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TAG to mount 10% buyback as share price flags

Thursday 8th December 2011

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TAG Oil is to buy back 10 percent of its issued capital as the company believes the market is undervaluing its interests in a growing web of commercial oil and gas finds, one of which it called a potential “game changer” earlier this week.

TAG has extensive onshore operations and exploration under way and is also exploring unconventional onshore prospects in Hawke’s Bay with US middle-weight oil explorer Apache Corp.

“TAG believes that the market price of the company's common shares may not reflect their underlying value and that the purchase of common shares for cancellation will increase the proportionate interest of, and will be advantageous to, all remaining shareholders,” it said in a statement to the Toronto Stock Exchange.

The company’s website shows TAG shares rose 3.1 percent to C$6.26 in the last trading period on the TSX, and had slumped below C$5 late last month, having traded at high points for the year of around C$7.60 in September.

TAG production facilities are handling oil and gas flows equivalent to 2,700 barrels of oil equivalent per day from existing finds, and yesterday announced production rates of 1,700 barrels a day of light oil and one million cubic metres daily of natural gas from a new well yesterday.

Cheal B-5 is the third in a 10-well programme, which indicated “substantially more upside potential in the Cheal field than originally anticipated,” said TAG’s chief executive, Garth Johnson, in a statement. “This result has once again exceeded our expectations and could prove to be a game-changer for TAG’s asset valuation and the scope of the company.”

“The Cheal-B5 well was drilled, tested and placed on full-time production in less than 30 days, with capital payback anticipated in less than 14 days.”

TAG is now making preparations to drill the Cheal-B6 and the Cheal-B7 wells.”

Under the share buyback plan, TAG says it will seek to purchase some 10 percent of TAG’s 44,277,739 outstanding common shares in the public float.

Macquarie Private Wealth will conduct the process, starting tomorrow, with daily purchases not to exceed 32,341 common shares.

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