TAG SprouleReport 12-31-08

EVALUATION OF THE P&NG RESERVES OF TAG OIL Limited IN THE CHEAL AREA OF NEW ZEALAND (As of December 31,
2008)
Copies:
TAG Oil Limited (5 copies) Sproule International Limited (1 copy) Electronic (1 copy) 3219.70535 Austral Pacific Energy Limited. Sunday O. Edobor, P. Eng. Douglas J. Carsted, P. Geol. Donald W. Wood, P. Eng This report has been prepared for the exclusive use of TAG Oil Limited., and shall not be reproduced, distributed, or made available to any other company or person, regulatory body, or organization without the knowledge and written consent of Sproule International Limited, and without the complete contents of the report being made available to that party.
Project No.: Prepared For: Authors:
Exclusivity:
Table of Contents Page 1
Table of Contents
Introduction
Field Operations Historical Data, Interests and Burdens Evaluation Standards Evaluation Procedures Evaluation Results BOE Cautionary Statement Forward-Looking Statements Exclusivity Certification Permit to Practice Certificates
Summary
Table S-1 Summary of the Evaluation of the P&NG Reserves of Tag Oil Ltd. in the Cheal Area of New Zealand (As of December 31, 2008), Before Income Tax Summary of Selected Price Forecasts (Effective December 31, 2008) Summary of Reserves and Net Present Values Total Proved Plus Probable Plus Possible Reserves Before Income Tax Summary of Reserves and Net Present Values Total Proved Plus Probable Reserves Before Income Tax Summary of Reserves and Net Present Values Total Proved Reserves Before Income Tax
Table S-2
Table S-3
Table S-3A
Table S-3B
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J:\Tag Oil 70535 Cheal Update\Report\Summary without NI-51-101.doc
Figure S-1
Map of New Zealand Highlighting Petroleum Exploration Permit (PEP) 38738 Daily Company Gross Barrels of Oil Equivalent (BOE) Forecast Annual Cash Flow (Before Income Tax) Net Present Values (Before Income Tax)
Figure S-2 Figure S-3 Figure S-4
Discussion
General Geophysics Geology Estimation of Reserves and Production Forecasts Pricing Operating and Capital Costs Royalties and Taxes Net Present Values Table 1 Cheal, New Zealand, Volumetric Reservoir Data and Estimates of Reserves Cheal, New Zealand, Estimates of Reserves and Net Present Values Forecasts of Production and Net Revenue Total Proved Plus Probable Plus Possible Reserves Forecasts of Production and Net Revenue Total Proved Plus Probable Reserves Forecasts of Production and Net Revenue Total Proved Reserves
Table 2
Table 3
Table 3A
Table 3B
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Figures
Figure 1 Map of New Zealand Highlighting Petroleum Exploration Permit (PEP) 38738 Seismic Control and PEP 38738 Depth Structure at Sandstone 3 and Fault Framework Interpreted by Sproule Depth Structure on Sandstone 3 with Well Tops Mt. Messenger Sandstone 3 Depth Structure Map Mt. Messenger Sandstone 2 Depth Structure Map Mt. Messenger Sandstone 3 Net Pay Map Mt. Messenger Sandstone 2 Net Pay Map Cheal A3X Production History Cheal A4 Production History Cheal A7 Production History Cheal B1 Production History Cheal B2 Production History Cheal B3 Production History
Figure 2 Figure 3
Figure 4 Figure 5 Figure 6 Figure 7 Figure 8 Figure 9 Figure 10 Figure 11 Figure 12 Figure 13 Figure 14
Appendices
Appendix A Appendix B Definitions Abbreviations
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Introduction Page 1
Introduction
This report was prepared by Sproule International Limited (Sproule) at the request of Mr. Garth Johnson, CEO, CFO, Director, Corporate Secretary, Tag Oil Ltd. Tag Oil Ltd. is hereinafter referred to as "the Company." The effective date of this report is December 31, 2008. The report consists of an evaluation of the P&NG reserves associated with the Company's interest in the Cheal Field, New Zealand. It was prepared during the months of December through February for the purpose of evaluating the Companys P&NG reserves according to Canadian Oil and Gas Evaluation Handbook (COGEH) reserve definitions that are consistent with the standards of National Instrument 51-101. This report was prepared for the Companys corporate purposes. This one volume report consists of an Introduction, Summary, Discussion and Appendices. The Introduction includes the summary of the evaluation standards and procedures and pertinent author certificates; the Summary includes high-level summaries of the evaluation; and the Discussion includes general commentaries pertaining to the evaluation of the P&NG reserves. Reserves definitions, abbreviations, units, and conversion factors are included in Appendices A and B.
Field Operations
In the preparation of this evaluation, a field inspection of the properties was not performed. The relevant engineering data were made available by the Company or obtained from public sources and the non-confidential files at Sproule. No material information regarding the reserves evaluation would have been obtained by an on-site visit.
Historical Data, Interests and Burdens

