TAG Oil Abandons Waitangi Valley-1 Well in PEP 38348 on Safety Concerns

Canada's TAG Oil Ltd., reported Tuesday that the Company has agreed that after encountering extreme drilling conditions, including high-pressure shallow hydrocarbon zones, in the interest of safety, the surface section of the Waitangi Valley-1 well, located in Petroleum Exploration Permit 38348 in New Zealand's East Coast Basin, will be plugged and abandoned.

CEO Garth Johnson commented; “Waitangi Valley-1 encountered very high hydrocarbon zone pressures at shallow depths that cannot easily be compared to anywhere else in the world. We understood this program would be challenging and we encountered extremely difficult drilling conditions in the first 2,808 feet (856 meters) of drilling. After consulting with worldwide drilling experts and considering all data ourselves, we have made a difficult decision to plug and abandon Waitangi Valley-1 before reaching the intended total depth of 11,811 feet (3,600 meters), to maintain the safety and integrity of the operation. The well will be abandoned following all regulatory requirements and with no environmental issues encountered to date. The Company’s previous guidance for fiscal year 2015 did not include any anticipated production or cash-flow from the Waitangi Valley-1 well.”

The Company will now mobilize the Nova-1 drilling rig and ancillary services back to Taranaki to focus on its core oil producing assets at Cheal in 3Q of fiscal year 2015 ending Dec. 31 as previously disclosed and as detailed in the table below:

• Permit Number PEP 54877: Cheal-E-JV-6 Well (TAG Working Interest - 70 percent)
• Permit Number PMP 38156: Cheal-E7 Well (TAG Working Interest - 100 percent)
• Permit Number PMP 38156: Cheal-E8 Well (TAG Working Interest - 100 percent)