Oil & Gas

TAG Oil1
Share Data
SPECULATIVE BUY
Recommendation SPECULATIVE BUY TAO CN C$5.05
Target C$ 10.00
Shares - (mm, basic/f.d.) 37.6 / 43.6
Target C$10.00
52-week high/low C$5.05 / C$0.80
Market capitalisation 211.5
Net Debt (mm) (8.9)
Enterprise value (mm) 202.7  We are initiating coverage on TAG Oil with a
Total projected return 98% SPECULATIVE BUY recommendation and a C$10.00
Risked NAV C$ 17.59
price target based on of our risked view of the
Unrisked NAV C$ 240.92
Company's activities in the next 12 - 18 months.
P/NAV (Risked) 29%

 TAG Oil’s operations are centered in New Zealand's

Key financials 10A 11E 12E
North Island which includes oil and gas production
Oil and NGLs (b/d) 203 651 1,752
Natural Gas (mmcf/d) 0.0 0.0 0.0
and exploration activities in the Taranaki Basin and
Total (mboe/d) 6:1 0.2 0.7 1.8
exploration in the East Coast Basin. The company's
Equivalent Growth 49% 221% 169%
asset base consists of over 2 mm acres across its
Brent (US$/b) 62.04 79.50 79.50 five permits and production of ~450 boe/d from its
Natural Gas (US$/mcf) 4.83 6.84 6.50 Cheal oil permit.
EPS (f.d.) (0.11) 0.10 0.39
CFPS (f.d.) 0.01 0.15 0.52  TAG Oil has an extensive development work-over
Capex (mm) 2.2 31.0 55.3 program planned on its Cheal permit which includes
Net debt (mm) (8.9) (0.8) 34.9 the optimization of wells, testing of the upper zone
Debt/CF n/a n/a 7.3 and several step-out wells with the aim of increasing
P/CF (x) 440.6 32.4 9.3 production to 1,000b/d by year end and at least
EV/DACF (x) 0.0 35.9 11.7 doubling production in 2011. TAG recently
EV/Reserves (boe 2P) 279.11
announced a new discovery Sidewinder on its
EV/Production (m/boe/d) 955.8
All figures in USD unless otherwise stated
Broadside Permit and is expected to flow test it in the
coming weeks.
TAO-TSE
1.2 C$6.00
 TAG has two independent resource reports
1.0 C$5.00 suggesting that the company has Prospective
Hydrocarbons in Place of 12.65bn boe of
Volume (Millions)

0.8 C$4.00
Closing Price

0.6 C$3.00 unconventional and 1.74bn boe of conventional

resources. This accounts for the bulk of our estimated
0.4 C$2.00
risked NAV of C$17.59. We believe the key for TAG
0.2 C$1.00
is to unlock the potential of its large prospective
0.0 C$0.00 resource base on New Zealand’s East Coast.
Jun-10
Oct-09

Feb-10

Apr-10

Aug-10
Dec-09

Oct-10

Prepared by GMP Securities Europe LLP

Please see important disclosures on the last page of this report.

October 21, 2010 Peter Nicol +44-20-7647 2819 peter.nicol@gmpeurope.com

010-128 Jessica Lindskog +44-20-7647 2826 jessica.lindskog@gmpeurope.com
 October 21, 2010

INVESTMENT SUMMARY
TAG Oil is a junior international oil and gas exploration company with operations in New Zealand.
TAG Oil’s production and exploration operations are centered on New Zealand's North Island
which includes production and exploration activities in the Taranaki Basin and exploration in the
East Coast Basin. The company has over 2 mm acres across its five permits and ~450 boe/d of
production from its Cheal oil permit. TAG Oil aims to increase its production and cash flow from its
Taranaki Basin conventional reserves and resources by drilling horizontal multi-stage frac wells
and to test the potential of its East Coast unconventional plays in 2011. TAG has independently
audited resources of 0.99 mmboe (P+P reserves), Prospective Hydrocarbon in Place Resources
(PHIPR) estimated at 1.736 bnboe unrisked (conventional, Sproule 2008 report), and 12.65 bnboe
unrisked (PHIP) (unconventional – oil shales, AJM Petroleum Consultants 2008 report). TAG is
listed on the Toronto Stock Exchange and trades under the symbol ‘TAO’.

TOP 3 CATALYST EVENTS AND TOP 3 RISKS

Over the next 6-12 months we believe the following events are the most important catalysts for
investors to focus on and are events which could potentially drive valuation levels forward:

 Increasing Production. TAG Oil’s immediate focus is on increasing production and

revenues at its Cheal permit (PMP 38156-S) in the Taranaki Basin in order to fund its
development and exploration programme. Cheal production averaged 294b/d in calendar
Q2 2010 (financial Q1 2011) and aims to exit the year with production over 1,000b/d and
to at-least double production again in 2011. TAG is in the process of commencing drilling
the Cheal BH-1 well, which will be the first horizontal well to be drilled in the Mt.
Messenger Formation in the Cheal field and will be completed with multi-stage fracture
treatment. Using a separate service rig, TAG is also in the process of fracture stimulating
the Cheal B-3 well. TAG is hopeful that it will be able to achieve initial production rates of
300-750b/d from vertical wells and 1,000-1,500b/d from horizontal wells.

 Reserves Growth. TAG Oil recently announced a new oil discovery with its Sidewinder-
1 exploration well on its Broadside exploration permit (PEP 38748) in the Taranaki Basin
to the North of the Cheal Permit. TAG will flow test the discovery after completing the
facture stimulation of the Cheal B-3 well. The Sidewinder well encountered 14 metres of
net oil-bearing sandstones in the Mt Messenger formation with logs indicating excellent
reservoir qualities with average porosities of 22.5% and oil saturation of 60%. In
November, TAG Oil also plans to test the prospectivity of the shallower Urenui
Sandstone, a widespread Miocene-aged formation with the potential to double the
existing Mt Messenger reserves. Prospect sizes in the Taranaki range from 0.5-5mmb
recoverable providing TAG with an opportunity to significantly grow its existing proven
and probable reserve base of 0.99mmboe.

 Prospective Acreage and Billions of Barrels of Oil in Place. TAG Oil has three
exploration permits on New Zealand's East Coast (PEPs 38348, 50940 and 38349). TAG
Oil has confirmed through a cored well that shallow oil and gas is present at shallow
depths on Waitangi Hill (PEP 38438). The oil was geochemically typed to the Waipawa
and Whangai source rocks, which are also believed to offer significant unconventional
shale potential. Independent reports carried out for TAG estimated that P50 undiscovered
Prospective Hydrocarbon in Place Resources (PHIPR) for the unconventional at 12.65bn
boe (AJM report) and the P50 undiscovered (conventional) resource potential at 1.74bn
boe (Sproule). TAG plans to carry out a programme towards the end of 2011 to begin to
see if it can unlock the potential of its unconventional oil shale plays.
 October 21, 2010

In our opinion the top three risks facing the company in the next six months are the following:
 Execution and Production Risk. Cheal provides an opportunity for TAG Oil to grow its
cash flow and help finance its expanding activities. However in order to do so, TAG will
have to demonstrate that fracture stimulation can be used to boost production and that it
can position horizontal wells to maximize recovery and production rates. While the
resources potential is known, reserves were downgraded in 2009 due to a number of dry
holes and thinner than expected pay at the Cheal A-7 well. Reserves were increased in
2010 with success due to fracture stimulation at Cheal A7 and the installation of down
hole heaters and other wax prevention technology in other wells.
 Financing Risk and Delays: TAG Oil is well financed to carry out its activities in the
Taranaki Basin, but will need to lift production in order to move to a position of net cash
generation from these operations. Cash at June 30th was C$25mm, and is sufficient to
carry out its work programme in the Taranaki Basin and to drill 5 stratigraphic wells in the
East Coast Basin. In order to fully test the potential of its unconventional plays, TAG Oil
will need to increase its operating cash flow from the Taranaki Basin or considering
farming out its acreage to another player or raise additional funding.
 Exploration failures and dry holes. There is significant potential for TAG’s acreage,
particularly the large prospective undiscovered resources on the East Coast of New
Zealand. While there is very large potential, TAG still has to prove up the conventional
and unconventional plays. If the company were to have several exploration failures or
inconclusive results in its initial program it could affect its ability to raise capital and/or
farm out its acreage going forward.

