TAG_WellingtonWest_09-20-10

Document Sample
TAG_WellingtonWest_09-20-10 Powered By Docstoc
					International Energy
TAG Oil Ltd. (TAO-V, $2.45)
Recommendation: Speculative Buy
Kevin Shaw, P.Eng. (403) 781-2715; kshaw@wwcm.com
Ronald Cheung, CFA (403) 781-2718; rcheung@wwcm.com
                                                                                                                                                                                       September 20, 2010

All values in C$ unless otherwise noted.
Current Price                                                                             $2.45          New Zealand “Pure Play” w/ Big Conventional
Target Price (12-Month)                                                                   $3.80
Implied Capital Gain                                                                      55%
                                                                                                         & Unconventional Oil Resource Potential
Changes
                                                                       Old                 New                 Proven-producing Taranaki basin estimated at ~100 mmboe OOIP
Production (boe/d) F „11E                                              n.a.                 649                 Cheal asset is currently producing ~490 boe/d net; prod‟n could easily
CFPS FD FY 2011E                                                       n.a.               $0.17                 reach 1,000+ boe/d within 3 to 4 months w/ current „10 drill program.
Production (boe/d) F „12E                                              n.a.               1,675
CFPS FD FY 2012E                                                       n.a.               $0.62
                                                                                                               E. Coast basin Waipawa/Whangai oil: call option on 14+ Bboe OOIP
Recommendation                                                         n.a.               Spec.
                                                                                                                Basin offers 1.7 billion bbls OOIP conventional & 12.7 billions bbls OOIP
                                                                                           Buy
Target Price                                                           n.a.               $3.80                 unconventional play (shale compares to Bakken & Paris Basin Liassic).
Company Profile
TAG Oil Ltd. (TAO) is an emerging                                                                              Sept. kick-off of Taranaki drills, workovers & 1st hztl multi-stage frac
international exploration and production                                                                        Set to spud expl‟n test (Sidewinder-1) on Broadside block targeting Mt.
company operating in New Zealand‟s East                                                                         Messenger zone, then 1st hztl multi-stage frac test at Cheal (Cheal-BH-1).
Coast and Taranaki basins. The company has
three permits in the East Coast basin (~14
                                                                                                               Initiating coverage with Spec Buy & $3.80 target; key attributes are…
billion bbls OOIP) and two permits in the
Taranaki basin (~100 million boe OOIP).                                                                         2+ mm acres, no debt, & $26mm w/c. Target based on 2P NPV, risked
TAG is currently producing ~490 boe/d from                                                                      NPV (Taranaki scenario), EMV/sh (incl. expl‟n upside), & FY‟12 DACF.
the Cheal initial discovery / pool in the
Taranaki basin with 2P reserves of 0.7
million boe, although we expect significant
resource upside in these two areas.

  Price Chart                                                                                            Financial Summary
                                                                                                             Shares FY 2011 O/S (mm, FD TSM)            39.0   52-Week Trading Range          $0.40-$3.71
                                                                                                             Market Capitalization (C$mm)                $98   Average Weekly Volume             557,358
          4.00                                                                  1,000,000
                                                                                                             Net Debt (C$mm)                            (26)   Market Float (mm)                      $72
          3.50
                                                                                900,000                      Enterprise Value (C$mm)                     $72   Risked EMV/Share                    $13.32
                                                                                          .




                                                                                                             Forecasts                             FY 2009*        FY 2010*      FY 2011E*     FY 2012E*
 .




                                                                                800,000
          3.00                                                                                               Production (boe/d)                         135             201            649         1,675
                                                                                700,000                      % gas                                       0%              0%             0%            0%
          2.50
                                                                                600,000                      Modeled WTI Oil Price (US$/bbl)         $61.56          $70.49         $80.23         $83.75
                                                                                          Daily Volume




                                                                                                             Modeled US$/CAD$ Exchange Rate            $0.88           $0.98          $0.95         $0.95
 Price (C$)




          2.00                                                                  500,000                      Realized Oil Price (C$/boe)             $44.14          $82.64         $68.28         $73.17
                                                                                400,000                      Revenues (C$mm)                           $4.9            $6.5          $16.4         $44.7
          1.50
                                                                                                             Cashflow (C$mm)                           $2.0            $0.3           $6.5         $24.4
                                                                                300,000                      DACF (C$mm)                               $2.0            $0.3           $6.5         $24.4
          1.00
                                                                                200,000                      Capex (C$mm)                              $2.5            $2.3          $19.5         $30.0
          0.50
                                                                                                             EPS (FD TSM)                            ($1.05)         ($0.08)         $0.05         $0.30
                                                                                100,000
                                                                                                             CFPS (FD TSM)                            $0.11           $0.01          $0.17         $0.62
          0.00                                                                  0                        Valuation                                                                  2011E         2012E
                 Sep-09

                          Nov-09




                                                              Jul-10


                                                                       Sep-10
                                   Jan-10

                                            Mar-10

                                                     May-10




                                                                                                         EV/DACF                                                                     12.7x          3.6x
                                                                                                         EV/BOE/d (per unit production)                                          $127,949       $52,891
                                                                                                         P/E                                                                         51.4x          8.2x
  Source: Thomson One                                                                                    Target EV/DACF                                                              20.5x          5.7x
                                                                                                         * Fiscal year ends on March 31 each year
                                                                                                         Source: Company reports, Wellington West Capital Markets Inc.
                                                                                                         Please see disclaimers on the last two pages of this report.
TAG Oil Ltd.


                              Investment Summary and Outlook
                              TAG Oil (TAG) is a “pure play” New Zealand based exploration and
                              production company positioned to exploit over 2 million prospective acres &
                              14+ billion barrels of original oil in place (OOIP), offering both high impact
                              exploration and lower risk development upside. TAG offers a mix of risk and
                              reward opportunity across a combination of large oil-in-place conventional
                              reservoirs and emerging unconventional resource plays. The Taranaki basin in
                              North New Zealand is a mature proven-producing basin yet remains highly
                              underexplored as compared to other mature basins around the world like those
                              found in North America. The lower risk Taranaki basin offers significant growth
                              potential across two acreage blocks (or permits) which holds an estimated 100
                              million bbls OOIP and is 100% owned by TAG. The company‟s near-term (Q4
                              2010 / Q1 2011) focus is to delineate reserves and boost corporate oil production
                              via an estimated ~$20 million work program on its Taranaki permits. The East
                              Coast basin offers “game changing” upside for TAG throughout the prove-up and
                              commerciality of multiple oil shale zones which have similar technical
                              characteristics to both the North Dakota Bakken & emerging Paris Basin Liassic
                              resource plays. Both the Taranaki and East Coast basins are prime candidates for
                              application of North American based multi-stage frac technology with TAG set
                              to implement the first uses of this technology in 2010 / 2011. TAG has also
                              recently acquired 100% of the overlapping gas-condensate rights & an initial
                              liquids-rich gas discovery on one of its Taranaki permits where the company
                              controls the facility infrastructure.

                              We are initiating coverage with a $3.80 target price and a Speculative Buy
                              rating. Given TAG is an early-stage exploration and development company and
                              is just starting to become active with its initial drilling & frac operations in Q4
                              2010, we focus our valuation on the company‟s exploration upside shown by our
                              net risked EMV/sh of ~$13.32. Our EMV/sh is driven by a risked recoverable
                              resource potential of up to ~52 mmbbls vs. unrisked of ~455 mmbbls
                              recoverable. As the company executes high impact exploration, makes
                              discoveries, and tests North American based technologies to commercialize its
                              potentially “game-changing” oil shale assets, we believe significant shareholder
                              value could be unlocked across TAG‟s 2+ million net undeveloped acres and 14+
                              billion bbl OOIP “prize”. We believe TAG shares represent a compelling
                              opportunity for investors looking to gain exposure to a well financed New
                              Zealand “explore-co” with a mix of lower risk plays in the medium-term and
                              higher risk, higher reward plays over the longer-term.


