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Co. Working To Unlock Great Oil Resources in Egypt

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Source: Adam Gill 03/01/2024

If its strategy of using horizontal multifracking is successful, “the growth and value creation potential is very high,” noted an Echelon Capital Markets report.

TAG Oil Ltd. (TAO:TSX.V; TAOIF:OTCQX) caught the attention of Echelon Capital Markets, which initiated coverage on it with a Speculative Buy rating and a CA$1.10 per share target price, analyst Adam Gill reported in a February 26 research note.

“We see solid upside potential in the stock,” Gill wrote. “We believe Tag Oil is currently providing a very attractive risk-reward proposition.”

The Canadian oil and gas company is currently trading at about CA$0.48 per share. The return to target from this price is 129%.

Unlocking the Potential

Gill discussed how TAG could achieve significant growth and value creation if its strategy for producing oil at its flagship asset in Egypt works.

Its approach is to use multifrack drilling and completion design on horizontal wells on the BED-1 concession in the Abu Roash “F” (ARF) formation. Whereas this technology rarely has been employed in this Middle Eastern country, TAG had success just last year using it on vertical well BED 1-7 in the ARF.

Subsequently, the company started to drill its first horizontal well, BED4-T100, on the concession but encountered some technical problems that caused delays. Since it has resolved them and recently restarted drilling. After drilling and completing, TAG intends to multifrack the well.

“While the stock has been heavy on the back of drilling complications, the potential in the ARF remains as it was before the delays,” Gill wrote. “With that, we like the setup going forward.”

If successful, the analyst pointed out, BED4-T100 will be the first of many producing wells, as the company has identified 20 potential well locations “backed by vertical wells targeting the lower formations” on the BED-1 concession.

Gill highlighted that by multifracking wells in these 20 spots, TAG could initially produce 1,000−1,500 barrels of oil a day (1−1.5 Mbbl/d) per well and provide 27,000,000 barrels of recoverable oil, based on resource estimates prepared by RPS Energy Canada.

According to the agreement in place, on production from the BED-100 concession, TAG will receive about 62% of revenue as a service fee, given the Brent oil price is between US$70 and US$90 a barrel.

Important Catalyst on Horizon

Results from the BED4-T100 well, anticipated in April, is the company’s next catalyst, Gill noted.

Favorable Financial Picture

Gill reported that TAG is currently in a strong financial position. The company is well cashed up to complete the first horizontal well, noted the analyst, having CA$24.9 million (CA$24.9M) of working capital, CA$23M of cash on hand, and no debt as of the end of Q3/23.

The infrastructure TAG will need to produce oil from the concession already is in place, including facilities on site that can process 25 Mbbl/d.

“This will allow TAG to focus capital on drilling without infrastructure taking up a meaningful portion of the budget,” wrote Gill.

TAG has two gross over-riding royalties on previously owned assets. One is 2.5% of gross revenue produced from the New Zealand assets. The other is 3% on gross potential future gas production at the Australian asset.

As for its capital structure, Gill reported TAG has 185.1 million (185.1M) shares outstanding and 11.5M options exercisable at an average price of CA$0.53 a share.

Well-Suited Team

Gill provided bios for each member of TAG’s leadership team, all of whom have extensive experience in the oil and gas industry.

For instance, Executive Chairman Abby Badwi most recently was the president and chief executive officer (CEO) and led the sale of Kuwait Energy, an exploration and production company with operations in Egypt, Iraq, and Oman.

TAG’s CEO, Toby Pierce, brings to the table 25 years’ worth of knowledge and understanding of oil and gas operations, capital markets, investment banking, and mergers and acquisitions.

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Important Disclosures:

  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. Doresa Banning wrote this article for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor.
  3. This article does not constitute investment advice and is not a solicitation for any investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Each reader is encouraged to consult with his or her personal financial adviser and perform their own comprehensive investment research. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company.

For additional disclosures, please click here.

Disclosures for Echelon Capital Markets, Tag Oil Ltd., February 26, 2024

Echelon Wealth Partners Inc. is a member of IIROC and CIPF. The documents on this website have been prepared for the viewer only as an example of strategy consistent with our recommendations; it is not an offer to buy or sell or a solicitation of an offer to buy or sell any security or instrument or to participate in any particular investing strategy. Any opinions or recommendations expressed herein do not necessarily reflect those of Echelon Wealth Partners Inc. Echelon Wealth Partners Inc. cannot accept any trading instructions via e-mail as the timely receipt of e-mail messages, or their integrity over the Internet, cannot be guaranteed. Dividend yields change as stock prices change, and companies may change or cancel dividend payments in the future. All securities involve varying amounts of risk, and their values will fluctuate, and the fluctuation of foreign currency exchange rates will also impact your investment returns if measured in Canadian Dollars. Past performance does not guarantee future returns, investments may increase or decrease in value and you may lose money.