COMPANY HISTORY
TAG Oil is a TSX-V listed oil and gas exploration company with a substantial acreage position in
New Zealand holding over 2 mm acres. The company’s shares trade under the symbol “TAO.”
 From 2002 through until 2006 TAG Oil established a presence in New Zealand through its
various stakes in the Taranaki Basin. The company listed on the TSX-V in 2005 and
currently trades under the symbol ‘TAO’. Toward the end of 2006 TAG Oil acquired over
2 mm acres of land in the East Coast Basin.
 In 2007, TAO completed a strategic review and shed non-core assets. In addition, the
company had a report issued by Sproule indicating undiscovered resource potential of
OOIP of ~1.74 bnboe (P50 estimates) on its conventional play.
 In 2008, TAG Oil commissioned the Cheal Production facility and had AJM conduct a
resource potential assessment of OOIP of 12.65 bnboe of unconventional resources (P50
prospective estimates).
 In 2009, the company completed the acquisition of the 69.5% of the Cheal oil field it did
not already own from the receivers of Austral Pacific Energy and also completed its
merger with Trans-Orient Petroleum Ltd.
 In May 2010, TAG Oil completed an equity offering raising C$18.5mm (~US$18mm) net
through the sale of 7.7mm units and 231,000 broker warrants. Each unit consisted of one
share and one half of one common share purchase warrant exercisable at C$3.60 for a
period of 18 months.
 At the end of June 2010, TAG Oil has over 2 mm acres of development/exploration
acreage (100% WI), ~C$25.9mm in cash and no debt and production averaged 294b/d
from the Cheal Oil Pool during the quarter.

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 October 21, 2010

FINANCIAL OUTLOOK AND CATALYSTS

Financial Position
TAG Oil has a March year end and its 2010 financial year ended on March 31st 2010. TAG Oil reported
a March 2010 fiscal year loss of C$2.6mm (C$0.13)/sh. Cash provided by operating activities was
C$184,655 and capex was C$2.3mm. However cash increased during the year from C$7.3mm to
$9.97mm due to the cash assumed (C$4.8mm) on the acquisition of Trans-Orient Petroleum. TAG Oil
acquired Trans-Orient Petroleum for C$6.5mm via the issue of 13.1mm shares priced at C$0.50/sh
thereby acquiring Trans-Orient Petroleum’s 100% working interest in PEP 38348, PEP 34349 and PEP
50940, the 2.2mm net acres of lightly-explored acreage on New Zealand’s East Coast Basin.

In October 2009 TAG increased its interest in the Cheal Permit to 100% through the acquisition of the
remaining 69.5% interest from Austral Pacific Energy for US$2mm in cash and a 25% overriding royalty
on the first 500,000 barrels of shallow oil produced and 7.5% thereafter and certain work commitments
over the next 30 months. Cheal production (100%) averaged 323b/d in fiscal 2010 with TAG’s net
share 185b/d over the year reflecting its 30.5% interest until October 2009 and 100% thereafter.

In May, TAG Oil closed an equity offering, raising net proceeds of C$18.5mm via the sale of 7.7 mm
units @ $2.60/unit and 231,000 broker warrants. Each unit comprised of one common share and one-
half of one common share purchase warrant, which will be exercisable at C$3.60/sh and will entitle the
holder to acquire one common share for a period of 18 months following the closing of the
offering. TAG intends to use the proceeds to fund exploration and development programs in the
onshore portion of the Taranaki Basin and the East Coast Basin and for working capital and general
corporate purposes. As at June 30th/10, TAG Oil had working capital of C$25.7mm, cash and cash
equivalents of $25.9mm and no debt.

Moving forward, TAG expects production from the Cheal Permit to help provide dependable cash flow
and the financial flexibility to fund ongoing operations. Operating costs are around US$22/b and the
field is not expected to pay income tax (30%) before 2015. We estimate netbacks post operating cost
and royalties (~30%) at around US$30.00/b based on a US$80/b WTI ($79b/ Brent) oil price
assumption. We are assuming that calendar 2011 production averages ~1500b/d (the mid point
between the calendar 2010 exit rate of 1,000b/d and the plans to double production in the following
year. On this basis we estimate fiscal 2011 production at ~650b/d and cash flow generation will be
around C$6mm (pre G&A) rising to fiscal 2012 production of ~1750b/d and cash flow generation of
~C$20mm compared to the desired 18 month expenditure budget of close to C$65-70mm. Work
programmes for the next 18 months are still fluid, but if TAG wants to pursue its exploration potential in
the East Coast of New Zealand, we believe it will need to exercise prudent financial management and
look to either secure a farmout partner to carry them for a portion of the development costs or look to
raise additional funds.

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 October 21, 2010

Exhibit 1: TAG Oil's Forecasted Work Program

Date Location Permit Actitivity Cost

2010 $mm
Sep-Oct Cheal (TB) Permit 38156-S Cheal: Frac B3 3.5
Oct/Nov Broadside (TB) Permit 38748 Test Sidewinder 1 discovery 3.5
Nov Cheal (TB) Permit 38156-S Drill Cheal BH-1 horizontal multi-stage frac well 4.0
Dec Cheal (TB) Permit 38156-S Complete Urenui formation production in Cheal-1 well 3.5
2011
Q1 Cheal (TB) Permit 38156-S Drill 3 vertical wells 6.0
Q1 Broadside (TB) Permit 38748 Drill 2 vertical wells 4.0
Q1 East Coast Drill 5 shallow strat wells to depths of 250-500 metres 1.5
TBD Cheal (TB) Permit 38748 Drill 5-10 horizontal multi-stage fracture wells in Taranki 30.0
H2 East Coast Drill 5-10 deeper vertical test well program 17.5 +
73.5
Source: TAG Oil

Catalysts Over the Next 12 Months

Over the next six months we believe the following events are the most important catalysts for
investors to focus on which could potentially drive valuation levels forward:

 Cheal work-overs and increased production: Cheal produced 294b/d on average

during the quarter ended 30th June 2010 and over the next 3-6 months, TAG is planning
simple remediation work and work-overs to boost production towards its 2010 exit goal of
at least 1000b/d with the aim of at least doubling production again in 2011. In May, TAG
completed its first vertical fracture stimulation on the Cheal A7 well by completing a 17-
ton artificial fracture stimulation into the Mt. Messenger Formation. Initial flow testing
increased daily production rates on the Cheal A7 well by ~365% to 292 b/d and
production has stabilised. TAG is in the process of commencing drilling the Cheal BH-1
well, which will be the first horizontal well to be drilled in the Mt. Messenger Formation in
the Cheal field and will be completed with multi-stage fracture treatment. Using a
separate service rig, TAG is also in the process of fracture stimulating the Cheal B-3 well.
TAG is hopeful that it will be able to achieve initial production rates of 300-750b/d from
vertical wells and 1000-1500b/d from horizontal wells.