                              Investment Highlights
                              Huge Land Position, 100% W.I. & Ready to Exploit Over 14 Billion
                              Barrels of OOIP
                              TAG has two highly prospective areas (100% working interest) covering
                              more than 2 million acres in New Zealand located in the emerging East
                              Coast basin and the proven-producing Taranaki basin. The East Coast basin
                              offers both conventional and unconventional opportunities on acreage originally
                              acquired through a transaction with Trans-Orient Energy (details to follow).
                              According to two independent engineering evaluations by Sproule and AJM,


Kevin Shaw, P.Eng, (403)781-2715; kshaw@wwcm.com                                           September 20, 2010- 2
TAG Oil Ltd.


                              these two basins have 14 billion barrels OOIP indentified on less than 10% of the
                              company‟s existing land base. Currently, TAG has three permits in the East
                              Coast basin and two permits in the Taranaki basin. We see the East Coast basin
                              as a free call option on recoverable resource potential of possibly over 1 billion
                              barrels.

                              Ramping Oil Production and Cashflow - Taranaki Basin Production
                              Positioned to Double in 3 Months to 6 Months
                              TAG’s initial Cheal oil pool is already producing at ~490 boe/d and is
                              expected to reach 1,000+ boe/d within several months and 1,500+ boe/d in
                              mid 2011. Following a relatively recent $20mm financing, TAG is initiating
                              “sizeable” work programs in 2010 & 2011 for the Cheal & Broadside blocks
                              within the Taranaki basin. TAG‟s strategy is focused on building oil production
                              & cashflow on lower risk development and exploration plays prior to conducting
                              exploration activities in the East Coast basin in 2011. The Taranaki basin offers
                              an estimated 100 mmboe of OOIP with TAG expected to further test the Urenui
                              & Mt. Messenger formations (i.e. known oil producing zones in New Zealand)
                              and utilize technology advancements both in horizontal multi-stage fracs as well
                              as downhole heater systems to enhance production rates, increase recovery
                              factors, and add new reserves. Leveraging relatively lower risk development of
                              Taranaki producing assets into a cashflow “engine” to fund the company‟s
                              planned East Coast basin exploration, we believe, is a solid strategy to build
                              shareholder value.

                              East Coast Basin – Call Option on a BIG Oil Resource Play & a Prime
                              Candidate for Horizontal Multi-Stage Fracs
                              99% of the company’s OOIP is in the East Coast basin which contains oil
                              shale which appears analogous to the Bakken and Paris Basin Liassic Oil
                              Shale, and could offer tremendous upside to TAG. The East Coast basin is a
                              high impact area with more than 2 million acres of unexplored lands. Hundreds
                              of drilling prospects at depths between 250 meters and 2,000 meters have been
                              identified with only 38 test “holes” drilled on the acreage since 1955. Within the
                              East Coast basin, there is potential for three separate play types, including: 1.
                              Shallow conventional oil in the Waitangi formation (i.e. 200 meters to 300
                              meters in depth; 2. Deep conventional oil targets (i.e. less than 1,500 meters
                              deep) in the Miocene sandstones offering 2 mmbbl to 10 mmbbl reserve targets
                              per prospect; and, 3. Unconventional oil-shale which is widespread regionally
                              (i.e. less than 2000 meters deep) and could prove similar to the North American
                              Bakken and emerging Paris Basin Liassic plays. The East Coast basin is a prime
                              candidate for horizontal multi-stage frac technology within two known
                              unconventional fractured shale plays in source rocks known as the Waipawa &
                              Whangai. Reserves have not yet been booked for any of the conventional or
                              unconventional zones of interest included in the East Coast‟s 14 billon OOIP
                              resource estimate.

                              New Zealand: Stable, Fiscally Attractive, and Underexplored
                              All of TAG’s assets are in New Zealand, an economically and politically
                              stable country. An investment in TAG provides investors with the opportunity
                              to invest in an international exploration company with relatively low “in country”



Kevin Shaw, P.Eng, (403)781-2715; kshaw@wwcm.com                                           September 20, 2010- 3
TAG Oil Ltd.


                              risks (i.e. geo-political, threat of wars, corruption, etc.) which exist in many
                              hydrocarbon rich countries in other parts of the world. New Zealand‟s permitting
                              regime and fiscal terms are highly ranked among the world. Specifically, policy
                              framework promotes the discovery of petroleum with a competitive fiscal
                              regime. The royalty rate for TAG is 5% for oil and 1% for gas sales and a 15%
                              accounting profits royalty for an onshore discovery for the first NZ$250 million
                              sales and 20% thereafter. The Taranaki & East Coast basins are expected to
                              yield high netbacks with oil revenues fetching WTI benchmark pricing.

                              Strong Balance Sheet, Fully Financed for Taranaki Drill Program
                              With $26mm in working capital and no debt, TAG is in a strong financial
                              position to move forward with an initial Taranaki basin development &
                              exploration program. The company has sufficient capital to fund its current
                              capital program within the Taranaki basin and further ramp oil production upon
                              success. Upon success of multiple wells in late 2010 or early 2011, we anticipate
                              TAG requiring additional capital either via equity and/or debt to finance future
                              development within the Taranaki basin and kick-off high impact exploration
                              drilling on the East Coast.

                              Attractive Valuation Based on our Risked NPV/sh & Risked EMV/sh
                              TAG is trading at 0.2X our risked EMV/sh estimate of $13.32 and 0.9X
                              our risked NPV/sh estimate of $2.67. With our risked NPV/sh based solely
                              on the company’s initial Taranaki potential, there is significant upside as
                              new exploration and resource development plays within the East Coast basin
                              move from the “testing / prove-up” stage to development. We believe TAG is
                              a Speculative Buy as the company begins its initial capital program in onshore
                              New Zealand in 2010 and works to delineate new reserves & apply horizontal
                              technology.




Kevin Shaw, P.Eng, (403)781-2715; kshaw@wwcm.com                                          September 20, 2010- 4
TAG Oil Ltd.


                                       Valuation and Summary Recommendation
                                       We are initiating coverage on TAG Oil with a Speculative Buy rating and a
                                       $3.80 target. We believe TAG offers investors exposure to significant upside
                                       through lower risk development and exploration on its two Taranaki basin
                                       blocks, with high impact “game changing” opportunities in the East Coast basin.
                                       TAG offers exposure to big oil upside via horizontal technology applications
                                       within both proven producing assets and new “frontier” higher risk acreage,
                                       where multiple zones of interest have been identified. Until a number of TAG‟s
                                       initial plays are further proved-up, TAG carries a higher overall risk rating like
                                       many emerging “explore-cos”, however the investment risk is somewhat
                                       mitigated given TAG has existing oil production (i.e. operates 490 boe/d with
                                       associated gas) and is expected to increase production volumes over the medium
                                       term to 1,000+ boe/d without leveraging the balance sheet.

                                       We estimate a risked NPV/sh of $2.01 (not including cash) on TAG’s
                                       Taranaki basin potential with a risked EMV/sh of $13.32 which includes
                                       both further exploration within Taranaki, the high impact plays on the East
                                       Coast and working capital. TAG‟s huge upside can be seen in our EMV/sh
                                       valuation and is driven by the East Coast basin with an unrisked recoverable
                                       resource estimate of 455 mmbbls accounting for only a 3% recovery factor on the
                                       14+ billion bbl OOIP prize. Our risked EMV/sh holds ~52 mmbbls of
                                       recoverable resource. If proved successful, the East Coast basin could support
                                       hundreds of vertical and horizontal development locations both targeting
                                       conventional & unconventional oil plays.


       Exhibit 1: WWCM Risked NPV/sh Valuation – Possible Scenario for Initial Taranaki Assets Alone
                                              WWCM Unrisked             WWCM Risked
                                                                 COS                        Unrisked    Risked
                      Prospect/Field         Resource Estimate         Resource Estimate
                                                                 (%)                         NPV/sh     NPV/sh
                                               (mmbbls, net)             (mmbbls, net)
                  Taranaki                            6.0        60%           3.6           $3.35       $2.01
                  Cash (Net Debt)                                                            $0.66       $0.66
                  Total                               6.0                      3.6           $4.01       $2.67
       Source: Wellington West Capital Markets Inc.




