Tag Forges Ahead with Solid Well Test at Badr

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Disclosure: The following represents my opinions only. I am long TAO.V (Image credit to Inbal Malca on Unsplash)

It’s not easy blazing new paths, but it would appear that good things come to those who wait. After much handwringing by its shareholder base, Tag Oil (TAO.V, last at $0.55) stepped up and delivered the goods this morning. TAO reported a headline test rate of 800 bopd and an implied total fluid rate of 1,140 bpd, with an oil cut that was already at 70% and rising as the BED4-T100 well continues its post-stimulation cleanup phase. Based on what TAO has reported, a total fluid rate of ~1,140 bpd is implied by the news release — and total fluid rate is the key — because as the well cleans up, those frack fluid barrels will be replaced by oil barrels. The reported 800 bopd represents 70% of the total fluid being produced, thus meaning that they were also flowing back about 340 barrels of frack fluid at the time… and the oil cut, and the total oil rate, would be expected to continue to rise (towards the total fluid rate) as the balance of the frack fluid is recovered from the well over the next 2-3 weeks (23% of the frack fluid has been recovered so far during clean up… usually about 50% of the frack fluid is ultimately recovered). After the well is cleaned up, the company will run production tubing into the well +/- artificial lift… changes that could be expected to increase the production rate further towards the 1200-1500 bopd range. The company will host a call to discuss the test results further tomorrow (Friday) morning at 10AM Eastern time.

The reported rate is a natural flow rate… that is, the well is flowing up the well casing to surface — without any pump assistance — and TAO investors can thank the high reservoir pressures in the ARF and its good rock quality for that. As I mentioned, oil cuts will continue to rise as the balance of the completion fluid is recovered. The total fluid rate is key because it is indicative of well productivity per horizontal metre and can be extrapolated to future (i.e., longer) wells. If a 300m-long horizontal section well can flow more than 1,000 bopd, what does a 1000m-long one with three times the frack stages produce? Hmmmm… If you’re thinking something in the 3,000 bopd range, you’d be right. The produced oil is currently being trucked to the nearby central processing facility where it will be treated and sent to the coast. TAO is officially in the unconventional oil business. Now it’s going to scale.

TAO will watch this well for a while longer, probably release more flow test data in a few/several weeks, and get ready for the next well, because it’s game on. The BED4-T100 well may not have been pretty, but it looks like it got the job done — as TAO is actively demonstrating the commerciality of the ARF play in real time. This will have implications for this region of Egypt and obviously has positive implications for TAO. With the first widget punched out of the factory, TAO’s job is will now shift to one focused on replication, scaling, and refinement — which is very different than the proof-of-concept stage that TAO was in before the BED4-T100 well. At least one more well will be drilled in 2024, and I’d expect the company to get more communicative about their future plans while they continue the flowback of this well.

There are over half a billion barrels of oil in place in the ARF just in the area that RPS evaluated in the Badr resource report, and now TAO has the key to unlocking it. With this well test, TAO is the first operator to drill and frack a horizontal well in the Abu Roash F formation (ARF), and they’re making good oil rates out of just a short horizontal leg. In brief, this is what validation looks like in terms of unlocking a new play, and it sets the stage for the development of the Badr ARF project. Congrats to the team that finally got this well done. Well productivity looks good, the oil is being sold, and the company will be gearing up for a new drilling program in the not-too-distant future. This well test will open all kinds of doors for TAO, so it’ll be interesting to see how this all plays out from here. Today is the first day of the rest of the TAO story… there’s lots to be written, but the first chapter went pretty well, even if it did run a little long. Chapter two is coming up…

Happy hunting.