 Broadside Permit exploration drilling: TAG Oil recently announced a new oil discovery
with its Sidewinder-1 exploration well on its Broadside (formerly Winchester) exploration
permit (PEP 38748) in the Taranaki Basin to the North of the Cheal Permit. The
Sidewinder well encountered 14 metres of net oil-bearing sandstones in the Mt
Messenger formation with logs indicating excellent reservoir qualities with average
porosities of 22.5% and oil saturation of 60%. TAG will flow test the discovery after
completing the facture stimulation of the Cheal B-3 well.

 Shallower Play – Urenui Sandstone: The main producing zone in the Cheal permit is
the Mt. Messenger Miocene play at a depth of ~1800 metres. However overlying this is
the Urenui sandstone, a Mioecene-aged formation, which is well-defined on 3D seismic
and has been present in all the 11 Cheal wells drilled to date. The formation has been
successfully tested in three wells, which have all produced oil and gas with no water. In

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 October 21, 2010

May, as part of its workover of Cheal-1 and A3X TAG Oil commenced the first sustained
production test from the Urenui. In the longer term TAG Oil believes that this formation
has the potential to double the Mt. Messenger reserves.

 Successful oil shale fracturing test: TAG Oil has three exploration permits on New
Zealand's East Coast (PEPs 38348, 50940 and 38349). In March, TAG Oil confirmed
through a cored well that oil and gas is present at shallow depths on Waitangi Hill (PEP
38438). The oil was geochemically typed to the Waipawa and Whangai source rocks,
which are also believed to offer significant unconventional shale potential. Independent
reports carried out for TAG estimated that P50 undiscovered Prospective Hydrocarbon in
Place Resources (PHIPR) for the unconventional at 12.65bn boe (AJM report) and the
P50 undiscovered (conventional) resource (PHIPR) potential at 1.74bn boe (Sproule).
TAG plans to bring a higher specification rig to carry out a 2011 programme to test the
shallower conventional plays as well as to begin to see if it can unlock the potential of its
unconventional oil shale plays.

 Boar Hill (PEP 38439) test: In this ~1.7mm acre exploration permit, there is the potential
for stacked conventional in the Miocene to the Paleocene as well as the unconventional
potential in the Waipawa-Whangai fractured shale system. TAG plans to drill at least one
pilot test well on the Boar Hill structure to test the potential in the next 12 months.

RESERVES AND RESOURCES

Taranaki Basin

TAG Oil holds three permits in the Taranaki Basin, Permit 38156-S, Permit 38156-D and Permit 38748.
The Cheal Field (Permit 38156-S) is situated in the onshore portion of the Taranaki Basin in New
Zealand, is located along the west coast of the North Island. The Taranaki Basin is a proven
hydrocarbon basin of about 25 million acres with ultimate reserves of 7TCF and 600mmb of oil and
condensate. Around 2/3rd of the reserves are believed to lie offshore and the largest discovery is the
giant Maui gasfield (~3.5TCF and 220mmboe) which was discovered in 1969 by a consortium of Royal
Dutch Shell, BP and Todd Petroleum.

Onshore the average field size discovered is estimated to be around 30mmboe with the average well
finding 3.8mmboe with prospects in the range of 0.5-5mmboe. TAG has a 100% working interest in the
7,487 acre petroleum mining permit PMP 38156 containing the Cheal Field which is TAG Oil's only
property with attributed reserves. Cheal has 0.706 mboe of 2P light and medium oil reserves with a
further 281mboe of solution gas (NI51-101 compliant). Oil produced from Cheal is a high-quality, waxy
low-sulfur oil that is sold to Shell at a price linked to Tapis, (which trades at a premium to Brent/WTI)
less a $1.45/b charge. The contract covers sales volumes up to 1,000b/d and is due for renewal on 31
Dec 2011. The Cheal facility, built in 2006 is capable of handling up to 2,000 b/d. There are six
additional development locations and five step-out prospects to test in its prospect inventory currently.
In Sept/10, TAG acquired 100% WI in PMP 38156-D, the permit which contains the Cardiff
gas/condensate discoveries located onshore Taranaki Basin. PMP 38156-D shares the same
permit boundary as TAG’s Petroleum Mining Permit 38156-S and effectively ends the previous
split of the permit and TAG now controls 100% of all prospective formations within PML 38156.
TAG had previously sold its interests in this in 2007 to Genesis Energy for cash and a 1% royalty
in order to reduce capital exposure and to concentrate on the shallower play. TAG has acquired
the permit from the receivers and liquidators of the previous operator and its JV partner the New
Zealand state-owned utility. Gas with rich condensates have been discovered at Cardiff within in
Kapuni zone which encountered 12 m of net pay and flowed over 3 mmcf/d and 100 boe/d. TAG
believes additional resource potential exists in deeper zones where strong gas shows were
encountered over a gross 600 m interval, which TAG will target with future drilling. Access to the

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 October 21, 2010

gas market is relatively straightforward as PEP 38156-D is conveniently situated 3 km from

existing infrastructure owned by TAG, which would provide a tie-in point to the gas network on the
North Island.
TAG also holds 100% working interest in exploration Permit 38748- Broadside (formerly known as
Winchester). The Permit encompasses 7,910 acres and several drillable prospects have been
identified by 3-D seismic modeling, indicating the potential for significant reserve discovery. At the
end of September, TAG announced a new oil discovery with the Sidewinder well which
encountered 14 metres of net oil-bearing sandstones in the Mt Messenger formation with logs
indicating excellent reservoir qualities with average porosities of 22.5% and oil saturation of 60%.
TAG plans to flow test the well immediately after it has completed the fracture stimulation of the
Cheal B-3 well.
East Coast Basin
The East Coast Basin is frontier exploration as only a handful of wells have been drilled to date -
approximately 1 well has been drilled for every 800,000 acres. TAG Oil has three permits in the
East Coast Basin including the Waitangi Hill (Permit 38348), Boar Hill (Permit 38349), and Nick’s
Head (Permit 50940). TAG Oil controls 100% interest in each of the three Permits, which cover
approximately 2.2 million acres, representing the most significant position in the onshore area of
the East Coast Basin. Geotechnical work to date has identified a number of multi-target,
conventional and unconventional prospects at depths between 250 and 2000 m.
In terms of conventional opportunities, at least 50 conventional prospects and leads have been
identified across the acreage with a number of large prospects including the Boar Hill, Pauariki,
KawaKawa, and the Arakihi Anticline prospects directly overlying primary unconventional
prospects. In 2007 Trans-Orient Petroleum commissioned Sproule International Ltd. to carry out a
technical assessment of the undiscovered in-place hydrocarbon resources associated with PEPs
38348 and 38349). Sproule did not assign any proved, probable or possible reserves to these two
holdings but estimated the “Undiscovered Resources” as defined in the Canadian Oil and Gas
Evaluation (COGE) handbook. Sproule estimated the undiscovered conventional resource
potential in TAG Oil's permits to be approximately 1.7 bnboe.

Exhibit 2: Undiscovered in Place Hydrocarbon Resources BOE (mmb)

Area Low Estimate Best Estimate High Estimate

PEP 38348 615 1002 1773
PEP 38349 601 710 866
Total* 1316 1736 2513
Source: Sproule Report (Trans-Orient Petroleum)
* Note: the total reported is the sum of all probabilistic cases and will not equal the arithmetic sum of the individual zone or
play type due to the effects of statistical aggregation.