Kevin Shaw, P.Eng, (403)781-2715; kshaw@wwcm.com                                                     September 20, 2010- 5
TAG Oil Ltd.


          Exhibit 2: WWCM Risked EMV/sh Valuation Breakdown – Including Exploration & Development
          Upside for Both Taranaki & East Coast Basins
                                                           WWCM Unrisked Working                   WWCM Risked
                                                                                             COS                Net Risked
                                 Prospect/Field               Resource    Interest                   Resource
                                                                                             (%)                 EMV/sh
                                                           (Gross, mmboe)   (%)                    (Net, mmboe)
                           East Coast Basin
                           Conventional                           87.0           100%        10%           8.7             $2.65
                           Waipawa Oil Shale                     175.0           100%        10%          17.5             $3.56
                           Whangai Oil Shale                     175.0           100%        10%          17.5             $3.56
                           Taranaki Basin
                           Cheal - Mt. Messenger                     7.0         100%        55%              3.9          $1.44
                           Cheal - Urenui                            5.0         100%        35%              1.8          $0.61
                           Broadside - Mt. Messenger                 4.0         100%        55%              2.2          $0.73
                           Broadside - Urenui                        2.0         100%        35%              0.7          $0.10
                           Cash (Net debt)                                                                                 $0.66
                           Total                                 455.0                                    52.2           $13.32

          Source: Company reports, Wellington West Capital Markets Inc.


Exhibit 3: Summary Valuation Table – Drives our Target of $3.80

 Valuation Matrix                                        Forecast          Target Multiple         Value            Weighting      Weighted Value
 Core 2P NPV10                                              $ 1.41              1.0                  $ 1.41           35%                 $ 0.49
 Risked NPV/sh. (Taranaki Assets only)                      $ 2.67              1.0                  $ 2.67           35%                 $ 0.93
 Asset EMV/share                                           $ 13.32              1.0                 $ 13.32           15%                  $2.00
 2011E DACF (Fiscal Yr. 2012)                               $ 0.62              4.0                  $ 2.50           15%                 $ 0.37
                                                                                                   12-month derived target price         $ 3.80
Source: Wellington West Capital Markets Inc. estimates



                                           Operating Areas – New Zealand
                                           TAG is a “pure play” focused solely on oil and gas exploration and
                                           production in New Zealand’s Taranaki and East Coast basins. With two key
                                           target areas, TAG has a portfolio of low risk and high risk plays. The Taranaki
                                           basin in North Island New Zealand has been producing for many years, yet it is
                                           still relatively underexplored. The East Coast basin is expected to hold a
                                           significantly larger resource potential, although will require more exploration
                                           work (see Exhibit 9). The lower risk Taranaki basin will be the company‟s focus
                                           in the near-term to ramp production, while the East Coast basin could generate
                                           significant shareholder value over the longer-term.




Kevin Shaw, P.Eng, (403)781-2715; kshaw@wwcm.com                                                                         September 20, 2010- 6
TAG Oil Ltd.


                              Exhibit 4: TAG’s Taranaki Basin and East Coast Basin Acreage – Located
                              on North Island of New Zealand




                              Source: Company reports


                              Taranaki Basin – Lower Risk, Historically Undercapitalized & Highly
                              Prospective
                              TAG has two permits with 100% interests in the proven but underexplored
                              Taranaki basin (see Exhibit 5). Although the basin covers 100,000 square
                              km‟s, only 175 wildcats have been drilled since 1955. Hence, it offers significant
                              opportunity to expand reserves through exploration and development. The
                              proven basin thus far has 600 million barrels of oil and 7 trillion cubic feet of
                              recoverable gas reserves. Currently, the basin is producing 53,700 bbl/d of oil
                              and 397 mmcf/d of gas. TAG has already indentified more than 30 initial drilling
                              locations within the Taranaki basin to further explore and develop its two key
                              land permits.




Kevin Shaw, P.Eng, (403)781-2715; kshaw@wwcm.com                                           September 20, 2010- 7
TAG Oil Ltd.


                              Exhibit 5: Taranaki Basin: TAG’s Cheal and Cardiff Discoveries, 2 Permits
                              and Operated Facilities are in the Middle of Increasing Industry Activity




                              Source: Company reports, Wellington West


                              TAG has 100% working interests in Cheal and is producing ~490 boe/d
                              (approx. 86% oil). Permit 38156-S, where the initial Cheal discovery is located,
                              covers 7,487 acres and has 3-D seismic coverage over the area. The Cheal A and
                              B blocks (see Exhibit 6) were the first developed and hold an estimated 10
                              mmbbls OOIP with recovery factors (RF‟s) in the 8% to 12% range. These RF‟s
                              are expected to increase via the implementation of downhole heater systems and
                              horizontal development. Moreover, there are several undeveloped blocks to the
                              NE and NW of the current development area (Blocks A and B) which have the
                              potential to increase the company‟s existing 2P reserves (initial bookings of ~0.7
                              mmbbls) by 4 to 10 times. TAG has identified up to 20 additional horizontal
                              locations among the undeveloped blocks with the potential to achieve rates up to
                              1,000 boe/d per horizontal. With TAG kicking-off its initial drilling activities in
                              Q4 2010, we expect the company to further delineate the undeveloped Cheal
                              blocks offset to blocks A&B.




Kevin Shaw, P.Eng, (403)781-2715; kshaw@wwcm.com                                           September 20, 2010- 8
TAG Oil Ltd.


                              Exhibit 6: Taranaki Basin – Existing Cheal Pools and Undeveloped Blocks
                              w/ Potential to Increase 2P Reserves by 4 to 10x




                              Source: Company reports


                              Horizontal development “tests” are planned for both the Mt. Messenger and
                              Urenui formations. The Mt. Messenger formation is about 1,800 m deep
                              whereas the Urenui is ~1,400 m. Exhibit 7, which shows an outcrop photograph
                              from New Zealand, demonstrates that the Mt. Messenger formation is comprised
                              of multiple thin (~1m) individual sandstone beds. Each lobe is 150-200 m across
                              and the sandstone beds are separated by shale. Each Mt. Messenger pool is made
                              up of hundreds of overlapping lobes covering an area of multiple kilometers.
                              The company plans to test the development of this known producing formation
                              (i.e. on offset acreage) using horizontal multi-stage frac execution with the
                              concept of applying this North American based technology to intercept hundreds
                              of lobes with a single horizontal wellbore (i.e. vertical wells can only intercept 5-
                              10 individual lobes per well). Successful horizontal tests could significantly
                              increase the 2P reserves for TAG, given the Mt. Messenger reserves at Taranaki
                              are currently modestly booked with respect to recovery factors from vertical
                              wells only.




Kevin Shaw, P.Eng, (403)781-2715; kshaw@wwcm.com                                             September 20, 2010- 9
TAG Oil Ltd.


                              Exhibit 7: Taranaki Basin: Mt. Messenger Formation – Prime Candidate for
                              Horizontal Multi-Stage Frac Technology




                              Source: Company reports

                              The Urenui formation is present in all 11 Cheal wells drilled to date. This
                              Miocene-aged formation is well defined on 3D seismic and is ~1,400 m deep.
                              Strong hydrocarbon shows on mudlogs were evident in 10 of 11 wells drilled in
                              the permit and three wells actually tested oil and gas with no water. With the
                              application of cost effective downhole heaters, the ultimate recovery factors and
                              reserve values for the Urenui formation could significantly increase, as no
                              previous reserves have been booked to this formation. Wax technology (i.e.
                              downhole heaters) was applied to two vertical wells in May / June „10 to pilot
                              different downhole completion designs to enhance overall productivity. The prize
                              going forward is to sustain much higher well rates from the known Urenui
                              formation which if successful, could support development drilling across the
                              Taranaki assets.

