Oil Co. Starts Drilling Horizontal Leg of Well in Egypt

TAG Oil Ltd. (TAO:TSX.V; TAOIF:OTCQX) announced it has started drilling the horizontal portion of its first horizontal well in the Badr Oil Field in the Western Desert of Egypt.

The company successfully drilled the vertical pilot hole to a depth of 3,290 meters and performed open-hole logging, formation imaging, and pressure measurement, followed by cement plugback of the lower vertical pilot hole. It then proceeded into whip-stock drilling of build and lateral horizontal sections in the Abu Roash F (ARF) reservoir.

The horizontal part of the well will target oil in the ARF's unconventional tight, carbonate reservoir. The lateral section of the horizontal well is expected to take three weeks and will extend more than 1,000 meters, the company said.

"The Company expects the well will be completed by calendar Q4/23," Research Capital Corp. analyst Bill Newman wrote in an updated research note on the company on August 30. "Based upon an independent resource report, a successful well is expected to initially produce in the 1,000 to 1,500 bbl/d (barrels a day) range. The results of the T100 well will be used to design a follow-up drilling program expected to commence in calendar Q1/24."

Newman rated the stock a Speculative Buy with a price target of CA$1.25 per share.

Research Capital Corp. analyst Bill Newman rated the stock a Speculative Buy with a price target of CA$1.25 per share.

The T100 drilling program is an important step forward for TAG. The design is made up of a vertical pilot assessment well for potential coring, open hole logging, formation imaging, pressure measurement, and fluid sampling.

TAG said it plans to start flowback testing of the well in November.

Harold Hamm, a pioneer in horizontal drilling, is currently the 89th richest person the planet and worth US$25.2 billion, according to Forbes.

Hamm recently compared the advent of horizontal drilling to the advent of FedEx, the Norman Transcript in Norman, Okla., reported.

"Horizontal drilling changed it all," said Hamm, who wrote a book called "Game Changer" that came out in August. "It gave us access to all of the reservoirs that contained oil that was too tight to produce."

The Catalyst: Egypt Could Be Major Oil Producer

Information obtained during the drilling of the T100 well, including mud logging and drill cuttings to assess the reservoir quality across the lateral section, will be used along with geochemical data and 3D seismic interpretation to design the well completion and fracture stimulation program.

"Performance from the T100 well will be used for planning and executing future drilling plans," TAG said in a release.

The ARF section was about 50 meters thick and very close to the structural elevation anticipated, the company said.

Chen Lin, author of What is Chen Buying? What is Chen Selling? is bullish on TAG Oil. "[TAG's success] would change politics forever," he noted while making it one of his picks for the third quarter of 2023. "Egypt would become a major oil producer."

"We're very excited about the scope and scale of the Abu Roash F and the fact that it's a 'new play,'" TAG Chief Executive Officer Toby Pierce noted on the company's website. "There are potentially more than 500 million barrels of oil in place, and to date, the zone has never been developed in Egypt."

Chen Lin, author of What is Chen Buying? What is Chen Selling? is bullish on TAG Oil. "[TAG's success] would change politics forever," he noted while making it one of his picks for the third quarter of 2023. "Egypt would become a major oil producer."

Newman of Research Capital Corp. is also bullish, predicting a possible 125% return for investors with his price target of CA$1.25 per share and Thursday afternoon's share price of CA$0.56.

TAG also recently released financial results for the period ending on June 30. According to TAG, the company had acquired CA$15.5 million in cash and CA$17.9 million in working capital by March 31 and has no debt. It recently finished a public offering worth CA$11.7 million.

Oil Prices Up, Demand Rising

Oil prices rose to their highest point in 11 months this week, driven up by Saudi Arabian production cuts and the war in Ukraine.

The international benchmark of Brent Crude Oil climbed to just under US$95 per barrel on Wednesday, its highest price since Oct. 27, 2022, Forbes reported. The West Texas Intermediate, a U.S. national benchmark, went up to just under US$93 on the same day, its highest point since last summer.

According to the International Energy Agency's September Oil Market Report, world oil demand is on track to grow by 2.2 million barrels per day (MMbbl/d) this year to 101.8 MMbbl/d, led by Chinese consumption.

"Russia's invasion of Ukraine in February 2022 upended oil and gas markets, creating the first truly global energy crisis amid the uneven economic recovery from the Covid-19 pandemic," the report said.

Global oil demand is expected to eclipse supply by 1.24 MMbbl/d in the second half of the year.

"Refiners are struggling to meet increased demand, especially for distillates," the IEA noted. "Surging product cracks and refinery margins near all-time highs have failed to spur a meaningful increase in throughputs. Sub-optimal crude allocations following embargoes on Russian crude and products and OPEC+ oil supply cuts have kept European, and OECD Asian refinery runs well below year-earlier levels."

Ownership and Share Structure

Management and insiders own 27.14% of the company. Askar Alshinbayev owns 18.78% with 29.99 million shares, Abdel Fattah Z Badwi owns 3.36% with 5.38 million shares, Shawn Reynolds owns 1.49% with 2.38 million shares, Suneel Gupta owns 0.99% with 1.59 million shares, Toby Robert Pierce owns 0.95% with 1.51 million shares, Barry MacNeil owns 0.85% with 1.36 million shares, and Gavin Hugh Lothian Wilson owns 0.72% with 1.15 million shares.

Institutions own 10.93% of the company. YF Finance, Ltd. owns 8.14% with 13.01 million shares, Purpose Investments Inc. owns 2.15% with 3.44 million shares, and Novum Asset Management AG owns 0.64% with 1.02 million shares.

There are 159.74 million shares outstanding, and 102.77 million free-float traded shares. The company has a market cap of CA$100.88 million. It trades in a 52-week range of CA$0.39 and CA$0.79.

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1. TAG Oil Ltd. is a billboard sponsor of Streetwise Reports and pays SWR a monthly sponsorship fee between US$4,000 and US$5,000.
2. Steve Sobek wrote this article for Streetwise Reports LLC and provides services to Streetwise Reports as an employee.
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