NEW Zealand onshore specialist TAG Oil Ltd has successfully increased its production figures despite significantly reducing its capital expenditure allocation.

Releasing its first quarter results for the Canadian fiscal year ending March 31, 2017, the company said it has continued to reduce its capital expenditures during the period and focused on field optimisation opportunities, prospect generation and capitalise on distressed asset acquisitions.

However, even with the cut back on capital expenditure, TAG has realised an increase in its oil and gas sales subsequent to the quarter end, with a current net daily average rate of 1,237 BOE/d (81% Oil) over the month of August and the recent successful testing of 254 bbl/d of light oil and condensates from a lower unproduced interval in an existing Sidewinder field wellbore.

“Despite the low oil price environment and substantially scaled back capital expenditure, we have continued to make progress as each fiscal quarter passes towards once again growing our production and reserve base,” TAG Oil CEO, Toby Pierce, said.

“The low oil price environment has created opportunity for TAG with the acquisition of the Puka discovery acreage, along with the successful uplift from workovers at Cheal and Sidewinder, is a testament to this progress. The testing of over 250 bbl/d of light oil and condensates from a bypassed interval at the Sidewinder field is quite encouraging, and should provide a significant and welcome production uplift going forward,” Mr Pierce said.

TAG also reported that there has been a delay in executing the first phase of a water flood project within the greater Cheal area.

The Cheal B Mt. Messenger pool has been identified as the first phase of  the flood project, which has now been put back by two months due to an engineering re-design, which TAG said will allow it to inject more water at increased rates and lower costs than originally planned.

The water flood project includes re-completion of Cheal-A9, water flood pumps at Cheal A site, and converting Cheal-A2 into an injection well. Planning for re-completion of Cheal-A9 is currently underway; following completion, the water injection will commence and production response will be monitored throughout Quarter 2, 2017.

The water flood project has also been scoped at Cheal E site for implementation throughout Q2/Q3 2017. This will involve the provision of additional pumps and associated equipment, as well as potentially converting Cheal-E7 into an injection well.

Recently, TAG successfully tested 254 bbl/d of light oil and condensate from a lower unproduced interval in the Sidewinder mining permit (PMP 53803) over a 24-hour period using a temporary gas lift system.

The company has also designed a permanent liquids production facility, which will allow TAG to continually produce liquids at Sidewinder and is expected to commence full time operation by the early September.

This follows TAG’s successful flow testing of light oil and condensate at 254 bbl/d from a lower unproduced interval at Sidewinder over a 24-hour period using a temporary gas lift system.

Meanwhile, TAG (70%) and its joint venture partner, MEO Australia Limited (30%), have agreed on a work programme for the remainder of 2016 and will look to establish future plans for the acreage including putting the suspended Puka wells, which produce oil from the Mt. Messenger formation, back online. The joint venture is committed to drilling one well on the Puka permit by Q4 2018 at a location and target depth to be determined.

TAG’s other upcoming activities include preparation for drilling of the Cheal-E8 and E9 exploration wells, Cheal-B6 and B7 workovers, and a rod pump project for Cheal-E5 that is likely to commence in September 2016.

The company said that given the recent excellent production result at Sidewinder, there is also the potential for it to convert additional Sidewinder wells into oil production wells. TAG is also assessing several other similar by-passed pay opportunities in the portfolio to enhance production in the near to medium term.