from exploration and appraisal drilling activities outlined above, TAG Oil expects to exit fiscal 2018 at over 2,000 boe/d. A portion of the growth is expected to come from the water flood and a portion from the commencement of production from Supplejack. A minor amount of production is expected from TAG Oil’s Australian operations. Additional growth from the testing of Cardiff-2 and Cardiff-3 wells could also impact production growth positively. Finally, appraisal success from any of the four planned wells to be drilled in the next 12 months would be additive to fiscal 2018 production growth.

TAG Oil has a solid balance sheet with no debt and $17.5 million in positive working capital  prior to the Offering.

PRICING AND FISCAL TERMS

TAG Oil received an average of C$66.12 per barrel for its oil and C$6.36 per Mcf for its natural gas produced during Q3 2017 (Oct-Dec/16). Due to New Zealand’s favourable fiscal regime and the sweet, light and high quality crude oil the Company produces, the Company received netbacks of C$23.86/boe during Q3 2017. TAG Oil continues to expect that its netbacks will improve as it comes off an operationally intensive quarter and as commodity prices trend higher.

This press release is not an offer or a solicitation of an offer of securities for sale in the United States. The Common Shares have not and will not be registered under the U.S. Securities Act of 1933, as amended, and may not be offered or sold in the United States absent registration or an applicable exemption from registration.

About TAG Oil Ltd.

TAG Oil Ltd. (https://www.tagoil.com/) is a development-stage international oil and gas producer with established high netback production, development and exploration assets, including production infrastructure in New Zealand and Australia. TAG Oil is poised for significant reserve and production growth with several oil and gas fields under development and high-impact exploration in proven oil and gas fairways. TAG Oil is debt-free and currently has 62,212,252 shares outstanding.

For further information:

Toby Pierce, Chief Executive Officer Phone: 1-604-609-3355

Email: toby.pierce@tagoil.com

Chris Beltgens, Vice President, Corporate Development Phone: 1-604-682-6496

Email: info@tagoil.com

Website: https://www.tagoil.com/

Blog: www.tagoil.com/media-center/tag-oil-blog/

BOEs:

TAG Oil has adopted the standard of six thousand cubic feet of gas to equal one barrel of oil when converting natural gas to “boes.” Boes may be misleading, particularly if used in isolation. A boe conversion ratio of 6 Mcf: 1 bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency  at the wellhead.

Resource Estimates:

The resource estimates in this document are by Sproule International Limited, an independent qualified reserves evaluator, in accordance with National Instrument 51-101 – Standards of Disclosure for Oil and Gas Activities (“NI 51- 101“) and the Canadian Oil and Gas Evaluation (COGE) Handbook, in a report entitled “Resource Assessment of the Cardiff Prospects, PEP 38156 and 54877, Taranaki Basin, New Zealand” with an effective date of July 31, 2013 (the “Sproule Report”).

Prospective resources are those quantities of petroleum estimated, as of a given date, to be potentially recoverable from undiscovered accumulations by application of future development projects. Prospective resources have both an associated chance of discovery and a chance of development. There is no certainty that any portion of the resources  will be discovered. If discovered, there is no certainty that it will be commercially viable to produce any portion of the resources.

“Best estimate” is considered to be the best estimate of the quantity of the prospective resource that will actually be recovered. It is equally likely that the actual remaining quantities recovered will be greater or less than the best estimate. If probabilistic methods are used, there should be at least a 50 percent probability (P50) that the quantities actually recovered will equal or exceed the best estimate.

Exploration for hydrocarbons is a speculative venture necessarily involving substantial risk. TAG Oil’s future success in exploiting and increasing its current reserve base will depend on its ability to develop its current properties and on its ability to discover and acquire properties or prospects that are capable of commercial production. However, there is no assurance that TAG Oil’s future exploration and development efforts will result in the discovery or development of additional commercial accumulations of oil and natural gas. In addition, even if further hydrocarbons are discovered, the costs of extracting and delivering the hydrocarbons to market and variations in the market price may render uneconomic any discovered deposit. Geological conditions are variable and unpredictable. Even if production is commenced from a well, the quantity of hydrocarbons produced inevitably will decline over time, and production may be adversely affected or may have to be terminated altogether if TAG Oil encounters unforeseen geological conditions. TAG Oil is subject to uncertainties related to the proximity of any reserves that it may discover to pipelines and processing facilities. It expects that its operational costs will increase proportionally to the remoteness of, and any restrictions on access to, the properties on which any such reserves may be found. Adverse climatic conditions at such properties may also hinder TAG Oil’s ability to carry on exploration or production activities continuously throughout any given year.

