TAG Oil Commences Drilling at Cheal Oil and Gas Field

Canadian listed, New Zealand oil and gas producer TAG Oil Ltd. (TSX-V: TAO), reports that the Company is now commencing an aggressive drilling campaign targeting the shallow formations at the 100%-controlled Cheal oil and gas field.

The Cheal discoveries are located in the lightly explored Petroleum Mining Permit 38156 in the onshore Taranaki Basin, New Zealand.

Following on from TAG's initial multi-zone Cheal discoveries, which are currently producing light oil and gas from the main producing Mt. Messenger Formation (~1800m) as well as the Urenui Formation (~1400m), Cheal-B4ST is the first of several "step-out" wells targeting these proven, producing zones in the Cheal discovery area. Cheal-B4ST will re-enter the suspended Cheal-B4 well, which previously recorded strong oil shows.

Says TAG Oil CEO Garth Johnson: "Numerous drill-ready prospects have been identified at Cheal, providing us with opportunities for high-impact reserve and production growth. We plan to fully exploit these shallow zones with an objective to build our near term cash flow, as we prepare to pursue the deeper condensate-rich gas formations and TAG's East Coast Basin fractured oil shale prospects."

All additional production arising from TAG's Cheal drilling campaign can be brought on production rapidly and cost effectively at TAG Oil's 100%-owned production station located in the Cheal development area.

Historical Perspective
The original Cheal-B4 well was drilled by the previous operator to test a deeper target within the Moki Formation (2900m) in December 2006, and was suspended at that time. During drilling, strong oil shows were recorded within the Mt. Messenger Formation (~1900m). However, TAG's technical interpretation of the seismic and well data indicates that these oil shows are associated with a culmination of an anomaly in the Mt. Messenger Formation, approximately 250m from the original Cheal-B4 well penetration.

Petroleum Mining Permit 38156
Petroleum Mining Permit 38156 is located in the main onshore Taranaki Basin play fairway where prolific light oil and condensate-rich gas fields have been discovered within numerous play levels.

Though the 7500-acre (11 section) permit area is only lightly explored, PMP 38156 contains oil and gas discoveries in multiple zones: the shallower Cheal Mt. Messenger and Urenui Formation discoveries and TAG Oil's deep, condensate-rich, Cardiff gas discoveries in the Kapuni Formation (4000m).

The Cardiff gas/condensate discovery is situated on trend and among several sizable Kapuni Formation discoveries including the offsetting Shell/Todd-operated landmark Kapuni gas/condensate field, New Zealand's first major onshore discovery.

Source: TAG Oil Ltd.

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