Data from various sources were used in the preparation of these documents; the information is believed but in no way warranted to be reliable, accurate and appropriate. Echelon Wealth Partners Inc. employees may buy and sell shares of the companies that are recommended for their own accounts and for the accounts of other clients. Echelon Wealth Partners compensates its Research Analysts from a variety of sources. The Research Department is a cost centre and is funded by the business activities of Echelon Wealth Partners including, Institutional Equity Sales and Trading, Retail Sales and Corporate and Investment Banking. Research Dissemination Policy: All final research reports are disseminated to existing and potential clients of Echelon Wealth Partners Inc. simultaneously in electronic form. Hard copies will be disseminated to any client that has requested to be on the distribution list of Echelon Wealth Partners Inc. Clients may also receive Echelon Wealth Partners Inc. research via third party vendors. To receive Echelon Wealth Partners Inc. research reports, please contact your Registered Representative. Reproduction of any research report in whole or in part without permission is prohibited.

Canadian Disclosures: To make further inquiry related to this report, Canadian residents should contact their Echelon Wealth Partners professional representative. To effect any transaction, Canadian residents should contact their Echelon Wealth Partners Investment advisor. U.S. Disclosures: This research report was prepared by Echelon Wealth Partners Inc., a member of the Investment Industry Regulatory Organization of Canada and the Canadian Investor Protection Fund. This report does not constitute an offer to sell or the solicitation of an offer to buy any of the securities discussed herein. Echelon Wealth Partners Inc. is not registered as a broker-dealer in the United States and is not be subject to U.S. rules regarding the preparation of research reports and the independence of research analysts. For U.S. persons only: This research report is a product of Echelon Wealth Partners Inc, under Marco Polo Securities 15a-6 chaperone service, which is the employer of the research analyst(s) who has prepared the research report.

The research analyst(s) preparing the research report is/are resident outside the United States (U.S.) and are not associated persons of any U.S. regulated broker-dealer and therefore the analyst(s) is/are not subject to supervision by a U.S. broker-dealer, and is/are not required to satisfy the regulatory licensing requirements of FINRA or required to otherwise comply with U.S. rules or regulations regarding, among other things, communications with a subject company, public appearances and trading securities held by a research analyst account. Research reports are intended for distribution only to “Major Institutional Investors” as defined by Rule 15a-6(b)(4) of the U.S. Securities and Exchange Act, 1934 (the Exchange Act) and interpretations thereof by U.S. Securities and Exchange Commission (SEC) in reliance on Rule 15a-6(a)(2). If the recipient of this report is not a Major Institutional Investor as specified above, then it should not act upon this report and return the same to the sender. Further, this report may not be copied, duplicated and/or transmitted onward to any U.S. person, which is not the Major Institutional Investor. In reliance on the exemption from registration provided by Rule 15a-6 of the Exchange Act and interpretations thereof by the SEC in order to conduct certain business with Major Institutional Investors, Echelon Wealth Partners Inc. has entered into a chaperoning agreement with a U.S. registered broker-dealer, Marco Polo Securities Inc. (“Marco Polo”). Transactions in securities discussed in this research report should be effected through Marco Polo or another U.S. registered broker dealer. U.K. Disclosures: This research report was prepared by Echelon Wealth Partners Inc., a member of the Investment Industry Regulatory Organization of Canada and the Canadian Investor Protection Fund.

ECHELON WEALTH PARTNERS INC. IS NOT SUBJECT TO U.K. RULES WITH REGARD TO THE PREPARATION OF RESEARCH REPORTS AND THE INDEPENDENCE OF ANALYSTS. The contents hereof are intended solely for the use of, and may only be issued or passed onto persons described in part VI of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2001. This report does not constitute an offer to sell or the solicitation of an offer to buy any of the securities discussed herein. Copyright: This report may not be reproduced in whole or in part, or further distributed or published or referred to in any manner whatsoever, nor may the information, opinions or conclusions contained in it be referred to without in each case the prior express written consent of Echelon Wealth Partners.

ANALYST CERTIFICATION Company: TAG Oil Ltd. | TAO-TSXV I, Adam Gill, hereby certify that the views expressed in this report accurately reflect my personal views about the subject securities or issuers. I also certify that I have not, am not, and will not receive, directly or indirectly, compensation in exchange for expressing the specific recommendations or views in this report.


During the last 12 months, has Echelon Wealth Partners Inc. provided financial advice to and/or, either on its own or as a syndicate member, participated in a public offering, or private placement of securities of this issuer? Yes

During the last 12 months, has Echelon Wealth Partners Inc. received compensation for having provided investment banking or related services to this Issuer? Yes

( Companies Mentioned: TAO:TSX.V; TAOIF:OTCQX, )


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