With regard to unconventional resources, the bulk of the stock's upside potential resides in TAG's
ability to unlock its shale oil resources. TAG obtained its shale assets through its acquisition of
Trans-Orient Petroleum in September 2009. The Trans-Orient Petroleum acquisition exposed TAG
to high-impact, under-explored frontier acreage located in the onshore East Coast Basin of New
Zealand. Trans-Orient's 2.2 mm acre exploration permits encompass a portfolio of high-impact
conventional prospects such as Waitangi Hill and unconventional opportunities such as Boar Hill.
TAG Oil hopes to leverage North American technology to target fractured oil shale source-rock
formations that have many similarities to successful developments such as the Bakken Shale in
Canada and the United States.

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 October 21, 2010

In 2008 Trans-Orient Petroleum commissioned AJM Petroleum Consultants to conduct a technical

assessment of the undiscovered in-place hydrocarbon resources associate with two onshore PEP
blocks, 38348 and 38349, located in the East Coast Basin. AJM estimated prospective resources
based on a review of the well log data and core pyrolysis results (thermo-chemical analysis of the
composition of the cores). Using probabilistic methods AJM used estimates for the areal extent,
pay and other parameters to estimate a low case, best estimate and high case for the prospective
hydrocarbons in place. As no commercial discoveries have been made on either block, AJM has
not assigned 1P, 2P, or 3P reserves. AJM’s best estimate for the prospective hydrocarbons in
place resource estimate was 12.6bn boe. The table below outlines AJM’s low, best and high
estimates for Prospective Hydrocarbons in Place Resource Estimates.

Exhibit 3: Prospective Hydrocarbon-in-Place Resource Estimate (mmb)

Shale Low Estimate Best Estimate High Estimate
Waipawa Black 1609 5208 16852
Whangai 2412 7446 22984
Total* 4022 12655 39836
Source: AJM Report (Trans-Orient Petroleum)
* Note: the total reported is the sum of all probabilistic cases and will not equal the arithmetic sum of the individual zone or play type due to the
effects of statistical aggregation.

METHODOLOGY AND ASSUMPTIONS

In valuing our international E&P universe, we use a standard set of assumptions. A 10% discount
rate reflects our broad views on the cost of capital for the group as a whole. There are a number
of other risks that must be recognized and incorporated into our valuation of individual companies,
projects, regions and ultimately, our NAV. We believe that one number (the discount rate) cannot
capture every nuance of risk so we apply an additional risking to each prospect and/or project on
an individual basis which is captured in our EMV tables that formulate our NAV.
Our current oil price assumptions are US$78.00 WTI (US$77.50/b Brent) for 2010, US$80.00 WTI
(US$79.50, Brent) for 2011 and US$85.00/b WTI (US$84.00/b Brent) long-term flat for 2012 and
beyond (Exhibit 4). For natural gas prices, New Zealand has an extensive gas market with over
50% of consumption used in Electricity Generation. Industrial and Commercial markets account for
a further 26% and Methanol production (Methanex) for 16%. The remaining 8% is split almost
equally between Residential markets and Ammonia/Urea use. Current New Zealand gas prices are
around US $6.50-$7.00/mcf and we have assumed that prices trade on a similar energy content
multiple (12:1) with oil prices.

Exhibit 4: Oil Price Assumptions

2010E 2011E Long Term
WTI (US$) $78.00 $80.00 $85.00
Brent (US$) $77.50 $79.50 $84.00
New Zealand Gas ($US/mmbtu) $6.46 $6.63 $7.00
NYMEX Gas (US$/mmbtu) $4.40 $4.75 $6.00
FX Rate (US$/CAN) $0.9615 $0.9500 $0.9500
FX Rate (US$/£) $1.5500 $1.5500 $1.5500
FX Rate (US$/EURO) $1.3700 $1.3700 $1.3700
FX Rate (US$/A$) $0.8800 $0.8800 $0.8800
Source: GMP Estimates

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 October 21, 2010

Our valuation approach is to calculate a core asset value for the company based predominately on
its known 2P reserves and 2C contingent resources (using the PRMS reserve and resource
definitions) and where the 2C resources are actively moving towards commercialization and
adjusted for its net cash or debt position. We have built an economic model to estimate the NPV of
the full field developments using known parameters where possible. Where these are not
available, developments have been modeled based on analogous fields. We use fully diluted
share capital taking into account potential options or warrants and include two years of G&A spend
to capture the ongoing cost of running the company in the absence of additional funding.
We identify the potential upside for each company and classify this as our estimated Risked Net
Asset Value. This includes any resources that the company has and the potential for reserves
upside. We have used a risked expected monetary value approach in estimating a potential value
of each of the company’s exploration portfolios. In some instances it has been assumed that
companies will farm down their interests. Thus, we have calculated our risked NAV based on the
view of what the company’s likely remaining net interest will be and have credited the company
with the associated reduction in drilling costs. This approach may undervalue the companies’
exploration portfolios, but we believe it is more realistic and reflects the likely risk mitigation that
each company’s management will carry out.

VALUATION/ESTIMATES
Independent third party reserves engineers have provided large resource numbers across TAG
Oil’s acreage. We have chosen to risk these numbers aggressively based on our view of recovery
factors. Even when applying conservative recovery factors (5% for the unconventional oil shales &
conventional oil targets) we have calculated large potential resource estimates. We have further
risked the plays aggressively which highlights the prospectivity of the acreage.
We estimate that TAG has a core NAV of C$0.97/sh consisting of its P50 Cheal producing
reserves (C$0.24/sh) and its current cash (C$0.59/sh) plus we have included 0.5mmb as
undeveloped assets for the recent Sidewinder discovery, which should be flow-tested imminently.
Our risked value per share of TAG is C$17.59/sh and our unrisked value per share is worth over
~C$240/sh if TAG can unlock the potential of its unconventional oil shale plays.

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 October 21, 2010

Exhibit 5: TAG Oil's Risked Net Asset

TAG Oil
Current
Gross Net Risked Risked Unrisked
Resource Working Costs Well Costs Overall Value/BOE Resources NAV (US$ US$/sh C$/sh NAV
Country Property/Prospect (mmboe) Int. (%) (%) (US$ mm) COS (%) (US$) (mmboe) mm) (FD) (FD) (C$/sh)
Producing Assets
New Zealand Cheal Oil Pool P38156-S 0.5 30.5% $24.76 0.2 4.0 0.09 0.10
New Zealand Cheal Oil Pool P38156-S (Austral) 0.5 69.5% $16.75 0.4 6.2 0.14 0.15
0.5 10.2 0.24
Undeveloped Assets
New Zealand P 38748 Sidewinder 0.5 100% 100% 2 70% $21.30 0.5 10.7 0.24 0.24 0.22
0.5 10.7 0.24
Risked Upside
New Zealand Cheal Oil Upside P38156-S (5 Hzntls) 5.0 100% 100% 15 40% $17.61 2.0 42.6 0.98 1.02 1.74
New Zealand Cheal Oil Upside P38156-S (3 Verticals) 1.7 100% 100% 6 40% $17.61 0.7 14.5 0.33 0.35 0.58
New Zealand Cheal Oil Optimisaton P38156-S 1.0 100% 100% 6 40% $17.61 0.4 8.5 0.20 0.20 0.31
New Zealand Broadside P38748 (5 Hzntls) 5.0 100% 100% 15 40% $17.61 2.0 42.6 0.98 1.02 1.74
New Zealand Broadside P38748 (2 Verticals) 1.2 100% 100% 6 40% $17.61 0.5 10.2 0.23 0.24 0.39
New Zealand Urenui formation 5.0 100% 100% 4 30% $16.00 1.5 32.0 0.73 0.76 1.70
New Zealand Cardiff gas/condensate Prospects 5.0 100% 100% 4 30% $6.62 1.5 13.2 0.30 0.32 0.67
New Zealand East Coast 38348 3 Strat wells na 100% 100% 3
New Zealand East Coast 38349 1 Strat wells na 100% 100% 1
New Zealand Waitangi Hill Prospective Resources 50.1 100% 100% 10 10% $16.00 5.0 71.2 1.63 1.70 19.14
New Zealand Boar Hill Prospective Resources 35.5 100% 100% 10 10% $16.00 3.6 47.8 1.10 1.14 13.56
New Zealand Waipawa Black Shale Unconventional 260.4 100% 100% 10 5% $13.23 13.0 162.7 3.74 3.88 82.23
New Zealand Whangai Shale Unconventional Res 372.3 100% 100% 10 5% $13.23 18.6 236.7 5.43 5.65 117.57
48.8 682.1 16.28

