New wells in the TAG Oil's drilling program underway in the Taranaki basin of New Zealand are showing encouraging results, the company said in a news release. These wells are part of an extensive New Zealand drilling campaign targeting significant hydrocarbon potential in lower risk shallow oil prospects and deeper high-impact gas-condensate prospects in the Taranaki basin, and unconventional prospects in the East Coast basin targeting naturally fractured source rocks.

The deep Cardiff-3 well targeting the Eocene-aged Kapuni formation is drilling ahead at approximately 4,113 m (13,494 ft) after some delays due to the well encountering a high-permeability, hydrocarbon-bearing zone in the McKee Sands, at approximately 4,100 m (13,451 ft) depth, the release said.

After drilling through the McKee sands and into the second target zone, the K1A zone, TAG has encountered additional encouraging gas kicks of up to 20 times background levels. The company said it expects to drill through the remainder of the main Kapuni formation target zones in November and, at that time, will make a decision whether to complete and production test the well, if supported by data acquired as expected.

In addition, TAG continues to drill step-out locations in the Cheal area. Wells recently drilled from the Cheal North East site have now significantly extended the known oil and gas saturated area from the initial Cheal pool discovery, the company said in the release.

TAG recently completed the third of five consecutive wells to be drilled within Petroleum Exploration Permit 54877: Cheal-E1, E2, and E3 wells have all encountered oil- and gas-bearing sands in the Urenui and/or Mt. Messenger formations, the release said. These wells have now been completed in preparation for production testing, which we anticipate will commence in a few days' time.

To ensure more reliable long-term production forecasting on future wells in this emerging play, the Cheal-E1, E2 and E3 wells will be initially rotated, so that each well will be individually tested for approximately 15 days, and then shut-in temporarily to conduct pressure and temperature analysis. Following this initial test period, all wells will then be placed into permanent production.

Based on these encouraging results in the Cheal-E site, TAG will now drill the Cheal-E4 and E5 wells, followed shortly by three new step-out wells in petroleum exploration permit 54879 (Cheal South, TAG 50%) with joint venture partner East West Petroleum Corp., the release said.