                              Broadside (Permit 38748) is strategically located in the heart of the
                              Taranaki fairway and is highly complimentary to Cheal. It covers 7,910
                              acres (100% TAG) and is located to the north of Cheal. Sharing many of the
                              same geotechnical characteristics as Cheal, Broadside will benefit from the
                              exploration and development experience executed on the Cheal blocks. The first
                              exploration well is expected to be drilled by TAG in Q4 2010 on the Broadside
                              acreage and is targeting the Mt. Messenger and Urenui oil formations which are


Kevin Shaw, P.Eng, (403)781-2715; kshaw@wwcm.com                                         September 20, 2010- 10
TAG Oil Ltd.


                              producing at Cheal and/or have been identified on surrounding blocks. To start,
                              five drillable prospects have been indentified with another five to ten wells to
                              follow upon initial success. The first well is expected to be drilled in September /
                              October 2010 to put this new permit into play.

                              Exhibit 8: Taranaki Basin: Broadside Permit – A New Exploration Area in
                              the “Heart” of the Fairway




                              Source: Company reports




                              East Coast Basin – The “Free” Call Option
                              Massive upside potential in the East Coast basin exists and could be “game
                              changing” to TAG who owns 100% working interest in three permits
                              covering more than 2 million acres of undeveloped land. Unlike the Taranaki
                              basin, the East Coast basin is higher risk, but offers significant upside for an
                              investor who takes a longer-term view. The permits were acquired through a
                              take-over of Trans-Orient in December 2009. TAG is planning on exploring &
                              developing the basin with conventional and unconventional methods while the
                              latter is expected to be the main focus for this basin. Even though it is still early
                              days for the widespread unconventional oil shales which have been identified on
                              these permits, the East Coast basin can be compared to both the Bakken shale


Kevin Shaw, P.Eng, (403)781-2715; kshaw@wwcm.com                                            September 20, 2010- 11
TAG Oil Ltd.


                              play in North America and the Paris Basin Liassic (see Exhibit 12). As a result,
                              TAG offers a unique opportunity for investors to gain exposure to an unexploited
                              “Bakken type” oil-shale on the international circuit, within New Zealand‟s
                              fiscally attractive and stable environment.

                              The huge OOIP offers both conventional and unconventional opportunities.
                              The East Coast basin has 14+ billion barrels of OOIP which, as estimated by two
                              independent qualified engineers. As shown in Exhibit 9, 12.65 billion barrels of
                              unconventional OOIP have been assessed by AJM while 1.74 billion barrels of
                              conventional OOIP have been estimated by Sproule. Geotechnical work to date
                              has identified a number of conventional and unconventional prospects at depths
                              between 250 and 2,000 m.

                              Exhibit 9: TAG’s OOIP Breakdown




                              Source: Company reports


                              TAG has indentified three approaches to explore and develop the East Coast
                              basin. Exhibit 10 identifies the stratigraphy of the basin and the multi-zone
                              potential within 3 distinct resource play types. We believe that horizontal multi-
                              stage frac technology will be key to unlocking this big oil opportunity to
                              commercialize the large in-place reserves within a widespread hydrocarbon
                              charged source rock. Hence, the company is taking steps to utilize proven
                              technology for shale plays in North America and apply them to the East Coast
                              basin with the first vertical and horizontal “test” wells expected into this play in
                              2011 (i.e. post an initial work program within the Taranaki basin). Exhibits 10
                              and 11 identify historical activity, resource estimates, and future activities
                              planned given specific reservoir characteristics.




Kevin Shaw, P.Eng, (403)781-2715; kshaw@wwcm.com                                           September 20, 2010- 12
TAG Oil Ltd.


                              Exhibit 10: East Coast Basin: Stratigraphy & Three Targets of Interest




                                                                                                        Paris Basin Liassic

                              Source: Company reports, Wellington West



                              Exhibit 11: Summary of the Approaches for the East Coast Basin
                             Shallow Conventional Targets                   First of three Cored Strat wells now complete at Waitangi
                                                                             Hill –shallow oil and gas at high pressure discovered
                                                                            1912 Bore Hole still bubbling 50 degree API, sweet crude
                                                                             oil and gas today
                                                                            Oil geochemically typed to Waipawa/Whangai source rocks
                                                                            Potential to drill 15 wells on Waitangi Hill alone
                             Deep Conventional Targets                      Potential for stacked conventional targets, as well
                                                                            4-way dip closure on Miocene through Paleocene
                                                                             formations
                                                                            Sproule estimates 1.74 billion barrels OOIP of conventional
                                                                             oil
                                                                            Extremely over pressured Basin (3,100 psi at 1,000m),
                                                                             impenetrable seal
                                                                            Naturally fractured and 50 degree API oil
                             Unconventional Targets                         Oil-and gas-rich Waipawa and Whangai fractured shale
                                                                             system widespread & thickly developed across TAG‟s
                                                                             holdings
                                                                            Improved horizontal, multi-stage fracturing technology
                                                                             optimizes extraction
                                                                            Comparable in total organic carbon content and oil and gas
                                                                             maturity level to Bakken Shale
                                                                            AJM undiscovered resource potential of 12.65 billion
                                                                             barrels of unconventional OOIP
                                                                            Boar Hill -1, Kawakawa-1, Waitangi Deep-1: all high-
                                                                             graded potential deep tests
                              Source: Company reports




Kevin Shaw, P.Eng, (403)781-2715; kshaw@wwcm.com                                                             September 20, 2010- 13
TAG Oil Ltd.


                              Exhibit 12: How Does TAG’s Oil Shale Stack-up: Waipawa / Whangai vs.
                              Bakken / Paris Basin Liassic
                                                        North Dakota    Waipawa      Paris Basin           Whangai
                                                          Bakken                        Liassic
                               Depth (m)                2,700 – 3,500   0 – 5,000    1,650 – 1,850         0 – 5,000
                               Net Thick (m)              10 – 50        10 – 60        1 – 40            300 – 600+
                               Primary Perm               40 – 50       10 – 200          50               10 – 110
                               (microdarcies)
                               Tmax (C)                  420 – 450      430 – 445        445               420 – 445
                               TOC %                      1.1 – 12       3.0 – 12         4.5              0.2 – 1.7
                               Quartz Content %           20 – 68        40 – 80       26 – 58              40 – 80
                               Vit Refl R                 0.3 – 1.2     0.3 – 0.4      1.0 – 1.3           0.1 – 1.4
                               Total Porosity %            8 – 12         9 – 23         4–5                16 -31
                               Source Rock / Oil         Type II/42     Type II/50    Type II/38           Type II/50
                               Gravity (API)




                              Source: Company reports



                              Recent Entry into Gas Exploration – Another
                              Call Option for TAG
                              On September 15, TAG strategically announced that it has acquired a 100%
                              interest in a condensate-rich deep gas discovery and the gas hydrocarbon
                              rights which overlap TAG’s existing Cheal oil acreage. There are 16 gas
                              fields in the country where the production is dominated by three key fields (see
                              Exhibit 13). The offshore 3.4 Tcf Maui gas field was discovered in 1969 and was
                              the crown jewel of the oil and gas industry in New Zealand. However, since
                              initial production in 1979, the field has more recently been declining at a
                              relatively steep rate. As a result, the price of natural gas in New Zealand has
                              been increasing at a rather steep rate. Domestic gas prices have increased from
                              US$1.36/mcf in 2000 to US$5.29/mcf in 2008 (see Exhibit 14).




Kevin Shaw, P.Eng, (403)781-2715; kshaw@wwcm.com                                                September 20, 2010- 14
TAG Oil Ltd.


