"This buy-back is largely possible due to the company having enjoyed high oil prices for the past two years," Tap said in a statement.

Any shares acquired by Tap pursuant to the buy-back will be immediately cancelled, reducing the total number of shares on issue in the company and proportionately increasing all shareholders' interests in Tap and their return on equity, the company said.

"The company presently has a very strong ungeared balance sheet and hence this buy-back initiative will not impact the company's ability to fully fund its well program from production cash flows," Tap said.

"The aggressive exploration strategy will not be affected."

Tap has previously announced that it has allocated up to $40 million for exploration and appraisal in 2005 and participation in up to 35 wells.

"This will be a record annual spend for Tap in its endeavours to find new reserves and production," the company said.

"The 2005 well program will address numerous prospects which have the potential to materially increase the company's reserves and future production."

The 2005 drilling program includes: additional wells in the Woollybutt north and south fields; two explorations wells, Lauda-1 and Maier-1, in WA-290-P adjacent to the Woollybutt permit; up to 20 wells in the Harriet Joint Venture area; four wells in New Zealand, including the Barque-1 exploration well targeting 700 million bbls of condensate; and several other wells in the Carnarvon Basin.

Tap also announced that the recent success of the Woollybutt-4 appraisal well indicated that the future life of the Woollybutt Oil Field would be significantly extended.

"The board considers that the upward revision for production from the Woollybutt oil field gives confidence in future earnings and balance sheet strength and makes the allocation of some of the company's capital to buy back shares a sensible decision at this time," Tap said.