is expected to complete the drilling of its first horizontal well BED4-T100 (T100) in Egypt's Abu Roash F (ARF) formation in Q4/23, successful production test results of which could move up the company's stock, reported Research Capital Corp. analyst Bill Newman in an Aug. 30 research note.
"A stabilized flow rate of over 1,000 bbl/d (1 Mbbl/d) from the T100 well could be a major near-term catalyst," Newman wrote.
Material Return Potential
As such, Research Capital reiterated its CA$1.25 per share target price on TAG, noted Newman. This implies a significant return for investors of 116%, given the Canadian company's current share price is about CA$0.58.
TAG remains a Speculative Buy.
Initial Drilling Underway
TAG commenced drilling T100 recently, around Aug. 22, and to date, has reached a vertical depth of 1,250 meters (1,250m) of the projected 3,300m total, reported Newman.
The company will use the results to develop a follow-up drill program, to likely begin in Q1/24.
The design of T100 and the start of drilling it followed TAG's fracture stimulation of the BED 1-7 vertical well, also in the ARF formation. Those efforts "confirmed that the ARF reservoir can be fracture stimulated and produced at a high rate," wrote Newman.
Highly Prospective Reservoir
Newman highlighted that with its pursuit of oil production in the ARF reservoir, TAG is "targeting a big prize."
The risked contingent recoverable resource in the area in which TAG plans 20 horizontal wells in the east-central part of the BED-1 concession is 27,000,000 barrels (27 MMbbl), Newman reported. This resource was calculated by RPS Energy Canada. The risk, after-tax net present value discounted at 10% for this resource is about CA$458 million (CA$458M), or CA$2.54 per share.
This equates to 16.5 MMbbl net to TAG.
However, the overall BED-1, RPS determined, contains an estimated 531.5 MMbbl of oil initially in place. All calculations were based on three-dimensional seismic data, 30 well penetrations, along with log and core data.
Further, Newman wrote, "TAG continues pursue additional acquisitions which could expand its exposure to the ARF unconventional resource play."
Good Financial Position
In other news, TAG raised US$11.7M in total proceeds from its recently closed upsized bought deal financing.
Now, the company has about US$25M in working capital and no debt.
"TAG has additional financial flexibility to accelerate a drilling program at the BED-1 block and also to pursue additional acquisition in Egypt and in the broader Middle East and Northern Africa region," Newman wrote.
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- TAG Oil Ltd. is a billboard sponsor of Streetwise Reports and pays SWR a monthly sponsorship fee between US$4,000 and US$5,000.
- As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of Tag Oil Ltd.
- Doresa Banning wrote this article for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor.
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Disclosures for Research Capital Corp., Tag Oil Ltd., August 30, 2023
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