Gross Resources Total 743.8 49.8 702.9 16.13 16.76 239.87

Fully Diluted Shares O/S (mm) 43.6

CDN/USD 0.96
Notes
Estimates of Reserves and Resources are provided by third party engineering firms, management and GMP securities
Overall COS = Chance of success after taking all risks into consideration including geological risk, political risk, etc
Value/BOE is calculated from a field model in the specific fiscal regime of the host country after government take, all capex and costs have been removed, and the time value of money is applied
Risked NAV is equivalent to Expected Monetary Value (EMV). Risked NAV = (Reward*C.o.S.) - [Capital at Risk*(1-C.o.S.)]
Fully diluted shares outstanding = shares at period end + options + all dilutive securities
Cost % = the difference (if any) in costs paid versus working interest. Of relevance when farm-outs or farm-ins occur
Our estimated Recovery Factors: 15% for Cheal Oil Upside, 5% RF for Waitangi Hill and Boar Hill prospective resource estimates and 5% RF for unconventional shale resources

Source: TAG Oil, GMP Estimates

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 October 21, 2010

Exhibit 6: TAG Oil's Net Asset Value

Net Asset Value Breakdown

MMBOE US$/BOE US$ mm C$/sh

Production Assets 0.5 19.19 10.2 0.24

Cash/(Net Debt) 24.7 0.59
Undeveloped Assets 0.5 21.30 10.7 0.24
Other Items incl G&A (4.2) (0.10)
Core NAV 1.0 40.18 41 0.97
Price to NAV (%) 521%

Option Proceeds 13.4 0.32

Risked Upside 48.8 13.99 682.1 16.28
Risked NAV 49.8 14.80 737 C$ 17.59
Price to Risked NAV (%) 29%

Current Stock Prices C$ 5.05

Unrisked C$ 240.92
Notes
Reserves evaluated by Sproule & AJM as of December 31st, 2008.
Long term Brent flat price is US$84.00
All asset values are NPV10 After Tax and in USD unless noted.
Two years of G&A are deducted to ensure 'going concern' costs are captured.
Source: TAG Oil, GMP Estimates

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 October 21, 2010

Exhibit 7: TAG Oil Target Price

Target Price Calculation

TAG Oil C$/sh

Production Assets 0.24

Cash/(Net Debt) 0.59
Undeveloped Assets 0.24
Other Items incl G&A (0.10)
Core NAV 0.97

Risked Upside - Included from EMV Sheet

Cheal Oil Upside P38156-S (5 Hzntls) 1.02
Cheal Oil Upside P38156-S (3 Verticals) 0.35
Cheal Oil Optimisaton P38156-S 0.20
Broadside P38748 (5 Hzntls) 1.02
Broadside P38748 (2 Verticals) 0.24
Urenui formation 0.76
Cardiff gas/condensate Prospects 0.32
East Coast 38348 3 Strat wells 0.00
East Coast 38349 1 Strat wells 0.00
Waitangi Hill Prospective Resources 1.70
Boar Hill Prospective Resources 1.14
Waipawa Black Shale Unconventional risked at 20% 0.78
Whangai Shale Unconventional risked at 20% 1.13

Option Proceeds 0.32

Sum of Parts 9.94
TARGET PRICE 10.00

Share Price 5.05

Expected Return 98.0%
Exchange Rate (CAD:USD) 0.96
Source: TAG Oil, GMP Estimates

We have based our valuation of TAG Oil on its risked NAV and our view of the company’s
exploration portfolio. We are setting our 12 month price target of C$10.00 based on the
company’s core NAV and the risked value of the company's activity over the next 12-18 months
(Exhibit 7). We have based our price target on TAG Oil’s planned activities in the Taranaki Basin
and we have included the risked value of the two East Coast shale plays which we have further
risked by 80% to a 20% chance of success on the first wells. We have included this to reflect the
potential value from the drilling of a well to test the properties of the unconventional plays. With an
expected return of 98% we are initiating with a SPECULATIVE BUY recommendation on TAG Oil
based on its high impact exploration portfolio and its funded upcoming drilling program.

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 October 21, 2010

ASSET OVERVIEW
New Zealand
TAG Oil’s operations are centered on New Zealand's North Island which includes oil and gas
production and exploration activities in the Taranaki Basin and exploration in the East Coast Basin.
The company has over 2 mm acres of acreage across its five permits and production of 294 boe/d
from its Cheal oil permit in the quarter to June 30th. New Zealand's fiscal terms are attractive and
Cheal oil is sold at a premium to WTI and Brent prices. New Zealand’s North Island has a well-
developed natural gas market and with its main producing gas field (Maui) in decline there is a
ready potential market for natural gas.
Most of the exploration attention in New Zealand has been focused around the Taranaki Basin.
The Taranaki Basin is a proven hydrocarbon basin of about 25 million acres (100,000 sq km) with
ultimate reserves of 7TCF and 600mmb of oil and condensate. Around 2/3rd of the reserves are
believed to lie offshore and the largest discovery is the giant Maui gasfield (~3.5TCF and
220mmboe) which was discovered in 1969 by a consortium of Royal Dutch Shell, BP and Todd
Petroleum.
Many basins in New Zealand exhibit significant oil and gas seeps, and exploration data reveals
multiple structures with hydrocarbon potential. Encouraging discoveries have also been made in
the offshore Canterbury and Great South Basins where ExxonMobil and Origin Energy are
exploring.
New Zealand operates under a royalty regime system whereby the government take comprises of
royalty and income tax, with varying rates which depend on the time the licence was issued. TAG
pays a 5% ad valorem on oil and 1% on natural gas, and a minimum of 15% APR (Accounting
Profits Royalty) for its Cheal property for the first $250 mm in revenue and 20% thereafter.
Exploration costs can be full expensed in the year they are incurred; while capital costs are
depreciated over 7 years on a straight line basis. Any costs incurred in New Zealand until
December 31, 2009 are deductible for the purposes of calculating the APR. TAG can deduct all
exploration and operating costs from anywhere in New Zealand, including the East Coast Basin
exploration, and carry-forward those losses. After the APR, the corporate tax rate of 30% is levied.
Subsequent to December 31, 2009, all new discoveries fall under the new royalty regime where
there is a 5% royalty and 20% APR. Under this regime, costs are only deductible against the APR
if they were incurred within the area of the mining permit and preceding exploration permit. New
Zealand’s corporate tax rate is 30% and TAG can deduct all exploration and operating costs from
anywhere in New Zealand, including the East Coast Basin exploration, and carry-forward those
losses. For a generic 10mmb field we estimate a NPV of ~$21.30/b. For Cheal, we calculate two
values for the existing 1mmb of reserves as the recently acquired 69.5% is subject to an overriding
royalty (Cheal Acquisition Royalty) of 25% on the first 0.5mmboe and 7.5% thereafter. We have
also taken into account Management’s view that the field will not be subject to income tax until
2015 and have estimated a value of $24.75/b for Cheal and $16.75/b for those barrels subject to
the Cheal Acquisition Royalty.