1. All historical production, well data, test results, capital budgets, revenue and expense data, pricing information and other data that were obtained from the Company or from public sources were accepted as represented, without any further investigation by Sproule in the course this evaluation.
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Introduction Page 2
2. Property descriptions and interests held, as supplied by the Company, were accepted as represented. No investigation was made into either the legal titles held or any operating agreements in place relating to the subject properties. 3. Lessor and overriding royalties and other burdens were obtained from the Company. No further investigation was undertaken by Sproule.
Evaluation Standards
This report has been prepared by Sproule using current geological and engineering knowledge, techniques and computer software. It has been prepared within the Code of Ethics of the Association of Professional Engineers, Geologists and Geophysicists of Alberta (APEGGA). This report adheres in all material aspects to the best practices recommended in the COGE Handbook, which are in accordance with principles and definitions established by the Calgary Chapter of the Society of Petroleum Evaluation Engineers. The COGE Handbook is incorporated by reference in National Instrument 51-101.
Evaluation Procedures
1. The Company provided Sproule with recent revenue statements to determine certain economic parameters. 2. The forecasts of product prices used in this evaluation were based on Sproules December 31, 2008 price forecasts. 3. Well abandonment and disconnect costs were included in this report at the entity level for wells which have reserves assigned. No allowances for reclamation or salvage values were made. 4. The Company has informed us that their tax pools exceed the forecasted taxable income from the Cheal property; consequently, income taxes have not been deducted in this report.
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Introduction Page 3
Evaluation Results
1. The accuracy of reserves estimates and associated economic analysis is, in part, a function of the quality and quantity of available data and of engineering and geological interpretation and judgment. Given the data provided at the time this report was prepared, the estimates presented herein are considered reasonable. However, they should be accepted with the understanding that reservoir and financial performance subsequent to the date of the estimates may necessitate revision. These revisions may be material. 2. The net present values of the reserves presented in this report simply represent discounted future cash flow values at several discount rates. Though net present values form an integral part of fair market value estimations, without consideration for other economic criteria, they are not to be construed as Sproules opinion of fair market value. 3. The dollar values presented throughout the report are in United States dollars, unless otherwise stated. 4. Due to rounding, certain totals may not be consistent from one presentation to the next.
BOE Cautionary Statement

BOEs (or McfGEs or other applicable units of equivalency) may be misleading, particularly if used in isolation. A BOE conversion ratio of 6 Mcf:1 bbl (or An McfGE conversion ratio of 1 bbl:6 Mcf) is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.
Forward-Looking Statements
This report may contain forward-looking statements including expectations of future production revenues and capital expenditures. Information concerning reserves may also be deemed to be forward-looking as estimates involve the implied assessment that the reserves described can be profitably produced in future. These statements are based on current expectations that involve a number of risks and uncertainties, which could cause actual results to differ from those anticipated. These risks include, but are not limited to: the underlying risks of the oil and gas industry (i.e., corporate commitment, regulatory approval, operational risks in development, exploration and production; potential delays or changes in plans with respect to exploration or development projects or capital expenditures; the uncertainty of reserves estimations; the uncertainty of estimates and
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Introduction Page 4
projections relating to production; costs and expenses, and health, environmental factors), commodity price and exchange rate fluctuation.
safety
and
Exclusivity
This report has been prepared for the exclusive use of Tag Oil Ltd. It may not be reproduced, distributed, or made available to any other company or person, regulatory body, or organization without the knowledge and written consent of Sproule International Limited, and without the complete contents of the report being made available to that party.
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Introduction Page 5
Certification
Report Preparation
The report entitled Evaluation of the P&NG Reserves of Tag Oil Ltd. in the Cheal Area of New Zealand (As of December 31, 2008) was prepared by the following Sproule personnel: ___________________________________ Donald W. Woods, P.Eng., Manager, Engineering Project Leader / /2009 dd/mm/yr
___________________________________ Sunday O. Edobor, P.Eng., Senior Petroleum Engineer / /2009 dd/mm/yr
___________________________________ Douglas J. Carsted, P.Geol. Vice-President, Geoscience / /2009 dd/mm/yr
Sproule Executive Endorsement