                              Exhibit 13: New Zealand Historical Natural Gas Production by Fields
                                                      700


                                                      600


                                                      500




                                Production (mmcf/d)
                                                      400


                                                      300


                                                      200


                                                      100


                                                       0
                                                       2000                2001   2002     2003      2004       2005     2006    2007       2008   2009

                                                                                  Maui          Kapuni            Pohokura          Other

                              Source: Ministry of Economic Development


                              Exhibit 14: New Zealand Historical Gas Price – Trending Upwards
                                                                      $6



                                                                      $5



                                                                      $4
                                                            US$/mcf




                                                                      $3



                                                                      $2



                                                                      $1



                                                                      $0
                                                                           2000   2001   2002     2003   2004     2005    2006   2007   2008


                              Source: Ministry of Economic Development


                              The acquisition of the Cardiff gas/condensate discovery (Permit 38156-D)
                              fits strategically with its Cheal asset (see Exhibit 15). It is located within
                              Permit 38156-S and the acquisition ends the split rights of the area allowing TAG
                              to control 100% of Permit 38156. Gas with rich condensate was discovered
                              within the upper Kapuni zone with 12m of net pay flowing at over 3 mcf/d and
                              100 bbl/d of condensate (light oil) from a vertical alone. Significant potential
                              may exists in the deeper K1A and K3E zones where strong gas shows were
                              encountered over a gross interval of 600 m. Cardiff gas can easily be sold to the




Kevin Shaw, P.Eng, (403)781-2715; kshaw@wwcm.com                                                                                 September 20, 2010- 15
TAG Oil Ltd.


                              North Island gas market given its close proximity to existing gas infra0structure
                              which is controlled by TAG on its oil operations in the area.

                              Exhibit 15: Cardiff Gas Discovery Location




                              Source: Company reports



                              Near-term Catalysts and 2010 Program
                              TAG recently announced their upcoming work program focused in the
                              Taranaki basin, which includes new exploration and development drills,
                              workover optimization operations, and the first horizontal multi-stage frac
                              “test”. The program kicks off mid September 2010 with an exploration well,
                              Sidewinder-1, on the Broadside permit which is planned to reach a total
                              measured depth of 1,457 m in approximately 10 days targeting the Mt.
                              Messenger Formation. Depending on the results, TAG has the option to drill one
                              or more additional follow-on exploration prospects for further delineation of Mt.
                              Messenger oil within the Broadside permit. Following this initial exploration
                              well, the rig will move to the existing Cheal production permit to drill the Cheal-
                              BH-1 horizontal well into the proven producing area of the Cheal “A” block
                              directly offsetting vertical producers in the area. A 600 m horizontal leg is
                              planned for this first “test” development well at a TVD of 2,325 m. This will be
                              an important well completion as a multi-stage fracture treatment has not as yet
                              been deployed in New Zealand.




Kevin Shaw, P.Eng, (403)781-2715; kshaw@wwcm.com                                          September 20, 2010- 16
TAG Oil Ltd.


                              Exhibit 16: Lots of Catalysts in 2010 with Focus on Taranaki Basin &
                              Building Oil Cashflow; High Impact East Coast Basin to Follow in 2011
                                  Property                                           Operation                                  Cost
                                                                                                                                 ($mm)

                              Taranaki Basin - 2010 Focus - Building Production & Cashflow; Delineating New Development Reserves
                               Broadside        1st of multiple exploration targets; "Sidewinder-1" to be spud ~mid Sept. '10    $2.5
                               Cheal BH-1       Mt. Messenger Well - Horizontal Multi-Stage Frac (Development well - lower risk) $3.5
                               Cheal            Optimize B3 & B1 Wells – frac & potential dual completion                        $1.5
                               Cheal            Urenui Well with Horizontal Multi-Stage Frac                                     $3.5
                               Broadside        Mt. Messenger Well – Vertical with Frac                                          $2.5
                               Cheal            1st of multiple Cheal "Step-Outs" starting with B5 - Horizontal Multi-Stage Frac $3.5
                               Cheal            Cheal B-4 Side-Track                                                             $2.5

                              East Coast Basin - 2011 Focus
                               TBD            Shallow Strat Wells for Data Gathering                                            TBD
                               TBD            Vertical/Horizontal Pilot Program Testing Oilshale Potential                      TBD

                              Source: Company reports


                              Operating and Financial Forecasts
                              As the company executes their phased exploration and field development
                              plan within the Taranaki basin focused at Cheal and on the Broadside
                              permit, we expect (with success) TAG’s production to increase from ~490
                              boe/d to ~1,200 boe/d by end of fiscal 2011 (March 2011). A key development
                              to watch for is the horizontal drilling planned for late October or early November
                              this year. Cash flows generated from the Cheal operations and work program are
                              expected to be key to help fund future exploration and development activities
                              both within the Taranaki basin and on the East Coast.

                              With no debt and $26mm in working capital, TAG is positioned for growth
                              by investing in five 100% controlled permit areas within the Taranaki and
                              East Coast basins. The Taranaki basin could generate cash flows of $6.5mm
                              and $24.4mm in fiscal 2011 and 2012, respectively, depending on execution
                              results from the initial work programs. Even though it is early days, the East
                              Coast basin has the potential to add significant value for shareholders over the
                              longer-term and is a great call option on what could be BIG international oil.
                              Our risked EMV for the East Coast basin is $9.77/sh.

                              Overall, we view TAG as an attractive early stage play on what could shift from
                              an emerging “explore-co” and early development E&P to a larger scale
                              “manufacturing” story (i.e. upon success on one of the company‟s conventional
                              and unconventional oil resource plays).




Kevin Shaw, P.Eng, (403)781-2715; kshaw@wwcm.com                                                             September 20, 2010- 17
TAG Oil Ltd.



                              History and Management
                              TAG Oil has assembled a highly focused management team and Board of
                              Directors with international oil and gas experience. Key management and
                              technical team members have been together for 7+ years focusing on New
                              Zealand and the company has added key technical staff over the last few
                              months as TAG begins to get active with the drill bit in Q4 2010. The
                              company has focused efforts on the Taranaki Basin since 2003, and has been
                              acquiring additional permits and acreage in the country. In December of 2009,
                              TAG Oil acquired 100% interests in Trans-Orient Petroleum, which held
                              exploration rights in the East Coast Basin. Led by Garth Johnson, CEO &
                              Director, the management team has extensive experience in New Zealand and
                              some members have held previous roles with Trans-Orient. Management,
                              together with the Board of Directors, holds 26% of the shares outstanding.

                              Exhibit 17: TAG Management Team and Board of Directors

                              Management Team
                              Garth Johnson, CEO & Director
                              Mr. Johnson joined TAG Oil as the corporate accountant in 1997. Mr. Johnson is a Certified
                              General Accountant who has extensive experience in executive management, acquisitions,
                              corporate finance, accounting and regulatory reporting for public companies in the oil and gas
                              industry and has been instrumental in developing junior companies from start-up to listing on
                              the TSX and AMEX exchanges for the last 14 years. Mr. Johnson is also a corporate business
                              executive and has focused, primarily in New Zealand and Papua New Guinea. Currently, Mr.
                              Johnson is the Chief Executive Officer and a director of TAG Oil and has previously served as a
                              director and officer of Trans-Orient, Austral and AMG.

                              Blair Johnson, CFO & Director
                              Mr. Johnson currently serves as the Chief Financial Officer of TAG Oil. Mr. Johnson, holds a
                              Bachelor of Management Studies with First Class Honors in Accounting and Marketing and has
                              worked with TAG Oil for the last four years. Mr. Johnson’s responsibilities with TAG Oil have
                              included corporate governance and accounting functions for TAG Oil’s New Zealand
                              subsidiaries. Mr. Johnson is a member of the Chartered Institute of Management Accountants
                              (UK), and a member of the Institute of Chartered Accountants of New Zealand. Prior to joining
                              25 TAG Oil, Mr. Johnson was Finance Director for Bridge Petroleum Limited (NZ) and has an
                              extensive track record of managing operational risk in highly regulated industries.

