Canadian oil exploration company TAG Oil Ltd. (TAO:TSX.V; TAOIF:OTCQX) announced on February 22, 2023, that it was recognized in the Toronto Stock Exchange (TSX) Venture 50 list, and ranked number six among the energy sector companies.
TSX Venture 50 is an annual ranking of the top 10 performing companies in the TSX from the past year across five sectors including energy, mining, clean technology and life sciences, diversified industries, and technology.
The ranking looks at the best TSX-listed companies in terms of market capitalization growth, share price appreciation, and trading volume.
In addition, TAG Oil said on February 28, 2023, that it has commenced re-completion in the existing vertical well BED 1-7 in its Badr Oil Field in the Western Desert of Egypt.
A re-completion involves modifying the configuration of an existing well completion to target a new or additional hydrocarbon reservoir zone. It can be both a complex and cost-effective way to increase production from existing wells and extend the economic life of an oil field.
TAG Oil said the plan is to do a diagnostic fracture injection test (DFIT) in the Abu Roash F (ARF) reservoir to check injection and leak-off properties of the oil well and then assess and analyze its production performance after stimulating the well and installing lift equipment to unload the well.
Re-completion results will be released in March — the data of which will improve reservoir forecasts and the design of its planned first horizontal well in apx May/June 2023.
TAG Oil is a Canada-based and listed oil and gas exploration company engaging in acquisitions, exploration, and production in the Middle East and North African (MENA) region.
Why Oil? Robust Global Demand
Global oil demand is seen to rapidly accelerate this year, driven by an increase of travelers in Asia, the bulk of which comes from rising Chinese demand for refined petroleum products supporting its delayed economic recovery.
McAlinden Research Partners (MRP) listed industry forecasts, all pointing to improved oil demand worldwide. It said the International Energy Agency (IEA) raised global demand estimates by 500,000 barrels per day (bpd) for the first quarter alone, and by 200,000 bpd for the whole of 2023.
This points to a projected world consumption of 101.9 million bpd in 2023, an increase of 2 million bpd from last year, according to IEA.
McAlinden Research Partners (MRP) listed industry forecasts, all pointing to improved oil demand worldwide.
This is due to a recovery in demand from Asian nations, accounting for 1.4 million bpd — 900,000 bpd of which is from China's demand alone. China’s total demand is expected to reach 15.9 million bpd, the IEA said.
MRP further said that the Organization of Petroleum Exporting Countries (OPEC) also increased its forecasts for global oil demand growth this year, raising expectations by 100,000 bpd. This growth will be supported by China’s oil demand, which will then help accelerate their economic growth. OPEC sees China growing its economy to 5.2% this year from the previous 4.8% estimate.
There will be rising Chinese demand for refined products from gasoline to jet fuel, considering Chinese travelers make up the largest group of international tourists from any single nation. China’s economy is poised for a robust re-emergence after its ZERO-COVID policy last year slowed the country’s growth to one of its worst economic performances in decades, MRP said.
Why TAG Oil?
Research Capital Corp. analyst Bill Newman recently said that there is a significant resource potential in the ARF reservoir for TAG Oil. He referred to an independent resource evaluation that said ARF’s BED-1 concession has 531.5 million oil barrels initially in place, while the east-central part of BED-1 has 178.3 million barrels of oil initially in place.
He said TAG’s plan to develop 20 horizontal wells in the east-central BED-1 equates to 16.5 million oil barrels net of contingent resource at best estimates (also known as 2C resource). “The risked, after-tax net present value discounted at 10% for the 2C resource is US$339M, equal to US$2.93 per share,” Newman said.
He also noted that TAG has zero debt and CA$24 million in positive working capital, including CA$21.4 million in cash and cash equivalents.
Research Capital Corp.’s target price for TAG Oil is at CA$1.35, or roughly US$1.
Research Capital Corp.’s target price for TAG Oil is at CA$1.35, or roughly US$1. The oil company is trading at US$0.47 apiece as of writing.
Last month, Malcolm Shaw of Hydra Capital Partners included TAG Oil as one of his top 3 stock picks, due to its proven management led by Chairman Abby Badwi, as well as the bright prospects of the existing oil-ready Badr Oil Field — a 107 km2 (26,000 acres) concession located in the Western Desert of Egypt.
On September 2022, TAG Oil announced it had a petroleum services agreement with Badr Petroleum Company to develop the Abu Roash “F” reservoir in the Badr Oil Field. Through this Badr Petroleum Company shall pay TAG a service fee, which is a percentage of the gross revenues generated from the project, to compensate the Company for assuming 100% of the capital and operating expenditures required for the ARF development at BED-1.
Shaw noted of Badwi’s oil and gas history and expertise, having served as CEO and director of Rally Energy Corp., for which he successfully led the sale of in 2007, and now applying this leadership style in the development of the overlooked Egypt oil resource.
According to TAG Oil, its management has a history of building companies to sell not just Rally Energy, but also Bankers Petroleum and Kuwait Energy.
“I think there could easily be 50 million barrels recoverable on the table here if their upcoming pilot program is successful, and that’s just on one-third of the prospective area . . . With TAG, there is no production to fall back on, and the company has CA$30 million in cash . . . (But) if you really dig into the details of what TAG is targeting and its plan in particular, it clears the hurdle. I’m willing not to worry about the downside risks because of how compelling it is technically . . . but once in a while, I will take a shot if a story checks all the boxes, as much as it can before it’s actually been tested,” Shaw added.
TAG Oil said that it may look at an exploration strategy in the future, but its current focus is on oil production and generating cash flow from bigger and more complex assets using its advanced technologies and experience.
The Catalyst: Initial Oil Production and Drilling for Horizontal Well in 2023
Along with the re-completion results, TAG Oil said it will start the flow-back and initial production cycle for the well also in March.
“Spudding” or drilling of the first horizontal well will also start by May or June of 2023. Drilling for a potential second horizontal well is expected around December 2023 or January 2024.
The company is also looking at furthering geomechanical studies and 3D seismic review to understand the petro-physical and geologic parameters in the ARF reservoir.
Ownership and Share Structure
Streetwise Ownership Overview*
TAG Oil Ltd. (TAO:TSX.V; TAOIF:OTCQX)
Management and insiders own 13.2% of TAG Oil. This includes the chairman, board members, CEO, and CFO.
According to Reuters, Abby Badwi has 2.06%, with 3.19 million shares. Director Shawn Reynolds has 1.54%, with 2.38 million. Vice President and COO Suneel Gupta has 1.03%, with 1.59 million. CFO Barry MacNeil has 0.96%, with 1.48 million shares. CEO and Director Toby Pierce has 0.82%, with 1.26 million shares. Director Gavin Wilson has 0.74%, with 1.15 million, and Director Keith Hill has 0.16%, with 0.25 million. Hill is also the chairman of Black Pearl Resources Inc. (PXX:TSX) and ShaMaran Petroleum (SNM:TSX), and the CEO of Africa Oil Corp. (AOI:TSX).
Askar Alshinbayev, the Founding Partner of Meridian Capital Limited, personally has 10.98% of the stock, with 16.99 million shares as a strategic investor.
22.9% is held by institutions and strategic investors, which includes Meridian Capital which holds 19.9%, and Coronation Capital which has 3%.
The 63.9% balance are held by retail investors.
TAG Oil reports CA$34 million in the bank, with a monthly burn rate of CA$400,000 per month.
TAG Oil has a market cap of CA$100 million and 155.146 million outstanding shares. It trades in the 52-week range between CA$0.20 and CA$0.79.
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