TAG Oil, Apache Conclude Farmout Agreement for NZ Permits

TAG Oil Ltd. announced that the Company's 100-percent owned New Zealand subsidiaries have concluded an agreement with Apache New Zealand Corporation LDC, which results in an early termination of the Farmout Agreement dated Sept. 1, 2011. This agreement relates to exploration in Petroleum Exploration Permits 38348, 38349 and 50940 located in the East Coast Basin of New Zealand.

Main Highlights of the Agreement:

Apache has paid TAG Oil a lump sum payment to satisfy its obligations related to funding Phase 1 operations under the Farmout Agreement.TAG Oil will retain all assets developed under the Agreement, including all seismic and technical work completed by the Joint Venture.TAG retains its 100% interest in the subject East Coast Basin permits, including the Waitangi Hill shallow oil discovery.

TAG Oil CEO Garth Johnson commented, "Although we are disappointed that Apache's shift in corporate strategy resulted in a refocusing of their international holdings, we do understand that tough decisions sometimes need to be made. TAG remains highly enthusiastic about the future of these prospects: All the work completed to date as a result of our JV Phase 1 activities strengthens our beliefs in the potential of TAG Oil's East Coast Basin holdings. We're also pleased to have full control back over the project with funding in place."

TAG intends to utilize the lump sum payment received by Apache to fund the drilling of up to four East Coast Basin wells as planned in the Apache-agreed Phase 1 work program. These wells will test several high-impact play objectives including the Waipawa and Whangai source rocks that have independently been confirmed to be generating 50 degree API oil. Additionally, these naturally fractured, high-quality source rocks are believed to be widespread across TAG's acreage. Independent assessments have concluded that there are approximately 14 billion barrels of undiscovered original oil in place potential, within less than a fifth of TAG's total land holdings on the East Coast.

Drilling of the first East Coast wells is expected to commence in late March/ April 2013, subject to receipt of the necessary consents from regional government. TAG will utilize conventional vertical drilling techniques similar to those used by TAG Oil over many years in its successful Taranaki Basin operations.

Mr. Johnson concluded: "It was a pleasure to have had the opportunity to work closely with Apache. Our work together provided important geotechnical and operational related work, which has confirmed our belief in the major potential of this project, and advanced it to drill-ready status. Furthermore, TAG's cash flow and assets have grown dramatically since we first signed the agreement with Apache. So the Company can now fund further drilling operations and exploration activities from a place of strength and greater flexibility."

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