                              Drew Cadenhead, COO & Director

                              Mr. Cadenhead currently serves as the Chief Operating Officer of TAG Oil. Mr. Cadenhead
                              obtained his B.SC. in Geology from the University of Calgary and began his career in the oil
                              and gas exploration business in 1979. Mr. Cadenhead has extensive technical and operational
                              experience in Western Canada and New Zealand and he has gained an in-depth knowledge of
                              both international and domestic oil and gas exploration and development. Mr. Cadenhead has
                              worked for Canadian Hunter Exploration, and also worked in various leadership capacities for a
                              number of other Canadian-based companies including Ulster Petroleum, Selkirk Energy and
                              Summit Resources. At Summit Resources, Mr. Cadenhead was responsible for identifying and
                              leading the company into the Gunnell area of B.C. to test the Upper Devonian Jean Marie
                              Formation where multi-TCF gas deposits were subsequently discovered. Mr. Cadenhead
                              gained his New Zealand experience with Fletcher Challenge Energy Taranaki, leading a team
                              of geoscientists, engineers and technical support staff into a successful multi-well drilling
                              program and secondary recovery implementation before joining TAG Oil in 2003. Mr.
                              Cadenhead is also a member of APEGGA.




Kevin Shaw, P.Eng, (403)781-2715; kshaw@wwcm.com                                                   September 20, 2010- 18
TAG Oil Ltd.

                              Giuseppe (Pino) Perone, Corporate Secretary

                              Mr. Perone currently serves as the Corporate Secretary of TAG Oil. Mr. Perone is currently
                              practicing as a corporate lawyer for TAG Oil and other public and private companies, and has
                              legal experience in a variety of corporate and commercial matters. Mr. Perone obtained a B.A.
                              with Distinction in Sociology from the University of Victoria in 2001 and an LL.B. from the
                              University of Alberta in 2005, and has previously articled at the law firm of Lang Michener LLP
                              in their Vancouver, British Columbia office. Mr. Perone is also an active member of the Law
                              Society of British Columbia and the Canadian Bar Association. Mr. Perone has previously
                              served as a director of TAG Oil.
                              John (Jack) P. Doyle, Drilling & Completion Manager

                              Mr. Doyle is a professional Petroleum Engineer, with over 30 years experience in the Canadian
                              oil and gas business. “Jack” is the CEO and founding partner of BASE Engineering, a Calgary-
                              based engineering firm that provides total engineering solutions and project management to the
                              oil and gas industry. Jack started his successful career with Amoco Canada (later Dome
                              Petroleum), spending 18 years working through positions of escalating seniority in the drilling,
                              completions, production and facility engineering departments. The last 12 years of Mr. Doyle’s
                              career have seen him take lead engineering supervisory roles with Northstar Energy, Dominion
                              Exploration, and Hawker Resources, before establishing BASE Engineering. Mr. Doyle
                              graduated with a B.Sc. in Petroleum Engineering from the Montana College of Mineral Science
                              and Technology and is a member of APEGGA.

                              Carey G. Davis, Exploration & New Ventures Manager

                              Mr. Davis is a Professional Petroleum Geologist with 15 years of international exploration and
                              development experience. Carey started his career with PetroCorp, the New Zealand State-
                              owned oil company. He continued developing his geological knowledge in New Zealand with
                              Fletcher Challenge Energy before striking out into broader international waters. In 2001, Carey
                              accepted a position with Talisman Energy, where he provided geotechnical leadership roles in
                              North Africa, Trinidad and Western Canada. He returned to New Zealand in 2003, where he
                              accepted the position of Senior Geologist with Swift Energy and later in 2007, Exploration
                              Technical Advisor for Mighty River Power. Carey is highly skilled in Reservoir Geology,
                              Petrophysics, Seismic Interpretation and Petroleum Risk/Resource Assessment as a result of
                              working in challenging and complex geological environments worldwide. Carey recently joined
                              TAG on a fulltime basis in New Zealand, specializing in onshore Taranaki as well as the other
                              emerging exploration basins within New Zealand. Carey graduated from Canterbury University
                              in Christchurch with a B.Sc. in Geology, and a M.Sc. with First Class Honors in Petroleum
                              Geology from Curtin University in Perth, Australia.

                              David Francis, Senior Geologist

                              A senior geologist with over 30 years experience with extensive knowledge of the East Coast
                              Basin, Mr. Francis has worked extensively in the Australasian region however has taken a
                              passionate personal interest in the East Coast Basin. He previously served as a field geologist
                              for the New Zealand Geological Survey, conducting extensive mapping and basin analysis and
                              has authored dozens of scientific papers and reports detailing East Coast Basin petroleum
                              geology, and has built a large database of geological information on this basin. Mr. Francis'
                              expertise lies in his ability to interpret field data and communicate with and direct other
                              specialists. In 1981 he played a major role in discovering a large ore body in Western Australia
                              resulting in a substantial increase in mineable ore. He has an M.Sc. from Auckland University.

                              Carlos Kazianis, New Zealand Operations Manager

                              Mr. Kazianis has extensive international field experience in well site supervision, management
                              of drilling operations and critical technical support. He also provides collation and completion of
                              geological prognosis for drilling, well planning, selection of service companies and other
                              technical assistance. Well-known for his diligence, Mr. Kazianis has worked in Europe, Africa,
                              Middle East, South East Asia, Papua New Guinea and New Zealand. Previously, he was a
                              senior advisor to the Petroleum and Minerals Investment Unit of New Zealand's Crown Minerals
                              and a former Lieutenant in the New Zealand army.




Kevin Shaw, P.Eng, (403)781-2715; kshaw@wwcm.com                                                      September 20, 2010- 19
TAG Oil Ltd.


                              Board of Directors
                              Alex Guidi, Director
                              Mr. Guidi has been a director of TAG Oil since December 16, 2009. Mr. Guidi has over 30 years
                              of experience as a self-employed investor and financier and has enjoyed success in having
                              founded a number of oil and gas companies focused on Western Canada and Australasia. In
                              New Zealand, Mr. Guidi was the founder of Austral, Trans-Orient and TAG Oil which, for many
                              years, 24 have made, and continue to make, a significant contribution to exploration and
                              development activity in New Zealand and Papua New Guinea’s Foreland region. In North
                              America, Mr. Guidi was a founder of Walking Stick Oil and Gas Ltd. as well as the major
                              shareholder in a company that participated in the development of the Karr gas field in West
                              Central Alberta. Mr. Guidi’s extensive career has also involved successful entrepreneurial
                              endeavors in technology and real estate development. Mr. Guidi has previously served as a
                              director and officer of TAG Oil, Austral and AMG.

                              John Vaccaro, Director

                              Mr. Vaccaro has been a director of TAG Oil since June 11, 2008. Mr. Vaccaro has over 20
                              years of experience in the financial services industry where he directed and provided
                              investment consulting to high net worth individuals as well as corporate and institutional clients.
                              He acted as a senior investment executive with CIBC Wood Gundy from January 2002 to
                              March 2007. Mr. Vaccaro has since established a private client consulting practice in the
                              financial services sector, Yield Management Consultants, and acts as Managing Partner and a
                              consultant for the practice. Mr. Vaccaro is also an active member of the Fellowship of the
                              Canadian Securities Institute and holds a degree from the University of British Columbia in
                              Urban Land Economics with double Majors.

                              Ronald Bertuzzi, Director
                              Mr. Bertuzzi has been a director of TAG Oil since December 16, 2009. Mr. Bertuzzi holds a
                              Bachelor of Economics from the University of British Columbia and he has more than 20 years
                              of executive, board and committee experience with U.S. and Canadian junior listed companies
                              focused primarily in the oil and gas industry that are doing business in Australasia. Mr.
                              Bertuzzi’s experience covers various stages of company development beginning with initial
                              start-up and initial public offerings, acquiring and exploring significant exploration acreages and
                              ending in discovery, facility development and commercial production of oil and gas. Mr. Bertuzzi
                              has previously served as a director of Trans-Orient and Austral.

