TAG OIL has a budget of about C$7.6 million for the company’s 2017 fiscal year (FY) which will focus on low cost, in-field production optimisation opportunities.
Funded by forecast cash flow and working capital at hand, TAG said a further C$4.6 million of incremental capital expenditures was are contingent on oil prices improving significantly.
Primarily the company’s goal is to conservatively manage its balance sheet with plans to end its fiscal 2017, from 1 April 2016 to 31 March 2017, with at least C$10 million in cash on hand.
The budget of C$7.6 million will focus mainly on low expenditure, in-field production optimisation opportunities and other necessary activities that are core to the business.
Tag advised these opportunities have been identified through an ongoing geotechnical and engineering review of the company’s Taranaki development and exploration acreage.
Increasing production through the implementation of a water flood program at the Cheal A, B and E-Sites, the installation of a rod pump in the Cheal E1 well, and the reactivation of several shut in wells are opportunities flagged by the company.
TAG said meeting various permit obligations; including the acquisition and reprocessing of seismic data on the Cheal G and Wai-iti permits will allow TAG to select infill and exploration drilling opportunities in due course.
In addition, the company said it will undertake abandonment and rehabilitation activities associated with the East Coast acreage.
The 2017 capital budget may also include around C$4.6 million of discretionary activity, which will be continuously reviewed and revised depending on the results of the activities outlined above, economic analysis and changing economic conditions, TAG said.
This includes potentially constructing two drilling pads for future exploration opportunities and drilling a Sidewinder North (PEP 57065) exploration well in the fourth quarter of 2017.
TAG is estimating revenue of around C$22 million from its operations in 2017 FY.
During the first quarter of 2017, TAG will focus on bringing the Cheal B7 well back online using a conventional jet-pump, with the results expected in May and have a potential uplift in production of around 50 barrels of oil equivalent per day (bopd).
TAG will carry out an extension of perforations and test of the Cheal E7 well.
Ahead of water-flood activities at the Cheal E site, geotechnical and engineering work is underway to determine which well will be most suitable for use as the initial water injector.
TAG said these results are also expected in May.
The company is conducting a solvent soak and clean out of the Cheal B5 well to enhance production, with results expected in June and have a potential uplift in production of around 50 bopd.
Expected to be complete in early June, TAG is drilling two water source wells at the Cheal A and E Sites to provide a continuous source of water for the water-flooding activities.
In addition, the company is commencing water flood injection into the Cheal B site pool, which is expected to begin in mid-June and the results will likely begin to become measurable in around mid-2017.
TAG chief executive Toby Pierce said the company was watching its capital spending.
“I am confident that the water flood programs will add both incremental production and reserves to TAG. However, at this early stage in the process, it is still difficult to have a firm understanding of the potential upside to TAG and over what time frame it will be achieved,” he said.
“We have a large number of opportunities in our portfolio, providing TAG with a large amount of both optionality and flexibility should oil prices increase above our price forecasts or production exceed our guidance.”
Mr Pierce said TAG’s focus remains on acquisitions and building out its inventory of opportunities going forward, while quietly preparing for exploration drilling when higher oil prices return.
“Finally, I am very excited about where TAG is at currently, and I expect fiscal 2017 to be a year of growth and opportunity for the company and its shareholders,” he added.