The Taranaki Basin

The Taranaki Basin is an emerging oil, gas and condensate province located on the North Island
of New Zealand. The Basin remains under-explored compared to many comparable rift complex
basins of its size and potential. Although the Taranaki Basin covers an area of about 100,000 sq.
km., only 175 wildcats have been drilled since 1955. To date, proven oil reserves of 600 mmboe
and proven gas reserves of 7.0 tcf have been discovered. Current production is ~ 400 mmcf/d of

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 October 21, 2010

gas and ~ 54mb/d of oil. The bulk of production comes from the Miocene reservoirs although
potential exists in the Oligocene and Eocene Strata.

Exhibit 8: Taranaki Basin Permits

Source: TAG Oil

TAG Oil has three permits in the Taranaki Basin including:

Permit 38156-S (contains the Cheal Discovery): TAG has 100% working interest in this 7,487
acre petroleum mining permit with 0.7 mmboe of P+P light and medium oil reserves assigned to
the Cheal oil pool (NI51-101 compliant) and a further 0.3mmboe of solution gas. Production
averaged 294b/d in the quarter to June 30th. Oil produced from Cheal is a high-quality, waxy low-
sulfur oil that sells at a premium to Brent and WTI. The Cheal facility, built in 2006 is capable of
handling up to 2000 b/d. There are six additional development locations and five step-out
prospects to test in inventory currently.

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 October 21, 2010

Exhibit 9: Cheal Discovery Permits

Source: TAG Oil

PEP 38156-D: In Sept/10, TAG acquired 100% WI in PEP 38156-D, the permit which contains the
Cardiff gas/condensate discoveries located onshore Taranaki Basin. TAG acquired exposure to
the permit from the previous operator 's receivers and liquidators and the New Zealand state-
owned utility, TAG's JV partner. Previous drilling has discovered gas with rich condensates at
Cardiff within the Kapuni zone which encountered 12 m of net pay and flowed over 3 mmcf/d and
100 boe/d. TAG believes additional resource potential exists in deeper zones where strong gas
shows were encountered over a gross 600 m interval, which will be targeted with future drilling.
PEP 38156-D is conveniently situated 3 km from existing infrastructure owned by TAG.
Following the acquisition of PEP 38156-D, the deep and shallow permits have been reunited as
one permit, residing within the same boundary as TAG’s Petroleum Mining Permit 38156-S, where
TAG is currently producing oil and gas and developing discoveries in shallower formations. This
acquisition effectively ends the previous split of the permit and TAG now controls 100% of all
prospective formations within Petroleum Mining License 38156.

Permit 38748: TAG has 100% working interest in this 7,910 acre petroleum exploration permit
“Broadside Permit”(formerly the Winchester Permit). A number of drillable prospects have been
identified by 3-D seismic modeling, indicating the potential for significant reserve discovery. This
permit is surrounded by producing fields, and is located within the central Mt. Messenger Pool
fairway. A 3-D defined Miocene aged prospect directly correlates to the largest Miocene pool in
Taranaki, the Ngatoro pool. At the end of September, TAG Oil announced a new oil discovery with
its Sidewinder-1 exploration well. The Sidewinder well encountered 14 metres of net oil-bearing
sandstones in the Mt Messenger formation with logs indicating excellent reservoir qualities with
average porosities of 22.5% and oil saturation of 60%. TAG will flow test the discovery after
completing the facture stimulation of the Cheal B-3 well.

East Coast Basin

The East Coast Basin is a Cretaceous-Cenozoic fore-arc basin situated across the Australian-
Pacific plate margin. Basins of this type can be prolific producers of oil and gas, as in Indonesia,

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 October 21, 2010

California and other active plate margins worldwide. There are very few wells drilled in the East
Coast Basin (one well per 800,000 acres), but the majority of these had significant oil and gas
shows, including two of the offshore wells. One onshore gas discovery, with flow rates of up to 12
mmcf/d is now under appraisal in the neighboring acreage. TAG Oil controls 100% interest in
approximately 2.2 million acres representing the most significant position in the onshore area of
the East Coast Basin. Geotechnical work to date has identified a number of multi-target,
conventional and unconventional prospects at depths between 250 and 2000 m.

Exhibit 10: East Coast Basin Permits

Source: TAG Oil

Conventional Opportunities
Conventional reservoir targets include Miocene - Oligocene aged turbidite sandstones with
porosities up to 30% or more, and fractured carbonate reservoirs that can be highly over-
pressured. At least 50 conventional prospects and leads have been identified across the acreage
with a number of large prospects like the Boar Hill, Pauariki, KawaKawa, and the Arakihi Anticline
prospects directly overlying primary unconventional prospects. Sproule International Ltd.
estimates the undiscovered conventional resource potential in TAG Oil's permits to be in excess of
1.7 bnboe.
Unconventional Opportunities
Unconventional prospects are widespread across the acreage and exist in the late Cretaceous to
Paleocene-aged Waipawa Black Shale and Whangai Shale source rock formations. Recent field
and subsurface core studies have confirmed these source rocks are not only rich in Total Organic
Carbon (TOC %), but they are also heavily fractured in many locations, which is a key factor in

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 October 21, 2010

successful fractured oil shale production. Many of the active oil and gas seeps situated within
TAG’s East Coast Permits have been geochemically tied to these underlying source rocks.
TAG Oil has three permits in the East Coast Basin including:
Waitangi Hill (Permit 38348): TAG has 100% working interest in this 530k acre petroleum
exploration permit. Underlain by the Waipawa Black Shale and Whangai Shale Formation source
rocks the block contains an unconventional fractured oil-shale opportunity as well as a shallower
potential oil development. Drilling in the early part of last century reported ongoing production of
high quality (50 degree API) crude oil from a depth of approximately 200m. TAG Oil recently
reported that its Waitangi Hill #2 well had experienced a strong ‘oil-wet’ gas kick combined with
significant pressures. The well was suspended at 179m with cored sandstone reservoir streaming
free oil. There are several follow-up development locations and step-out prospects to test in
inventory currently when a suitable rig is found.

Exhibit 11: East Coast Basin Permits

Source: TAG Oil

Boar Hill (Permit 38349): TAG has 100% working interest in this~1.633 mm acre petroleum
exploration permit. Work to date has identified a number of multi-target conventional and
unconventional prospects at depths between 250 and 2000 m. At least 20 conventional prospects
and leads have been identified across the acreage with a number of prospects now drill-ready.
TAG Oil's initial focus is the Boar Hill structure which has a series of modern 2D seismic lines over
the Boar Hill structure, confirming sub-surface correlation to earlier NZGS surface mapping. In
October of 2009, TAG Oil completed a 487m stratigraphic well, drilling through the Miocene
section and set casing in the Oligocene aged Weber Formation. The shallow section of the well

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 October 21, 2010

provided encouraging preliminary data and progressively more oil-rich readings as the well
penetrated the Oligocene strata. Planning is now underway for the main Boar Hill-1 well to fully
penetrate the underlying Waipawa Black Shale and Whangai Formation fractured oil-shale source-
rocks at an anticipated depth of 1600 m.

