Mr. Toby Pierce reports

TAG OIL REPORTS FY2017 RESULTS

TAG Oil Ltd. has released the annual and fourth quarter results for the fiscal year ended March 31, 2017. Specifically, the company successfully increased its total gross proven plus probable (2P) reserves for fiscal 2017 while also increasing its oil and gas production, revenue from sales and operating netbacks during the quarter.

TAG Oil continues to remain well organized and focused on its core producing operations, which have demonstrated substantial upside potential for near-term production and reserve building, and has preserved capital and reduced production and administrative costs wherever possible. The company has also been growing its production and reserves base through exploration drilling in the Taranaki basin and continues to be active, having recently drilled the successful Cheal-E8 well and to be spudding the Cheal-D1 well in July, 2017. TAG Oil has also managed to complete additional strategic acquisitions during fiscal 2017 and continues to assess other acquisition and farm-in opportunities in New Zealand and Australia.

Toby Pierce, TAG Oil's chief executive officer, commented: "TAG has weathered another year of the low-oil-price environment by focusing on our core Taranaki producing assets and making opportunistic acquisitions of distressed assets to position the company for when prices improve. Through the first half of our fiscal year, TAG successfully completed several recompletions to stabilize our production rates and implemented a waterflood program at our main Cheal permit. Following the oversubscribed capital raise in March, we have returned to drilling our exploration targets and have an active program planned for the remainder of the fiscal year with up to four more additional wells planned. With the continued volatility in commodity prices, we are diligently watching oil prices and will adjust our capital program accordingly."

Fiscal 2017 financial and operating highlights

• At March 31, 2017, the company had $21.6-million (March 31, 2016: $16.8-million) in cash and cash equivalents and $25.9-million (March 31, 2016: $22.1-million) in working capital and no debt.
• Total 2P reserves at March 31, 2017, reflecting the company's 100-per-cent interest in PMP 38156 (Cheal), 70-per-cent interest in PEP 54877 (Cheal East) and 100-per-cent interest in PMP 53803 (Sidewinder), are estimated at 4.1 million barrels of oil equivalent (92 per cent oil), compared with 3.6 million barrels of oil equivalent (93 per cent oil) at March 31, 2016, which is an approximately 14-per-cent increase that takes into account:
  • An annual reserves revision of 946,000 barrels of oil equivalent (accounting for an approximate 26-per-cent increase in reserves);
  • Production of the 421,000 barrels of oil equivalent that the company produced over fiscal 2017 (accounting for an approximate 12-per-cent decrease in reserves).
• Average net daily production decreased by 13 per cent to 1,200 barrels of oil equivalent per day, compared with 1,386 barrels of oil equivalent per day in fiscal 2016.
• Revenue decreased by 6 per cent to $23.3-million, compared with $24.8-million in fiscal 2016.
• Operating netback increased by 10 per cent for fiscal 2017 to $24.88 per barrel of oil equivalent, compared with $22.61 per barrel of oil equivalent for fiscal 2016.
• The company acquired the following permits:
  • 70-per-cent interest in the 20,923-acre onshore PEP 51153 (Puka) in June, 2016;
  • 100-per-cent interest in the 25,700-acre onshore PL17 (Surat basin) in January, 2017.
• The company relinquished the following permits:
  • 40-per-cent interest in the 21,623-acre offshore PEP 52181 (Kaheru) in April, 2016;
  • 100-per-cent interest in the 4,275-acre onshore PEP 38748 (Sidewinder B) in June, 2016;
  • 100-per-cent interest in the 634,047-acre onshore PEP 38349 (Boar Hill) in November, 2016;
  • 100-per-cent interest in the 22,054-acre onshore PEP 57063 (Wai-iti) in April, 2017.
• The company has submitted the following permit to be relinquished, which is pending approval:
  • 50-per-cent interest in the 1,102-acre onshore PEP 54879 (Cheal South) in March, 2017.
• Capital expenditures totalled $15.6-million, compared with $11.8-million for fiscal 2016. The majority of the expenditure related to the following:
  • Taranaki development drilling and waterflood, workovers and facility improvements ($7.4-million);
  • Taranaki exploration activities ($5.4-million);
  • Australian PL17 acquisition and seismic planning ($2.6-million);
  • Other assets ($200,000).

