profitetrader | Börsenbrief für TSX Werte aus Kanada - Aktien, Short Spekulationen CEO INTERVIEW MIT GARTH JOHNSON, TAG OIL LTD. (TSX-V: TAO, Frankfurt WKN: A0RF4G)

CEO INTERVIEW MIT GARTH JOHNSON, TAG OIL LTD. (TSX-V: TAO, Frankfurt WKN: A0RF4G)

Profitetrader: Garth, TAG Oil has a couple of different properties - the Taranaki Basin being rather modest of somewhere between one million and 20 million barrels, but it's your unconventional plays that have simply astounding numbers. Could you give us a little background on, first of all, New Zealand and secondly, your conventional production?

Garth Johnson: TAG actually has 5 properties contained within two Basins in New Zealand, consisting of more than 2.3 million acres of land that will provide a significant amount of activity over many years to come.

New Zealand is a country with great fiscal terms, a supportive Government and very low sovereign risk. New Zealand is extremely under-drilled, yet it has developed a robust and skilled service industry with the infrastructure systems required to meet our needs. New Zealand's oil and gas industry is growing substantially as a result of large new discoveries made in the last few years that combine to contribute approximately 1/3 of the estimated ultimate reserves to date within the country. In addition to these recent discoveries, some new players like Petrobras International Braspetro B.V, Anadarko and Exxon Mobil are adding New Zealand to their portfolios by securing acreage in New Zealand. I think the world is starting to wake up to the potential in New Zealand.

In terms of TAG's land position we own 2.3 million acres (more than 3,500 sections of land) 100%. Our conventional program consists of hundreds of drilling prospects and leads. We currently have the potential for approximately 50 future wells within the Taranaki Basin alone, 30 of which are contained within our 7,500 acre Cheal Mining Permit, with the balance located within PEP 38748, a 7,900 acre permit referred to as our Broadside permit. Both Permits have full 3D seismic coverage and are located in the heart of the Taranaki Production fairway, surrounded by long-life producing fields.

Our East Coast conventional program provides a significant amount of drilling opportunities. We have really just scratched the surface when it comes to conventional prospects in this basin, but as of today we have identified approximately 100 prospects, and drilled the first test well at Waitangi Hills targeting a shallow conventional reservoir. This well actually blew out high pressure gas and oil at only 150-180m depths. Our conventional production is provided 100% by Cheal; we are currently producing approximately 450 bopd + associated gas. Our optimization program recently completed has proven we can increase both reserves and daily production going forward, initially right within the proven reserve area of Cheal. Utilizing proven technology such as down hole heating, horizontal drilling and multi-stage fracture stimulations within our producing formations has proven very successful for us; we'll leverage that success into commercialization of the Urenui Formation and then further development of both formations in the 4 to 5 additional un-drilled fault blocks within the Cheal Mining Permit.

Profitetrader: Some of the numbers being tossed around is the potential for unconventional oil, are simply astounding. When you see numbers of one billion barrels and some suggesting as much as 40 billion barrels, until some actual drilling is done, why should one ever be that hopeful?

Garth Johnson: From my perspective we have a lot of evidence that allows us and our shareholders to be extremely hopeful. Having said that, we will never run TAG based on hope alone as we take a disciplined approach to operations where we build our plans diligently, based on all factors that contribute to a company's success. I think that's what distinguishes TAG from many of our peers. We honestly believe that we can technically support the optimism that surrounds our shale play, yes there is risk, but the upside is very significant. First off we have had independent assessments provided by Sproule and AJM that support the resource potential of billions of barrels of original oil in place, we have a highly competent technical team on the ground in New Zealand that truly believes in the East Coast play. This team is well versed in the North American geotechnical, drilling and completions technology that has made shale plays around the world what they are today. Our team has made careful comparison between successful North American shale plays like the Bakken and Barnett shales, and concluded that these New Zealand shales meet or exceed the key parameters of these proven shales.

Factors like the high degree of natural fracturing in these quartz-rich brittle New Zealand shales, well documented significant over pressuring within this Basin (3,100 psi at 1,000 m in an offset well), and of course the best indication of all, 50 degree API sweet oil seeping out of the ground that has been unequivocally tied to our target source rocks, give us great hope for this play. When you combine all this information, there is a lot to be hopeful for.

Foto: TAG Oil CEO Garth Johnson

Profitetrader: One question we are asked most frequently is "What do you see as the biggest risk in realizing these amazing numbers you talk about in the East Coast shale play?"

Garth Johnson: We feel the biggest risk to realizing this resource is not whether there is high quality light oil in the shales, that's pretty hard to dispute given the data and we do believe we will be able to produce from the shales. However, we feel the biggest risk is deliverability. These are shales after all and successful shale plays didn't happen overnight in North America. It took literally hundreds of wells to crack the deliverability puzzle in North America and as a result we happen to be in a position now that we can utilize what has been learned to date and use the most modern technologies available for our play in New Zealand right from the start. Again, to us, the biggest risk is not whether oil will come out of these shales, but at what rates. We are confident we can achieve results with the advantages we have in the East Coast Basin such as natural fracturing, over-pressuring and very light crude. This is what provides us with the hope you mentioned.

