Calgary-headquartered TAG today announced the signing of a conditional purchase agreement to acquire all of Cheal Petroleum’s interests in licences PEP 38738 (Cheal and Cardiff), PEP 38757 and PEP 38758 from Cheal’s parent company South Pacific Lease Operations.
Cheal Petroleum holds a 30.5% interest in the proven Cheal oil field and a 15.1% interest in the Cardiff deep gas discovery, as well as 5% gross over-riding royalties for both PEP 38758 and PEP 38757.
TAG is paying South Pacific Lease Operations $NZ18.5 million ($A15 million), as well as 5 million TAG Oil shares and a 0.775% gross over-riding royalty on PEP 38738 deep-gas production.
“This acquisition gives TAG access to significant oil production revenue and reserves at attractive metrics compared to recent North American production purchases,” said company president Drew Cadenhead.
“We’ve got two wells ready for production at Cheal capable of a total of 600 barrels of oil per day, with plans to drill at least four more wells before the end of the year.
“Appraisal wells have shown that oil is reservoired across the structure and because Cheal is a shallow target, it’s much less costly to drill and bring into profitable production in the event of discovery than a deep reservoir would be.”
Cadenhead said Cheal operator Austral Pacific Energy had an aggressive drilling schedule mapped out for Cheal this year, with the Cheal-B1and B2 wells slated for the third quarter and the Cheal-A5 and A6 wells for later in 2006.
The Cheal joint venture was also upgrading the facilities for jet pumping, allowing several future wells to produce at the same time, thereby increasing total daily production.
The Miocene-aged sandstones appeared to be of similar quality and extent to typical Mount Messenger producer wells at the nearby Ngatoro and Kaimiro oil fields – “so we’re very motivated and energised”, Cadenhead added.
“As for the Cardiff well, there’s definitely gas there, but we need to establish commerciality. It would be a bonus for us if we can crack the code to this tricky deep gas reservoir,” he concluded.
Cardiff operator Austral Pacific hopes to restart production testing at the troublesome Cardiff-2A well this month, with initial results from the main producing zone, the Eocene-aged McKee sands, soon afterwards.
Austral chief executive Rick Webber recently said Austral planned to fast-track the development of Cheal and Cardiff to generate early cash flow and to provide the backbone for Austral to fully develop the company’s reserve base.
Cheal has already produced over 90,000 bbls of oil, with independent petroleum consultants Sproule International assigning total proven, probable, and possible reserves of 5.01 million bbls of oil equivalent over a possible 18-year production life.
Once finalised, the new holdings in the Cheal and Cardiff fields will be PEP 38738-01 (Cheal) partners Austral, the operator which holds a 36.5% stake, TAG Oil (30.5%) and Arrowhead Energy (33%).
PEP 38738-02 (Cardiff) partners are operator Austral (25.1%), Genesis Energy (40%), TAG (15.1%) and International Resource Management Company (19.8%).