Exhibit 12: Boar Hill Prospect Map

Source: TAG Oil

Nick’s Head (Permit 50940): TAG has 100% working interest in this 112k acre petroleum
exploration permit located in the northern oil-prone area of the East Coast Basin with several oil
and gas seeps evident. The relatively unexplored area has potential for both large conventional
Miocene prospects and widespread unconventional fractured oil-shale opportunities in the rich
Waipawa Black Shale Formation and the 300-500m thick Whangai Shale Formation.

CONCLUSIONS AND RECOMMENDATION

We are initiating coverage on TAG Oil with a SPECULATIVE BUY recommendation and a
C$10.00/sh price based on of our risked view that the value of the Company's top prospects. We
like the prospectivity of New Zealand. After its recent capital raise, TAG Oil has sufficient capital
require to execute its proposed work program in the Taranaki Basin and to drill a number of strat
wells on its East Coast acreage over the next 12-18 months. However if it is to fully-test the
potential of its unconventional acreage on the East Coast with a major drilling program, it will need
to boost its operational cash flow from its Taranaki assets, consider farming out its acreage or look
to raise additional funds. We estimate that the company has a Core NAV of C$0.97/sh consisting
primarily of its cash position but has an attractive portfolio with significant potential and we
estimate TAG’s risked NAV at C$17.59/sh at this point in time. We believe TAG offers investors
exposure to a well diversified portfolio of cash flow generating producing assets and to the upside
of frontier exploration.

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 October 21, 2010

FINANCIAL SUMMARY

TAG Oil
Analyst: Peter Nicol +44 20 7647 2819 Associate: Jessica Lindskog +44 20 7647 2826
March 31st year end
Recommendation SPECULATIVE BUY Current price C$ 5.05
12-month target price C$ 10.00 Total projected return 98%
October 21, 2010
(In US$ unless otherwise stated)
Share Information Market Multiples 2011E 2012E
Market cap ($mm) $212 Discretionary cash flow multiple 32.4x 9.3x
Shares O/S – basic (mm) 37.6 Debt-adjusted multiple 35.9x 11.7x
Shares O/S – float (mm) 29.6 Earnings multiple 47.4x 12.1x
Shares O/S – f.d. (mm) 43.6 Target multiple 64.2x 18.5x
52-week range C$ 0.80 C$ 4.99 Debt-adjusted target multiple 77.6x 21.4x

Valuation Net Income 2010A 2011E 2012E

Net asset value C$ 17.59 Net income ($mm) ($2.5) $3.6 $14.5
Price/NAV 29% EPS (basic) ($0.11) $0.10 $0.39
Enterprise value ($mm) $194 EPS (f.d.) ($0.11) $0.10 $0.39
EV/2010 production (boe/d) $956
EV/P+P reserves ($/boe) $279.11 Cash Flow 2010A 2011E 2012E
Return on equity (%) (17.8%) 13.2% 32.2% Cash flow ($mm) $0.2 $5.5 $19.6
Return on capital employed (%) (18.3%) 12.9% 23.2% CFPS (basic) $0.01 $0.15 $0.52
CFPS (f.d.) $0.01 $0.15 $0.52
Oil & Liquids Production (b/d) 2010A 2011E 2012E
First quarter 111 294 1,375 Capital Expenditures & Debt 2010A 2011E 2012E
Second quarter 106 450 1,625 Capital expenditures ($mm) $2.2 $31.0 $55.3
Third quarter 317 725 1,875 *Year-end net debt ($mm) ($8.9) ($0.8) $34.9
Fourth quarter 274 1,125 2,125 Year-end net debt/cash flow n/a n/a $7.3
Annual 203 651 1,752 *Excl. Unrealized Fin. Derivatives

Natural Gas Production (mmcf/d) 2010A 2011E 2012E Commodity Prices 2009A 2010E 2012E
First quarter 0.0 0.0 0.0 Brent (US$/bbl) $62.04 $79.50 $79.50
Second quarter 0.0 0.0 0.0 UK North Sea Gas (US$/mmbtu) $4.83 $6.84 $6.50
Third quarter 0.0 0.0 0.0
Fourth quarter 0.0 0.0 0.0 Netbacks ($/boe) 2010A 2011E 2012E
Annual 0.0 0.0 0.0 Revenue $84.85 $76.44 $80.77
Net royalties ($24.38) ($22.67) ($23.96)
Total Production (boe/d) - 6:1 2010A 2011E 2012E Operating costs ($21.51) ($22.77) ($22.77)
First quarter 111 294 1,375 Operating netback $38.96 $30.99 $34.04
Second quarter 106 450 1,625 Cash flow netback $12.76 $22.12 $30.59
Third quarter 317 725 1,875
Fourth quarter 274 1,125 Management Team Prior Companies
Annual 203 651 1,752 Garth Johnson Trans Orient
% crude oil & liquids 100% 100% 100% Drew Cadenhead Ulster Petroleum
Production growth 49% 221% 169% Blair Johnson Bridge Petroleum

Reserves - 6:1 (at March 1, 2010) Reserve Engineer Total Debt Capacity
Equivalent reserves (mmboe) Oil Gas Total Sproule & AJM n/a
Proved 0.3 0.0 0.31 Auditor
Proved + probable 0.65 0.04 0.69 De Visser Gray LLP
% Proved producing 0% 0% 0%
% Proved 0% 0% 0% TAO-TSE
% Crude oil & liquids 0% 1.2 C$6.00
Reserve life – P+P (yrs) n/a n/a n/a 1.0 C$5.00
Finding Costs - including future development capital 1 Year 3 Year
Volume (Millions)

Proved F&D costs ($/boe) n/a n/a 0.8 C$4.00

Closing Price

P+P F&D costs ($/boe) n/a n/a

Proved + Probable replacement ratio n/a n/a 0.6 C$3.00

0.4 C$2.00
Comments
TAG Oil is a Canadian-based oil and gas exploration and production 0.2 C$1.00
company focused on exploration and development in New Zealand.
TAG Oil’s operations are centered in the North Island which includes oil 0.0 C$0.00
Oct-09

Dec-09

Feb-10

Apr-10

Jun-10

Aug-10

Oct-10

and gas production and exploration activities in the Taranaki Basin and
exploration in the East Coast Basin.

