TAG Oil Ltd. is pleased to announce that the recently drilled Cheal-B6, Cheal-A9 and Cheal-A10 wells confirm a commercial oil discovery within the Urenui Formation at a depth of approximately 1400 meters.

Strong initial flow test results were achieved, with each individual well having the capability to initially produce approximately 200 barrels of light oil per day, plus associated gas from high-quality reservoir sands.

Permit-wide 3-D seismic interpretation, including data from pre-existing wells which all intersected Urenui pay, indicates that the Urenui Formation has been deposited as a blanket sand, and is prospective for oil discovery across the Cheal permit.

The Cheal-B6, Cheal-A9 and Cheal-A10 wells will be placed on full-time production, along with other established production, once the enhancements to Cheal's artificial lift capabilities have been completed. These upgrades will allow TAG Oil to produce all existing and future wells simultaneously, and is expected to be complete within the next three months.

TAG also reports that the new VR500 drill rig, which the Company has under exclusive contract, has been mobilized to the Cheal-C site discovery area in preparation to spud the Cheal-C3 and Cheal-C4 wells. The Cheal-C3 and Cheal-C4 wells are follow-on wells to the Cheal C site discoveries, including the Cheal-C2 gas condensate discovery well, primarily targeting the Mt. Messenger Formation.

The Cheal-C2 well achieved stabilized flow rates of approximately 14 million cubic feet gas per day (~2,333 barrels of oil equivalent per day) on a 48/64" choke, with associated condensate production, which was increasing during the 10-day flow test.

The 100%-TAG-owned Cheal oil and gas field is located in the Taranaki Basin of New Zealand.

TAG Oil CEO Garth Johnson commented, "Based on these consistent results, we will now integrate the Urenui oil play into our overall development and exploration strategy, which will also include Mt. Messenger wells and the deeper liquids-rich Kapuni Formation gas play."