The significant positive factors that are relevant to the resource estimate are: proven production in close proximity; proven commercial quality reservoirs in close proximity; oil and gas shows while drilling wells; and calculated hydrocarbon pay intervals from open hole logs.

The significant negative factors that are relevant to the resource estimate are: tectonically complex geology could compromise seal potential; and seismic attribute mapping can be indicative but not certain in identifying proven resource.

Non-GAAP Measures in this News Release

References to “netbacks” in this news release are references to “operating netback”, a non-GAAP measure. Operating netback is the operating margin that the Company receives from each barrel of oil equivalent sold. Operating netback is exclusive of electricity revenue and costs and denotes oil and gas revenue on financial instruments less royalty expenses, operating expenses and transportation and marketing expenses. Please see “Summary of Quarterly Information – Oil and Gas Operating Netback ($/BOE)” and “non-GAAP measures” in the Company’s Management’s Discussion and Analysis, dated February 13, 2017, for the nine months ended December 31, 2016 for more information regarding the calculation of the Company’s operating netback.

Cautionary Note Regarding Forward-Looking Statements

Statements contained in this news release that are not historical facts are forward-looking statements that involve various risks and uncertainty affecting the business of TAG Oil. Such statements can generally, but not always, be identified by words such as “expects”, “plans”, “anticipates”, “intends”, “estimates”, “forecasts”, “schedules”, “prepares”, “potential” and similar expressions, or that events or conditions “will”, “would”, “may”, “could” or “should” occur. All estimates and statements that describe the Company’s objectives, goals, or future plans relating to operations are forward-looking statements under applicable securities laws and necessarily involve risks and uncertainties. Actual results may vary materially from the information provided in this release, and there is no representation by TAG Oil that the actual results realized in the future will be the same in whole or in part as those presented herein.

Statements contained in this news release that are not historical facts are forward-looking statements that involve various risks and uncertainty affecting the business of TAG Oil. Such statements can generally, but not always, be identified by words such as “expects”, “plans”, “anticipates”, “intends”, “estimates”, “forecasts”, “schedules”, “prepares”, “potential” and similar expressions, or that events or conditions “will”, “would”, “may”, “could” or “should” occur. All estimates and statements that describe the Offering, use of proceeds of the Offering, plans to drilling Supplejack-A2X exploration/appraisal well, investigation of bypassed pay in the Cardiff-2 well, ongoing testing of gas/condensate from the Cardiff-3 well, drill either a Cheal exploration well or farm-in to an existing high impact exploration opportunity in New Zealand, the expected Closing Date and receipt of necessary approvals are forward-looking statements under applicable securities laws and necessarily involve risks and uncertainties. Estimates and statements underlying the Company’s objectives, goals, production rates, optimization, infrastructure capacity and/or future plans with respect to drilling involve risks and uncertainties including, without limitation: risks associated with oil and gas exploration, development,  exploitation and production, geological risks, marketing and transportation, the risk associated with estimating undiscovered original initially in-place described above, availability of adequate funding, volatility of commodity prices, imprecision of reserve estimates, environmental risks, competition from other producers and changes in the regulatory  and taxation environment.

Forward-looking statements relating to TAG Oil’s exploration and development of its oil and gas properties including with respect to completion of its drilling programs involve risks and uncertainties including, without limitation: regulatory approval, equipment availability, weather, risks associated with establishment of additional production of oil and gas in accordance with TAG Oil’s expectations at its oil and gas properties, well performance, drilling results, successful completion of new infrastructure at its oil and gas properties, successful optimization, the increase of cash flow from new production, achievement of expected growth, successful results of operations, performance results, prospects and evaluation results.

While TAG Oil considers these factors and assumptions to be reasonable based on information currently available, they may prove to be incorrect. Actual results may differ materially from the information provided in this release, and there is no representation by TAG Oil that the actual results realized in the future will be the same in whole or in part as those presented herein. Other factors that could cause actual results to differ from those contained in the forward-looking statements are also set forth in filings that TAG Oil and its independent evaluator have made, including TAG Oil’s most recently filed reports in Canada under NI 51-101, which can be found under TAG Oil’s SEDAR profile at www.sedar.com. TAG Oil undertakes no obligation, except as otherwise required by law, to update these forward-looking statements in the event that management’s beliefs, estimates or opinions, or other factors change.