                              Michael Hart, Director

                              Mr. Hart has been a director of the Company since December 16, 2009. Mr. Hart is a long-time
                              investor in natural resources and has experience with public companies in the oil and gas
                              industry. Mr. Hart has previously worked in the financial markets’ sector with a number of
                              financial institutions where he acted as an account executive and financial consultant. Since
                              1995, Mr. Hart has worked with an investment-banking group responsible for taking projects
                              from startup to the public markets. Mr. Hart is currently the Corporate Secretary and a director
                              of Entourage and has previously served as a director and officer of Trans-Orient and AMG.

                              Garth Johnson, Director, See bio in Management Team section.
                              Source: Company reports




Kevin Shaw, P.Eng, (403)781-2715; kshaw@wwcm.com                                                      September 20, 2010- 20
TAG Oil Ltd.


                              Investment Risks
                              Our fundamental outlook for oil and gas producers remains favorable, however,
                              several normal industry risks do exist that could impact TAG Oil‟s ability to
                              achieve our forecasts, including:
                                   Commodity price fluctuations could have a material impact on the
                                      company‟s re-investment capacity, and hence ultimate growth potential.
                                      High netback gas reserves and low cost structure, along with a healthy
                                      balance sheet helps to mitigate commodity price exposure, coupled
                                      periodically with price protection through hedging strategies.

                                    Adverse well or reservoir performance in any one or a number of
                                     producing pools could result in abnormally high production decline rates,
                                     impacting overall corporate volumes. Long life gas reserves, operated
                                     under prudent production practices, and more diversity in producing
                                     horizons helps mitigate exposure to high decline well/pool exposure.

                                    Field operational hazards such as well blowouts, explosions and fires
                                     within pipeline/gathering/facility infrastructure, mechanical equipment
                                     failures could lead to sour gas releases, spills, personal injuries and/or
                                     damage to the environment. Industry insurance policies, particularly
                                     those which include business disruption, help to mitigate financial
                                     exposure to such mishaps.

                                    Industry capacity constraints due to high levels of activities can result
                                     in shortages of services, products, equipment, or man power in many or
                                     all necessary components of the exploration and development drilling
                                     cycle. Increased competition leads to escalated land costs, along with
                                     other service costs during peak activity levels.

                                    Political instability and changes in fiscal policy can result in; a forced
                                     reduction in equity or nationalization of assets, higher taxes and
                                     royalties, endangerment to employees, and terrorist threats to physical
                                     assets (pipelines or processing facilities). Instability and changes can
                                     lead to a reduction in the company‟s share of profits and/or shut-down
                                     operations.

                                    Extraordinary hazards such as unusual swings in weather patterns,
                                     changes in regulatory operating terms, or actions by certain groups such
                                     as industry organizations, local communities, or militant groups could
                                     impact the company‟s ability to re-invest for future growth.




Kevin Shaw, P.Eng, (403)781-2715; kshaw@wwcm.com                                         September 20, 2010- 21
TAG Oil Ltd.

               Exhibit 18: Consolidated Statement of Income
               (stated in C$000's, except per share amounts)            2008         2009         2010          2011E        2012E
               Revenue
                 Oil and Gas Revenues                                      4,104        4,924        6,528         16,379       44,666
                 Royalties                                                   209          249        1,875          2,294        5,360
                                                                           3,895        4,675        4,652         14,085       39,306
                 Interest and Other Income                                   427          159           67             99          100
                                                                           4,321        4,833        4,719         14,184       39,406
               Expenses
                 Operating                                                 1,814        1,874        1,655          5,216       12,224
                 General and Administrative                                2,110        1,545        2,114          2,686        2,800
                 Stock Based Compensation                                     80           20          303            229          300
                 Depletion and Depreciation, and Accretion                 1,349        1,374          923          4,401       12,224
                 Foreign Exchange Loss (gain)                                864         (355)         702           (248)           -
                 Write-off of Impaired Assets                              6,763       19,565           64              -            -
                 Legal Settlement                                           (471)        (182)         (27)             -            -
                 Interest and Bank Charges                                     -            -            -              -            -
                 Loss (gain) on disposition of oil and gas properties       (208)        (132)       1,560              -            -
                 Risk Management (gain)                                        -            -            -              -            -
                 Non-cash items                                                -            -           27              -            -
                                                                          12,301       23,708        7,320         12,284       27,548

               Income before taxes                                         (7,980)    (18,875)       (2,601)        1,901       11,858

               Current taxes                                                    -            -            -             -            -
               Capital taxes                                                    -            -            -             -            -
               Future taxes                                                     -            -            -             -            -
                                                                                -            -            -             -            -

               Net income                                                 (7,980)     (18,875)      (2,601)         1,901       11,858
               Dividends on common shares                                      -            -            -              -            -
               Net income to common                                       (7,980)     (18,875)      (2,601)         1,901       11,858
               Retained earnings, beginning of period                    (30,663)     (38,643)     (57,518)       (60,118)     (58,218)
               Redemption of shares                                            -            -            -              -            -
               Retained earnings, end of period                          (38,643)     (57,518)     (60,118)       (58,218)     (46,360)

               Earnings per common share                                   ($0.07)      ($1.05)      ($0.09)        $0.05        $0.31
               Earnings per fully diluted common share                     ($0.07)      ($1.05)      ($0.08)        $0.05        $0.30

               EBITDA                                                        132        2,064        (1,614)        6,302       24,082
               EBITDA per common share                                     $0.00        $0.12        ($0.05)        $0.17        $0.64
               EBITDA per fully diluted common share                       $0.00        $0.12        ($0.05)        $0.16        $0.62
               Source: Company reports




Kevin Shaw, P.Eng, (403)781-2715; kshaw@wwcm.com                                                               September 20, 2010- 22
TAG Oil Ltd.


               Exhibit 19: Consolidated Balance Sheet

               (stated in C$000's, except per share amounts)   2008         2009         2010           2011E        2012E
               Assets
               Current Assets
                 Cash and Cash Equivalents                        6,553        7,385        9,967          14,818        9,200
                 Accounts Receivable & Prepaids                   1,537          193          357             493          493
                 Inventory                                        1,016          779          713             949          949
                                                                  9,106        8,357       11,037          16,260       10,642

               Restricted Cash                                        -            -            -              121          121
               Plants, Properties and Equipment                  29,382        4,548        9,490          24,479       42,255
               Other Assets                                           -          218          601             697          697
                                                                 29,382        4,765       10,091          25,297       43,073
                                                                 38,488       13,123       21,128          41,557       53,715
                                                                                              697
               Liabilities
               Current Liabilities
                 Accounts Payable and Accrued Liabilities         1,595            485      1,467           1,294        1,294
                 Asset Retirement Obligation                          -              -        348             345          345
                                                                  1,595            485      1,815           1,639        1,639

               Long-term Loan                                         -            -            -               -            -
               Future Income Tax                                  4,145            -            -               -            -
               Asset Retirement Obligation                          514          813        1,949           1,871        1,871
                                                                  4,659          813        1,949           1,871        1,871
                                                                  6,254        1,297        3,764           3,510        3,510

               Shareholders Equity
                 Share Capital                                    69,980       69,645       76,228         94,804       94,804
                 Contributed Surplus                                 898          918        1,219          1,448        1,748
                 Retained Earnings                               (38,643)     (57,518)     (60,118)       (58,218)     (46,360)
                                                                  32,234       13,044       17,328         38,034       50,192
                 Accumulated Other Comprehensive Loss                          (1,219)          36             13           13
                                                                 38,488        13,123       21,128         41,557       53,715

               Book Value                                        32,234       11,826       17,364          38,047       50,205
               Book Value per share (common)                      $0.29        $0.66        $0.58           $1.01        $1.33
               Book Value per share (diluted)                     $0.29        $0.66        $0.56           $0.97        $1.29

               Source: Company reports




Kevin Shaw, P.Eng, (403)781-2715; kshaw@wwcm.com                                                      September 20, 2010- 23
TAG Oil Ltd.


