Canadian oil company taps unconventional oil and gas asset in Egypt

• Fracking opened up whole new oil and gas fields in the U.S. and now a Canadian company is applying the technology to assets in Egypt
• Flow tests on the first horizontal well drilled on TAG Oil’s BED-1 field showed encouraging results
• TAG Oil plans to drill up to 20 horizontal wells on the project and independent firm RPS has given the company over US$420 million in contingent resource value

The fracking and horizontal drilling technologies that unlocked unconventional oil and gas assets in North America have had a major impact on the global energy market.

The technologies turned the United States into a net exporter of oil in the 2000s and 2010s and caused a fracking boom in places like the Permian Basin in Texas and the Bakken field in North Dakota.

But there are still places in the world that have not seen these technologies employed to tap unconventional oil and gas fields. One of those is North Africa and, in particular, Egypt.

Canadian oil and gas company, TAG Oil Ltd. (TSXV: TAO | OTCQX: TAOIF | FSE: T0P), is determined to change that and has recently drilled its first horizontal well at BED-1, the company’s oil and gas concession in the country.

TAG Oil announced on July 8, 2024 that the current T100 oil production rate is 400 barrels of oil per day (bopd) with an associated gas-oil ratio of 150 standard cubic feet per barrel.

After encountering drilling issues, the company shortened the lateral length of the well to 308 metres, rather than the planned 1,000 metres. With approximately 130 bopd per 100 metres of lateral horizontal length, the company is very encouraged by the results of this well and is eager to start drilling their next ARF well in the BED-1 field. With 20 potential horizontal well sites on BED-1 alone, the company is primed to deliver cash flow and value for shareholders.

“Looking ahead, TAG Oil plans to drill horizontal wells with lateral lengths of up to 1,000 meters, accompanied by three times the fracture stimulation stages. This longer lateral approach lays the groundwork for scaling production growth. Success of the T100 well is an important step to unlock the potential of this significant resource play and planning is underway to develop the 500 million barrels of oil in place in the ARF.”

—  Toby Pierce, CEO, TAG Oil

Egypt is an underappreciated oil and gas location

A democratic republic with a history in the region that goes back millennia, Egypt is the largest Arab country in the Middle East.

Though not an oil and gas juggernaut like Saudi Arabia, Egypt still produces 700,000 bopd and is a net exporter of natural gas.

It has one of the largest and most diversified economies in the Middle East and recently signed a tri-lateral agreement with Israel and the EU to be a major gas and liquid natural gas hub to Europe.

And now, TAG Oil is determined to help revolutionize the oil and gas sector in Egypt by applying fracking and horizontal drilling to its BED-1 field.

TAG Oil’s first horizontal well at BED-1 already producing oil

The Abu Roash “F” (“ARF”) unconventional formation at BED-1 is in Egypt’s Western Desert.

Shell previously held BED-1 and produced more than 90 million barrels of light oil from formations below the ARF. Since 2012, when Shell surrendered the field, it has been operated by the Badr Petroleum Company (“BPCO”), a wholly owned subsidiary of the Egyptian General Petroleum Corporation.

In October 2022, TAG Oil signed a petroleum services agreement with BPCO on BED-1, seeing in ARF similarities to the highly productive Eagle Ford formation in Texas.

After recompleting the BED 1-7 vertical well in May 2023, TAG Oil went on to drill the BED4-T100 horizontal well. Originally designed to be drilled to 1,000 metres horizontally, heavy fracturing caused TAG Oil to stop the drilling for BED4-T100 at 308 metres laterally.

TAG Oil’s CEO Toby Pierce commented: “In North America you have managed pressure drilling equipment that you can use to drill through highly fractured zones like that one and we didn’t have that in country.”

In July 2024, TAG Oil reported successful flow rates from the BED4-T100 well and had shipped the produced crude for further treating and handling. As of July 8th, 2024, the T100 well had produced over 10,000 barrels.

There are facilities nearby that TAG Oil can tie the well into, but according to Pierce, “we will truck oil for first couple of months until we understand what the stabilized flow rate is and then we will tie the well into the facilities.”

Over US$420 million of unrisked contingent resource value

TAG Oil has a field development plan for 20 wells like BED4-T100. Future wells will be drilled laterally at a length of 1,000 metres.

That possibility has independent rating firm RPS predicting that BED-1 has over US$420 million in unrisked contingent resource value.

TAG Oil’s utilization of advanced technologies and its unconventional experience to drive production is not a combination found in many of its peers.

The company’s primary focus remains on producing oil and generating cash flow off bigger, more complex assets. Aside from their current acreage, the company is actively working on increasing their footprint on this play in Egypt, and in the broader Middle East region.

Management has experience building and selling oil and gas companies

TAG Oil is actively on the lookout for acquisitions that can build its portfolio. According to Pierce, TAG Oil’s Executive Chairman “Abby Badwi will be spending about 80 per cent of his time in country and his primary goal will be to work on additional acquisitions.”

It is a position Badwi has been in before. Between 2017 and 2019 he built and then sold Kuwait Energy for US$830 million. As CEO and Chairman of Bankers Petroleum from 2008 to 2016, he grew production and reserves in Albania and sold the company in 2016 for C$790 million.

As founder and chairman of Verano Energy, Badwi completed the sale of the company in 2014 for C$200 million. And finally, as CEO of Rally Energy from 2005 to 2007, he grew production in Egypt and Pakistan and sold the company in 2007 for C$890 million.

Clearly, Badwi is a leader who know how to create value for shareholders.

Multiple share price catalysts on the horizon

Looking ahead, Pierce sees several upcoming potential catalysts for TAG Oil’s share price.

“We will continue to optimize productivity and truck oil produced from the T100 horizontal well. Planning is underway to drill our next ARF well with a full 1,000 metres and we are also proceeding with a workover of BED-1’s existing vertical well to bring it into production within the next six weeks. Additionally, we anticipate announcing an acquisition within the next eight to 12 weeks.”

With a firm plan to establish value and cash flow at BED-1 and to add to its assets in the region, TAG Oil is well-positioned to deliver value in the near future.

To learn more about TAG Oil, visit their website or follow them on social media via X or LinkedIn.