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 October 21, 2010

MANAGEMENT
Garth Johnson, Chief Executive Officer and Director. Mr. Johnson is a CGA and hands-on
business executive who has extensive experience in accounting, corporate finance, and
managing, reporting and legal matters pertaining to the oil and gas industry. He has been directly
involved in oil and gas activities, primarily in New Zealand and PNG, over the past 14 years and
has been involved in a number of international companies from start-up to listing on the TSX and
AMEX exchanges.
Drew Cadenhead, Chief Operating Officer. Mr. Cadenhead worked in the Western Canadian
Sedimentary Basin with 24 years based in Calgary. Thirteen of those years were with Canadian
Hunter Exploration. He also worked in various leadership capacities for a number of other
Canadian-based companies including Ulster Petroleum, Selkirk Energy and Summit Resources.
Mr. Cadenhead gained his New Zealand experience with Fletcher Challenge Energy Taranaki,
before joining TAG Oil in 2003.
Blair Johnson, Chief Financial Officer. Mr. Johnson has worked with the Company for the last
four years. His responsibilities have included corporate governance and accounting functions for
TAG’s New Zealand subsidiaries. He is a member of the CIMA (UK), and a member of the Institute
of Chartered Accountants of New Zealand. Prior to joining TAG, Mr. Johnson was Finance Director
for Bridge Petroleum Limited (NZ).
Alex Guidi, Non-Executive Director. Mr. Guidi is highly experienced international oil and gas
entrepreneur and the founder of TAG Oil. Mr. Guidi has founded and led a number of successful
Canadian-based growth companies. Mr. Guidi has also led the funding, development and growth
strategy of several companies that pioneered exploration onshore and offshore in Australasia and
China throughout the early 1990s to the present.
John Vaccaro, Non-Executive Director. Mr. Vaccaro has over 20 years of experience in the
financial services industry. Until 2006 he was a senior investment executive with major
international brokerage firms, where he directed and provided investment consulting to high net
worth individuals as well as corporate and institutional clients. Since 2006, Mr. Vaccaro has
established a private client consulting practice in the financial services sector.
Ronald Bertuzzi, Non-Executive Director. Mr. Bertuzzi has more than 20 years of executive,
board and committee experience with US and Canadian junior listed companies focused primarily
in the oil and gas industry doing business in Australasia. Ron’s experience covers various stages
of company development beginning with initial start-up and initial public offerings, acquiring and
exploring significant exploration acreages and ending in discovery, facility development and
commercial production of oil and gas.
Michael Hart, Non-Executive Director. Mr. Hart is currently the President and a director of AMG
Oil Ltd., and the Corporate Secretary and a director of Entourage Mining Ltd. His previous
experience involves working in the financial markets with a number of financial institutions where
he acted as an account executive and financial consultant. Since 1995, Mr. Hart has worked with
an investment-banking group responsible for taking projects from start up to the public markets.

RISKS
Beyond the typical risks associated with commodity price and US dollar exchange risks, there are
several factors that might affect a company exploring for and/or producing oil and gas in the
international arena (outside North America), including:

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 October 21, 2010

 Geologic and engineering risks associated with the finding and ultimate recovery of oil
and gas reserves in the quantities estimated which in turn determine the company’s
value.

 Dry holes during the exploration phase can severely limit not only the company’s current
prospects but also their ability to leverage into new ventures and/or their ability to access
additional capital.

 Ability to secure drilling and completion services in a timely manner and/or at a

competitive rate.

 Capital and operating cost inflation which can erode the economics of a project,
potentially reducing the return to shareholders.
 Current conditions of capital markets may have a material impact on the company’s ability
to move forward if financing is needed. High levels of debt financing through project
financing are a standard method of financing development projects and ability to access
debt markets and the macro assumptions used by the finance providers can have a
material impact on a company’s ability to move forward, realise value and/or face
potential equity dilution and/or realise full value through an industry sale process.

 Sector rotation risk and market movements and the funds flow associated with
reallocation of capital. Additionally, liquidity risk can affect all companies especially
during aggressive market movements.

 Loss of key employees is a major concern for all E&Ps as the specific skill sets required
for individual positions can make the recruiting and retaining of select individuals difficult.

 Changes to existing oil and gas fiscal regimes could defer foreign investment, increase
government take and reduce the company’s net asset value attributable to a specific
project.

 Infrastructure risk and access to infrastructure can be a potential risk. This can lead to
delays in the sale of energy products to international and local markets and can increase
operating costs (such as when trucking is used, for example).

 Geopolitical and security risks are an issue in many countries and can disrupt operations
and activities for a considerable length of time or, in extreme situations, result in the loss
of property and assets.

 While in most instances international oil prices are closely correlated, ability to access
international markets may impact crude oil realizations in some jurisdictions. International
gas prices are determined by a number of factors including inter-alia, different linkages
(time lags and energy ratios) to crude oil prices, other competing fuels, coal and electricity
and potential requirements to supply local markets at rates well below international price
levels. Ability to commercialize gas reserves to a ready market can have a significant
impact on potential valuations.

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 October 21, 2010

GMP Securities Europe LLP (“GMP”) is authorised by the Financial Services Authority and is a member of the London Stock Exchange.

Company disclosures
1 GMP or any of its group affiliated companies has, within the previous 12 months, provided paid investment banking services or acted as
underwriter to the issuer.
2 GMP or any of its group affiliated companies is a market maker for the securities of the issuer.
3 non-voting
4 subordinate-voting
5 restricted-voting
6 multiple-voting
7 the analyst who prepared this report has viewed the material operations of this issuer.
8 the analyst who prepared this research report owns this issuer's securities.
9 limited voting
10 GMP or any of its group affiliated companies owns 1% or more of this issuer’s securities.
* The analyst is related to a member of the Board of Directors of [name of company], but that individual has no influence in the preparation of
this report.
**[Other disclosure]

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Investors should be aware that the value of investments can rise or fall and need to be aware of these risks in exercising investment decisions.
Foreign currency exchange rates can also adversely affect investment returns. GMP Research will initiate, report and cease coverage at the
sole discretion of GMP and is under no obligation to update information herein.

GMP and group affiliated companies or persons or employees thereof may continue to, have a position in, or make a market in, the securities
mentioned herein, including options, futures or other derivative instruments thereon, and may, as principal or agent, buy and sell such
products. Griffiths McBurney Corp., an affiliate of GMP, accepts responsibility for the contents of this research subject to the foregoing. U.S.
clients wishing to effect transactions in any security referred to herein should do so through Griffiths McBurney Corp. GMP will provide upon
request a statement of its financial condition and a list of the names of its principals and senior officers.

Each research analyst and associate research analyst who authored this document and whose name appears herein certifies that (1) the
recommendations and opinions expressed in the research report accurately reflect their personal views about any and all of the securities or
issuers discussed herein that are within their coverage universe and (2) no part of their compensation was, is or will be, directly or indirectly,
related to the provision of specific recommendations or views expressed herein.
GMP Analysts are compensated competitively based on several criteria, including performance assessment criteria based on quality of
research. The Analyst compensation pool is comprised of general revenue sources including that from sales and trading and investment
banking. GMP policies do not allow the issuer to pay any expenses associated with a visit to its material operations by the Analyst. GMP
prohibits any director, officer, employee or Canadian agent of GMP from holding any office in publicly traded companies.

Key
The GMP research recommendation structure consists of the following categories:
FOCUS BUY. Small cap stocks (defined as stocks with less than $500 million market capitalization) in this category have a total return
potential (including dividends payable) of greater than 25% and large cap stocks a greater than 20% total return potential, as well as superior
qualitative and timing characteristics.
BUY. These stocks will have 15% or greater (small cap) or 10% or greater (large cap) total return potential.
SPECULATIVE BUY. These stocks will have a 30% or greater total potential return and they will have a speculative component which could be
material to the return expectations.
HOLD. Small cap stocks ranked Hold will have a total return potential of 0% to 15%; large cap stocks ranked Hold will have a total return
potential of 0 to 10%; and stocks that have a speculative component which could be material to the return expectations ranked HOLD will have
a total return potential of 0% to 30%.
REDUCE. Companies ranked Reduce have a negative potential total return.
FOCUS REDUCE. Companies ranked Focus Reduce have a significant negative potential total return and materially compromised qualitative
and timing characteristics.
Note: Analysts have discretion within 500 basis points of the upper and lower limit of each rating to determine the recommendation.

All disclosures contained in this document are governed by English law.

United Kingdom: this information is issued for the benefit of persons who qualify as eligible counterparties or professional clients and should
be made available only to such persons and is exempt from the restriction on financial promotion in s21 of the Financial Services and Markets
Act 2000 in reliance on provision in the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 particularly Article 19(5) for
Investment Professionals and Article 49(2) for entities of prescribed net worth.
Other countries: circulation of this report may be restricted by laws and regulations in other countries and persons in receipt of this document
must satisfy legal requirements in that country.
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