TAG Oil wins PSA for Abu Roash F development in Egypt

Executive Summary

• TAG Oil Ltd. has been awarded a petroleum services agreement (PSA) by ENPEDCO to develop the unconventional Abu Roash "F" (ARF) reservoir within the Southeast Ras Qattara (SERQ) concession in Egypt's Western Desert.
• The award follows a competitive bidding process and becomes effective upon execution of the definitive agreement and posting of a $100,000 performance letter of guarantee.
• TAG Oil will fund 100% of capital and operating expenditures, receiving a sliding-scale service fee of 48% to 55% of gross project revenue based on production volumes.

Key Details

• Agreement Structure: Petroleum Services Agreement (PSA) for the development of the unconventional Abu Roash F (ARF) reservoir.
• Counterparties: TAG Oil Ltd. (Service Provider) and Egyptian National Petroleum for Exploration and Development Company (ENPEDCO).
• Concession Details: Southeast Ras Qattara (SERQ) concession, spanning approximately 2,000 square kilometres (512,000 acres).
• Asset Characteristics: Low-permeability carbonate formation with existing subsurface data (full 3-D seismic coverage) and existing well bores. Conventional production remains with ENPEDCO; TAG Oil has access to shut-in wells for low-cost re-entry.
• Performance Guarantee: $100,000 (U.S.) performance letter of guarantee required for the PSA to become effective.
• Development Plan - Phase 1 (Firm Commitment, 2 Years):
  • Re-entry of one or more existing vertical wells for diagnostic fracture injection testing (DFIT).
  • Drilling a new vertical well or sidetracking an existing well (vertical or horizontal), followed by potential hydraulic fracture stimulation.
• Development Plan - Phase 2 (Optional):
  • Full-scale commercial development contingent on successful Phase 1 completion, actual production results, and cost analysis.
  • Economic terms to be agreed upon by both parties.
• Commercial Terms:
  • TAG Oil funds 100% of capital and operating expenditures.
  • Service fee: Sliding scale of 55% to 48% of gross project revenue.
  • Royalties and taxes are paid by the Egyptian General Petroleum Corp. on behalf of the company.
• Technical Validation: TAG Oil has completed detailed technical studies and an independent evaluation of the reservoir; results are expected to be released next month.
• Technology Basis: Strategy relies on proven horizontal drilling and hydraulic fracturing technologies, citing successful results in TAG Oil's Badr oil field (BED-1), Canada's Montney formation, and the U.S. Eagle Ford shale.

Notable Quotes

• "We are very pleased to have received this approval, which represents another significant step in expanding TAG Oil's footprint in Egypt. While the initial phase focuses on piloting the development concept, the reservoir characteristics and our proposed strategy are based on proven technologies that have consistently delivered successful outcomes in similar projects across North America." — Abby Badwi, Executive Chairman and CEO