TAG Oil (TSXV: TAO; OTCQX: TAOIF) has announced that it has completed the re-entry and installation of the completion string at the BED 1-7 well. The company has completed its fracture stimulation on the well, which is one of the largest completed in Egypt to date. The company gave detailed information on some next steps for the company. This move comes at a time when the oil market has seen some ups and downs, and which experts seem to think could go either way.
TAG Oil is an oil and gas exploration company that specializes in acquisitions, exploration, and production. The company is based in Canada but focuses their activity on the Middle East and North Africa. The CEO is Toby Pierce, and the Executive Chairman is Abby Badwi. Suneel Gupta is the Vice President and COO.
New Accomplishments at TAG
The company's installation of a new completion string in the open hole section of the well in the Abu-Roash Formation. This process was to prepare the site for hydraulic fracture, and throughout the process, indications of reservoir pressure and oil content were present. The hydraulic fracture operation, which has been completed, is the largest in Egypt. The market will be updated when testing has been completed. According to Toby Pierce, CEO, "while the re-entry and completion operation has taken longer than forecast due to the procedural steps necessary for contracting of the various services in Egypt, the project remains on budget and has also provided valuable information required for planning our first horizontal well."
Chen Lin remarked, "The oil price jumped to US$80 over the weekend, and this is great news for my oil stock, TAG Oil Ltd., which should release very important news on fracking this month. The price jumped immediately after Saudi and Russia, together with the Organization of the Petroleum Exporting Countries, announced 1+ MMbbl production cuts."
TAG Oil's re-entry operation required the installation of a new well-head assembly, the removal of the old tubing string and dual packer assembly, isolation of previously perforated upper reservoir layers, and cleaning the well to base depth.
The company has also performed perforation and diagnostic fracture injectivity testing (DFIT) of the formation, followed by an evaluation of the formation's potential in the vertical completion through hydraulic fracturing, flow-back and stabilized production performance. Additionally, planning for the first horizonal well has already begun.
Last week saw some major adjustments from U.S. oil. The country's gasoline stocks went down by 1.1 million barrels, and demand for gasoline fell by 0.2% from last year. According to the EIA, crude oil blending and an under-reported oil output were the primary causes. However, the Russian war in Ukraine, and Russia's decision to cut oil to Europe and the U.S., may affect the market in other ways.
In an April 5 newsletter, Chen Lin of What is Chen Buying? What is Chen Selling? remarked, "The oil price jumped to US$80 over the weekend, and this is great news for my oil stock, TAG Oil Ltd., which should release very important news on fracking this month. The price jumped immediately after Saudi and Russia, together with the Organization of the Petroleum Exporting Countries, announced 1+ MMbbl production cuts."
Russia planned to cut oil exports to Western consumers by a quarter or more in May of this year, and while its energy ministry refused to give statements, analysts have put forward conflicting reasons why. According to Reuters, while some sources claim that it was to increase oil prices, others believe that it has to do with Russia's inability to sell inventory due to price caps and other sanctions.
The Future of TAG Oil
TAG has a number of short-term catalysts to report. TAG is expecting the first well re-completion results in early March of 2023, and the first horizontal well to spud in the early summer of 2023. It expects the potential 2nd horizontal well in January of 2024.
TAG Oil is trading at approximately 30% of their valuation after the independent resource report, which was US$340 million.
Ownership and Share Structure
Streetwise Ownership Overview*
Management and insiders own a total of 13.2% of the company. Askar Alshinbayev owns 10.94% of the company, while Abby Badwi, the Executive Chairman, owns 2.05%, Director Shawn Reynolds owns 1.53%, Suneel Gupta, the Vice President and COO, owns 1.02%, Barry MacNeil, the CFO, owns 0.95%, Toby Pierce, the CEO owns 0.81%, and Director Gavin Wilson owns 0.74%.
As for institutions, YF Finance, Ltd. Owns 8.38%, Novum Asset Management AG owns 0.65%, and Palos Management Inc. owns 0.26%. YF Finance represents a strategic investor and acquired its shares through placements and open market buying.
TAG currently has CA$24 million in working capital, with a burn rate of CA$400k per month.
TAG has a market cap of ~CA$100 million. There are 155,146,252 shares, with 169,916,252 fully diluted shares. There are 6,250,000 warrants, and 8,520,000 options. In the 52-week period it traded between .20 and .79.
Bill Newman of Research Capital, Malcolm Shaw of Hydra Capital, and Chen Lin all provide analysis and news coverage of the company.
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