TAG Oil Ltd. (TAO:TSX.V; TAOIF:OTCQX) provided an operational and financial update, highlighting that vertical well test results are expected this month, reported Research Capital Corp. analyst Bill Newman in a March 1 research note.
Vertical Well Data Imminent
Regarding its efforts in the Badr Oil Field (BED-1) of Egypt's Abu Roash "F" reservoir, the Canadian energy company started recompletion of the BED 1-7 vertical well there. Now, TAG is preparing to stimulate this well, on schedule for next week. Results of subsequent flow testing are to follow, sometime this month.
TAG will use these data to design its first horizontal well targeting the ARF formation, noted Newman. The company expects to stud this new well in May or June of this year and then follow up with the spudding of a second horizontal well in late Q4/23 or Q1/24.
Large Resource Potential
Newman reiterated the significant resource potential the ARF reservoir holds and what that means for TAG.
An independent resource evaluation prepared by RPS Energy Canada and effective March 2022 indicates that over ARF's BED-1 concession, there are 531,500,000 barrels (531.5 MMbbl) of oil initially in place, relayed Newman. The east-central part of BED-1 contains 178.3 MMbbl of oil initially in place.
Further, TAG's plan to develop 20 horizontal wells in the formation's east central area equates to a risked contingent recoverable, or 2C, resource, according to RPS, of about 16.5 MMbbl net to the oil and gas explorer-developer.
"The risked, after-tax net present value discounted at 10% for the 2C resource is US$339M, equal to US$2.93 per share," wrote Newman.
Impact on Share Price
In his report, Newman again pointed out that if TAG has success with its vertical and horizontal well programs, it could convert a large portion of its 2C resources to the Proven and Probable category. Such an upgrade would likely move boost TAG's share price.
Currently, the oil and gas firm is trading at about CA$0.67 per share, and Research Capital's target price on it, in comparison, is CA$1.35 per share, Newman noted. Implied in this price difference is a roughly 101% return for investors, and TAG is a Speculative Buy, according to Research Capital.
Strong Balance Sheet
As of Dec. 31, 2022, the end of Q3 of the fiscal year 2023 (Q3 FY23) for TAG, it had zero debt and US$24 million in positive working capital, including US$21.4M in cash and cash equivalents.
During Q3 FY23, the company spent US$4.5M on capex.
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