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Onshore Taranaki oil and gas producer TAG Oil has shifted production heavily in favour of oil and away from natural gas between the first quarters of the current and the previous financial years, substantially improving its earnings per barrel of oil equivalent in the process.
Operating results for the three months to June 30, filed with the Toronto Stock Exchange, show "netback" per barrel of oil equivalent has improved from C$43.72 per boe in the first quarter of last year to C$72.16 per boe in the first quarter of the current financial year.
The change appears primarily driven by the fact that oil, worth US$118 per boe in the quarter, has moved to be 74 percent of production, compared with 46 percent in the first quarter last year. Gas is said to be worth US$5.60 per thousand cubic feet, the measure Canadian-based TAG uses for gas quantities.
That shift meant that net oil and gas revenues totalled C$13.1 million for the quarter under review on production of 1,750boe, compared with C$12.1 million in the first quarter of last year, which had a higher rate of boe production, at 2,354 boe, of which more than half was natural gas.
Chief executive Garth Jonson said in a statement that TAG was "considering a number of business growth opportunities", now that it had stabilised production results from two new wells in its Cheal prospect, which have taken production to an average 1,977 boe daily this month, in line with the company's 2,000 boe daily target.
"One such opportunity may include contracting with additional drilling services required to expedite drilling operations, with a view to further grow shallow production within the Cheal and Sidewinder fields", both of which are onshore Taranaki.
The company has also shifted the Nova-1 drilling rig from Taranaki to the East Coast of the North Island to drill an exploratory well at Watangi Valley, targeting so-called "unconventional" shale deposits in the Waipawa black shale and Whangai source rocks. A second East Coast well is planned at Boar-1, later in the current financial year.
However, that won't be drilled until after another five shallow wells, including two step-outs at the producing Sidewinder field, have been completed. TAG will also participate in a wildcat exploration well in the lightly explored Canterbury Basin during the year.
During the quarter, average daily production increased by 18 percent to 1,750 boe, compared with the last quarter of the previous financial year, ended March 31. Total revenue was up 11 percent on the March quarter at C$15.6 million, and increased 6 percent on the C$14.7 million sales recorded in the first quarter of the last financial year.