TAG Oil Announces Cardiff Transaction and Provides Update

    VANCOUVER, Oct. 17 /CNW/ - Independent Canadian oil and gas production
and exploration company TAG Oil Ltd. (TSX-V: TAO and OTCBB: TAGOF) announced
today that the Company has signed a letter of intent ("LOI") with New Zealand
based Genesis Energy to sell its 15.1% interest in PEP 38738-D and PMP 38156-D
containing the Cardiff deep gas prospect for a combination of cash and a 1%
royalty on any future production from both permits. The LOI is conditional to
a formal agreement being signed as well as consents required under the joint
venture operating agreement and the Ministry of Economic Development in New
    Garth Johnson, TAG Oil CEO stated, "The Cardiff transaction is the first
transaction resulting from the Company's review of it's prospect portfolio and
the decision was made to sell the interest in Cardiff after considering the
risk profile associated with the project and the possible need to commit
significant additional capital. As a result of TAG's review of Cardiff the
board felt it was prudent to mitigate the financial risk of Cardiff while
still participating in the prospect's upside through a royalty."
    In addition, TAG's primary asset, a 30.5% interest in the Cheal oil
field, is currently producing at approximately 400 barrels of oil per day
gross (TAG net: 122 barrels) as a result of Cheal B production being
temporarily shut-down as part of the planned final construction process of the
permanent B site facilities. This construction is anticipated to be completed
by mid to late December and is expected to increase Cheal production to
approximately 700 barrels of oil per day gross (TAG net: 214 barrels) as well
as significantly reducing production costs at the Cheal B site. In addition
the Cheal A4 well, one of the field's better producers, is currently producing
at a reduced daily rate of approximately 140 barrels of oil per day as a
result of a casing leakage that has occurred in the well. The joint venture is
presently taking steps to resolve this operational issue and is considering a
possible workover with a goal to return the well to full production capability
of approximately 250 barrels of oil per day.
    The Cheal joint venture is also considering plans to drill two additional
wells from the Cheal A site (Cheal A5 and Cheal A6) subject to a review of
drilling costs and consideration of drilling Cheal A5 as a horizontal well to
maximize flow rate and drainage in this proven pool.
    Finally, TAG also announced that after holding discussions with a number
of key advisory firms and after completing an internal review of the Company's
assets, a strategy has been developed, to better position the Company for
future growth. This includes further development of the Cheal and surrounding
acreage and, balancing the financial exposure on exploration prospects through
farm-out while maintaining upside in the event of discovery. "At the current
time, and after establishing relationships with key advisory firms, we decided
that the Company will defer the appointment of an advisor in order to focus
efforts on Cheal, Cardiff and certain other transactions that have recently
become available to the Company." CEO Garth Johnson stated.

    About TAG Oil:

    TAG Oil Ltd. is an independent Canadian oil and gas exploration and
production company with international operations in the Taranaki and East
Coast Basins of New Zealand.

    Forward Looking Statements:

    Statements contained in this news release that are not historical facts
are forward-looking statements that involve various risks and uncertainty
affecting the business of TAG Oil. Actual results may vary materially from the
information provided in this release. As a result there is no representation
by TAG Oil that the actual results realized in the future will be the same in
whole or in part as those presented herein. Actual results may differ
materially from the results predicted, and reported results should not be
considered as an indication of future performance. Factors that could cause
actual results to differ from those contained in the forward-looking
statements, are set forth in, but are not limited to, filings that the Company
and its independent evaluator have made, including the Company's most recent
reports in Canada under National Instrument 51-102 and in the United States
under Forms 20-F and 6K.

    The TSX Venture Exchange has not reviewed and does not accept
    responsibility for the adequacy or accuracy of this release.

For further information:

For further information: Garth Johnson, gje@tagoil.com, (604) 609-3350

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