TAG Oil has signed a farmout agreement with Apache for potentially expanding and discovering oil and natural gas resources occurring in New Zealand’s East Coast basin.
Apache will perform a multi-stage assessment, exploration and potential expansion program in the PEP 50940, PEP 38348 and PEP 38349, which are the exploration permits of TAG's East Coast Basin. These permits include more than 1 million potential onshore oil and gas acres that are situated in the southeast of the North Island. At present, TAG has a 100% working interest in the properties.
Apache has decided to compensate a portion of the direct expenses of TAG and gives a complete continuation of three phases of operation for TAG to the utmost approved expenditure in every stage. If further operations are performed or if the approved cost goes beyond the stage, Apache will reimburse a major share in the seismic costs or drilling as defined in the agreement.
Both the two and three dimensional drilling and seismic program are incorporated in every operation phase. After the operations are performed in phase I, Apache will get a 50% interest in the exploration permits by agreeing for the phase II program. It will obtain a 25% interest in the exploration permits and committing to the third phase and also will get 50% interest in the permits and committing to the fourth phase operation..
The companies will perform the proposed exploration program in the subsequent four years due to certain circumstances. They will commence the seismic programs in 2011 and drilling works in 2012.
According to the agreement, Apache will act as the operator for all the ongoing activities, without including the four primary vertical wells of the drilling program, which will be done by TAG with the support of Apache. Once the phase III program is completed, Apache will pay up to $100 million to get a 50% interest in the exploration permits. TAG will continue as the operator of the exploration permits, when the phase III program comes to an end. If Apache agrees for the phase IV exploration campaign, then all the expenditures will be divided evenly between TAG and Apache for further operations..