With fewer than 38 million shares outstanding, TAG is providing shareholders with exposure to billions of barrels of undiscovered resource potential, underpinned by rapidly growing proven reserves and cash flow, $26 million in cash and no debt. All this at a time when the learning curve (and cost) has been reduced significantly when it comes to shale drilling and completion.

Profitetrader: I guess some background is probably needed about New Zealand to start with as it is not usually thought of as being a significant producer at all in oil and gas. In fact, it's you folks that are introducing some of the new technology to New Zealand. Could we get some history on New Zealand?

Garth Johnson: TAG's focus is to employ proven North American technology in a Basin where it hasn't been done before. We have completed a pilot program of some of the technology available to us during our recent optimization program at Cheal and we are encouraged by the results to date. The next step is to incorporate what we have learned in the past few months and take it one step further where we add horizontal drilling with multi-stage fracture treatments.

Profitetrader: The truth will be told when drilling finally happens. What kind of a schedule are you anticipating now for TAG in the coming months?

Garth Johnson: We are just completing the planning phase for our drilling program and I can't disclose too much at this point but we will be prepared to do so shortly. I can say that the plan will consist of a multi-well drilling program in Taranaki consisting of vertical and horizontal wells that will be fracture stimulated, combined with further optimization of producing wells at Cheal. Our short term plan remains to grow our producing assets and direct our capital to our low risk development opportunities. We feel there's a lot of low risk/high value reserve growth we can deliver within our cash-flowing and offset acreage and the next few months will see us exploit that even further than our first round of optimization has achieved. We recognize some would like us to jump right into the East Coast, and we will increase our activity, but we will first complete a diligent operational plan that we are confident we can execute that aligns operational goals with value creations so we can maximize the value of this asset. That being said, we aren't far off at this point and we expect to be drilling deep shale test wells in the East Coast Basin within the next fiscal year.

Profitetrader: Giving TAG Oil a little bit of credibility these days has been additional players buying into some of the land holdings around New Zealand. Who are they and what kind of size and credibility are they bringing to access near-by?

Garth Johnson: As I mentioned previously, there have recently been some majors securing substantial land positions in New Zealand. The entry that adds significant credibility to TAG's East Coast Basin play likely rests with the recent entry of Petrobras International Braspetro B.V., a wholly-owned subsidiary of Petróleo Brasileiro S.A. Petrobras is responsible for carrying out exploration and production activities for its parent company. Petrobras have been awarded a permit for 12,330 square kilometers located at the Northern end of the East Coast Basin, offshore from TAG's onshore acreage. Petróleo Brasileiro is the largest company in Latin America and the largest company to be headquartered in the southern hemisphere. Petrobras is one of the leading petroleum explorers in the world holding tenements in onshore and offshore licences in some 27 countries. It has proven production capacity of approximately 2.4 million barrels of oil per day from 112 production platforms and 15 refineries. Petrobras's oil and gas reserves in 2008 were 15.1 billion barrels. As at 1 December 2009, Petrobras had a market capitalisation of US$221 billion. I guess that provides a bit of credibility when a company like Petrobras secures acreage directly offsetting TAG acreage.

Anadarko is also a new entrant (actually, re-entrant), and is among the largest independent oil and natural gas exploration and production companies in the world, with approximately 2.3 billion barrels of oil equivalent (BBOE) of proven reserves at year-end 2009. Anadarko's portfolio of assets encompasses premier positions in nearly a dozen major U.S. onshore natural gas resource plays. The company also is the largest independent deepwater producer in the Gulf of Mexico, and has production and/or exploration in Alaska, Algeria, Brazil, China, Indonesia, East and West Africa. Anadarko was recently awarded an offshore Taranaki Basin exploration permit bringing Anadarko's total gross land position to ~9 million acres in New Zealand.

Exxon Mobil has joined the majors discovering New Zealand as well. Last year, Exxon Mobil secured a 16,000 square kilometer offshore permit in New Zealand's Great South Basin, and is actively exploring that acreage now.

Profitetrader: The final question I usually like to ask on these kind of interviews is, if you could buy only one oil and gas stock today, other than your own, what would it be?

Garth Johnson: To be honest, I just wouldn't buy another junior oil and gas stock today because of the many factors that make it difficult for the shareholder to make money, especially pure exploration companies with hundreds of millions of shares outstanding already. In this regard I truly believe TAG is a rare anomaly within the junior space. Apache Corp would likely be my large company pick as I like the aggressiveness of their recent transactions.

P.S.: Das Interview wurde am 05.08.2010 durchgefuehrt.

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