               Exhibit 20: Consolidated Statement of Cash Flows

               (stated in C$000's, except per share amounts)        2008         2009           2010             2011E        2012E
               Operating Activities
                  Net income                                           (7,980)     (18,875)        (2,601)           1,901       11,858
               Items not involving cash
                  Depletion and Depreciation                           1,349        1,374            923             4,401       12,224
                  Stock Based Compensation                                80           20            303               229          300
                  Write-off of Impaired Assets                         6,562       19,565             64                 -            -
                  Write-down of Inventory                                201         (132)           127                 -            -
                  Realized Loss on Investment                                                      1,432                 -            -
                  Foreign Exchange Loss (Gain)                              -              -           -                 -            -
                  Other                                                                                2                 -            -
                  Other non-cash                                            -           -              -                 -            -
                                                                          212       1,952            250             6,531       24,382
               Change in Non-cash Working Capital Items                (1,713)      1,743            (65)             (517)           -
                                                                       (1,500)      3,695            185             6,014       24,382
               Financing Activities
                 Issue of Common Shares, net of costs                       -              -            93          18,534            -
                 Restricted Cash                                            -              -             -            (121)           -
                 Shares Purchased and Returned to Treasury                  -           (335)          (42)              -            -
                 Share capital from exercised options                                                                   42
                 Change in non-cash Working Capital                         -              -             -               -            -
                                                                            -           (335)           51          18,454            -

               Cash Available for Investing Activities                 (1,500)      3,360              236          24,469       24,382

               Investing Activities
                 Oil and Gas Properties                                (5,372)      (2,524)        (2,303)         (19,500)     (30,000)
                 Investments                                                -           (4)          (194)               -            -
                 Cash Assumed on Acquisition                                                        4,843                -            -
                 Proceeds from Sale of Properties                           -              -            -                -            -
                 Purchase of shares                                                                                   (118)           -
                 Change in Non-cash Working Capital Items                   -            -             -                 -            -
                                                                       (5,372)      (2,528)        2,346           (19,618)     (30,000)

               Increase (Decrease) in Cash                            (6,873)         832          2,582             4,850       (5,618)
               Cash and Short-term Deposits - Beginning of Period     13,426        6,553          7,385             9,967       14,818
               Cash and Short-term Deposits - End of Period            6,553        7,385          9,967            14,818        9,200

               Cash Flow per Common Share                              $0.00        $0.11          $0.01             $0.17        $0.65
               Cash Flow per Fully Diluted Share                       $0.00        $0.11          $0.01             $0.17        $0.62


               Source: Company reports




Kevin Shaw, P.Eng, (403)781-2715; kshaw@wwcm.com                                                              September 20, 2010- 24
TAG Oil Ltd.


                              Disclaimers
                              The particulars contained herein were obtained from sources that we believe to be
                              reliable, but are not guaranteed by us and may be incomplete or inaccurate. The
                              opinions expressed are based upon our analysis and interpretation of these
                              particulars and are not to be construed as a solicitation of offer to buy or sell the
                              securities mentioned herein. Wellington West Capital Markets Inc. (“WWCM”)
                              may act as financial advisor, fiscal agent or underwriter for certain of the
                              companies mentioned herein, and may receive remuneration for its services.
                              WWCM and/or its principals, officers, directors, representatives, and associates
                              may have a position in the securities mentioned herein and may make purchases
                              and/or sales of these securities from time to time in the open market or otherwise.
                              This report may not be reproduced in whole or in part, or further distributed or
                              published or referred to in any manner whatsoever nor may the information,
                              opinions or conclusions contained herein be referred to without in each case the
                              prior written consent of WWCM.

                              U.S. Institutions may conduct business through our affiliate Wellington West
                              Capital Markets (USA) Inc. Wellington West Capital Markets (USA) Inc. accepts
                              the contents of this research report, however, the company that prepared this report
                              may not be subject to U.S. rules regarding the preparation of research reports and
                              the independence of research analysts.

                              This report will be forwarded to our affiliate Wellington West Capital Inc.
                              (“WWCI”). Subject to WWCI management review and approval, this report may
                              be distributed to clients of WWCI. WWCI and WWCM are members of the
                              Canadian Investor Protection Fund (“CIPF”).

                              Wellington West Capital Markets Stock Rating System
                              The rating system is based on the stock‟s expected absolute total return over the
                              next 12 months. Generally, Strong Buy rating is expected to produce a total
                              return of 25% or more, Buy a total return of 10% to 25%, Market Perform a total
                              return of 0% to 10% and Underperform a negative total return. Speculative Buy
                              rating is expected to produce a total return of 25% or more, but is based on
                              factors and forecasts that have high degrees of uncertainty. The distribution of
                              the recommendations for the last three-month period and their relationship with
                              investment banking business are available on request by emailing to
                              compliance@wwcm.com.

                              Analyst Compensation
                              Research analysts receive compensation based on a number of factors as
                              determined by WWCM‟s management. Compensation is affected by all of the
                              firm‟s business activities, including revenue generated from capital markets and
                              investment banking. No part of the compensation of the analyst who authored
                              this report is based on the specific recommendation or views expressed in this
                              report.




Kevin Shaw, P.Eng, (403)781-2715; kshaw@wwcm.com                                            September 20, 2010- 25
TAG Oil Ltd.

                              Analyst Trading
                              WWCM permits analysts to own and trade in the securities and/or derivatives of
                              those companies under their coverage, subject to the following restrictions: no
                              trades can be executed in anticipation of the initiation of coverage; no trades can
                              be executed for five days after dissemination of launching coverage or a material
                              change in recommendation; and no trades can be executed against an analyst‟s
                              recommendation. Exceptions require prior approval of the Head of Research and
                              can only be executed for a reason unrelated to the outlook of the stock.
                              Dissemination of Research
                              WWCM endeavors to make all reasonable efforts to provide research,
                              simultaneously and electronically to all eligible clients and potential clients.

                               Company Name                          Ticker Symbol        Applicable Disclosure
                               TAG Oil Ltd.                               TAO-V                      -

                              Applicable Disclosure Details
                              1) In the last 12 months, WWCM, or its affiliates, have managed or co-managed
                                  an offering of securities by the subject issuer.
                              2) In the last 12 months, WWCM, or its affiliates, have received compensation
                                  for investment banking and related services from the subject issuer.
                              3) The research analyst or a member of the research analyst‟s household, or any
                                  associate or individual preparing the report, has a long position in the shares
                                  and/or the options of the subject issuer.
                              4) The research analyst or a member of the research‟s household, or any
                                  associate or individual preparing the report, has a short position in the shares
                                  and/or the options of the subject issuer.
                              5) WWCM or its affiliates is a market maker, or is associated with the specialist
                                  that makes a market in the securities of the subject issuer.
                              6) WWCM or its affiliates own more than 1% of any class of common equity of
                                  the subject issuer.
                              7) WWCM has a conflict of interest with the subject issuer.
                              8) The research analyst(s) has a conflict of interest with the subject issuer.
                              9) Over the last 12 months, the research analyst has received compensation based
                                  on a specific investment banking transaction relative to the subject issuer.
                              10) The research analyst or a member of the research analyst‟s household serves as
                                  a Director or Officer or Advisory Board Member of the subject issuer.
                              11) The research analyst(s) has viewed the material operations of the issuer.
                              12) A portion of the travel expenses of the analyst were paid or reimbursed by
                                  the issuer.
                              Analyst Certification
                              Each analyst of WWCM whose name appears in this research report hereby
                              certifies that (i) the recommendations and opinions expressed in the research
                              report accurately reflect the research analyst‟s personal views about any and all
                              of the securities or issuers discussed herein that are within the analyst‟s coverage
                              universe and (ii) no part of the research analyst‟s compensation was, is, or will
                              be, directly or indirectly related to the provision of specific recommendations or
                              views expressed by the research analyst in the research report.



Kevin Shaw, P.Eng, (403)781-2715; kshaw@wwcm.com                                           September 20, 2010- 26

				
DOCUMENT INFO
Shared By:
Tags:
Stats:
views:3
posted:11/28/2011
language:
pages:26