2017 fourth quarter financial and operating highlights

• Average net daily production increased by 3 per cent for the quarter ended March 31, 2017, to 1,218 barrels of oil equivalent per day (79 per cent oil) from 1,185 barrels of oil equivalent per day (80 per cent oil) for the quarter ended Dec. 31, 2016.
• Revenue from oil and gas sales increased by 4 per cent for the quarter ended March 31, 2017, to $6.3-million from $6-million for the quarter ended Dec. 31, 2016.
• Operating netbacks increased by 15 per cent for the quarter ended March 31, 2017, to $27.46 per barrel of oil equivalent, compared with $23.86 per barrel of oil equivalent for the quarter ended Dec. 31, 2016.
• Capital expenditures totalled $8.1-million for the quarter ended March 31, 2017, compared with $1.5-million for the quarter ended Dec. 31, 2016.
• On March 20, 2017, the company announced that it had closed a short form prospectus offering for aggregate gross proceeds of $14,995,500.

Fiscal 2018 outlook and guidance

TAG Oil's capital budget for fiscal 2018 is $27.4-million, which is projected to be financed entirely by forecasted cash flow and working capital on hand. A further $8.4-million of incremental capital expenditures are contingent mainly on the results of the activities outlined as follows, the status of locating suitable joint venture or farm-in partners and notable improvements in oil prices. Farmout discussions are continuing, and more information will be provided as it becomes available in due course. TAG Oil intends to diligently manage its balance sheet by preserving capital and reducing costs where necessary.

As TAG Oil enters the next phase of its reserve and production growth, the fiscal 2018 capital budget of $27.4-million will reintroduce an exploration-focused capital program for the company and continue with other necessary activities that are core to its business. These opportunities have been identified through an extensive continuing geological and engineering review of the company's development and exploration acreage and namely include the following:

• Drilling of one further exploration well at PEP 54877 (Cheal East);
• Drilling of one exploration well at PEP 51135 (Puka);
• Drilling of up to two exploration wells at PEP 55769 (Sidewinder East);
• Commencement of the Cheal A site waterflood program;
• Continued appraisal of the Cardiff field;
• Meeting various permit obligations, including the acquisition and reprocessing of seismic data on PEP 57065 (Sidewinder North) and PL17 (Surat basin), which will allow TAG Oil to properly select exploration drilling opportunities.

TAG Oil is estimating that fiscal 2018 revenue from operations will be $28-million, with production averaging approximately 1,400 barrels of oil equivalent per day (75 per cent oil). The company expects to exit fiscal 2018 with production of approximately 1,900 barrels of oil equivalent per day. This guidance is based on TAG Oil's optimization of in-field opportunities and existing production and assumes a Brent oil price for the year of $55 (U.S.) per barrel. An increase in oil prices or success from any of the five planned exploration wells to be drilled in the next 12 months would have a positive impact on this guidance. Should oil prices remain significantly below $55 (U.S.) per barrel for any length of time, TAG Oil may reduce its capital program and/or activities to protect its balance sheet.

Fiscal 2017 conference call

TAG Oil will host a discussion of its fiscal 2017 fourth quarter financial results on Thursday, July 6, 2017, at 1 p.m. Pacific Daylight Time. Please call in 10 minutes before the conference call starts and stay on the line (an operator will be available to assist you should you have questions of management during the call). In addition, questions can be forwarded by e-mail in advance to info@tagoil.com.

Interested parties may access the conference call using the following information.

Date:  July 6, 2017

Time:   1 p.m. Pacific Daylight Time

Toll-free dial-in number:  1-844-513-7160

Secondary dial-in number:  1-508-637-5604

Conference passcode:  28002465

You may e-mail questions to info@tagoil.com.

Replay will be available on TAG Oil's blog on the company's website following the conference call.

About TAG Oil Ltd.

TAG Oil is a development-stage international oil and gas producer with established high-netback production, development and exploration assets, including production infrastructure in New Zealand and Australia.

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