This report has been reviewed and endorsed by the following Executive of Sproule:
___________________________________ John L.Chipperfield, P.Geol.
Senior Vice-President
/ /2009 dd/mm/yr
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Introduction Page 6
Permit to Practice
Sproule International Limited is a member of the Association of Professional Engineers, Geologists and Geophysicists of Alberta and our permit number is P6151.
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Introduction Page 7
Certificate
Donald W. Woods, B.Sc. Chemical Engineering, P. Eng.
I, Donald W. Woods, Manager, Engineering, at Sproule International Limited, 900, 140 Fourth Ave SW, Calgary, Alberta, declare the following: 1. I hold the following degrees:
a b. B.Ed. (1973) University of Calgary, Calgary AB, Canada B.Sc. Chemical Engineering (1980) University of Calgary, Calgary AB, Canada
2. I am a registered professional:
a. Professional Engineer (P.Eng.) Province of Alberta, Canada
3. I am a member of the following professional organizations:

a. b. c. d. Association of Professional Engineers, Geologists and Geophysicists of Alberta (APEGGA) Petroleum Society of Canadian (PetSoc) Society of Petroleum Engineers (SPE) Society of Petroleum Evaluation Engineers (SPEE)
4. I am a qualified evaluator and auditor as defined in National Instrument 51-101. 5. My contribution to the report entitled Evaluation of the P&NG Reserves of Tag Oil Ltd. in the Cheal Area of New Zealand (As of December 31, 2008) is based on my engineering knowledge and the data provided to me by the Company, from public sources, and from the non-confidential files of Sproule International Limited. I did not undertake a field inspection of the properties. 6. I have no interest, direct or indirect, nor do I expect to receive any interest, direct or indirect, in the properties described in the above-named report or in the securities of Tag Oil Ltd.
Donald W. Woods, P. Eng.
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Introduction Page 8
Certificate
Sunday Edobor, B.Sc., P.Eng.
I, Sunday Edobor, Senior Petroleum Engineer of Sproule International Limited, 900, 140 Fourth Ave SW, Calgary, Alberta, declare the following: 1. I hold the following degree:
a. B.Sc. Petroleum Engineering (1986), University of Ibadan, Nigeria
a. Professional Engineer (P.Eng.) Province of Alberta, Canada

a. Association of Professional Engineers, Geologists and Geophysicists of Alberta (APEGGA)
4. My contribution to the report entitled Evaluation of the P&NG Reserves of Tag Oil Ltd. in the Cheal Area of New Zealand (As of December 31, 2008) is based on my engineering knowledge and the data provided to me by the Company, from public sources, and from the non-confidential files of Sproule International Limited. I did not undertake a field inspection of the properties. 5. I have no interest, direct or indirect, nor do I expect to receive any interest, direct or indirect, in the properties described in the above-named report or in the securities of Tag Oil Ltd.
Sunday Edobor, P.Eng.
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Introduction Page 9
Certificate
Douglas J. Carsted, B.Sc., P.Geol.
I, Douglas J. Carsted, Vice-President, Geoscience, and Director at Sproule International Limited, 900, 140 Fourth Ave SW, Calgary, Alberta, declare the following: 1. I hold the following degrees:
a. b. B.Sc. (Honours) Geology (1982) University of Manitoba, Winnipeg MB, Canada B.Sc. Chemistry (1979) University of Winnipeg, Winnipeg MB, Canada
a. Professional Geologist (P.Geol.) Province of Alberta, Canada

a. b. c. d. e. f. Association of Professional Engineers, Geologists and Geophysicists of Alberta (APEGGA) Canadian Society of Petroleum Geologists (CSPG) American Association of Petroleum Geologists (AAPG) Petroleum Society of Canadian (PetSoc) Canadian Well Logging Society (CWLS) Indonesian Petroleum Association, Professional Division (IPA)
4. I am a qualified evaluator and auditor as defined in National Instrument 51-101. 5. My contribution to the report entitled Evaluation of the P&NG Reserves of Tag Oil Ltd. in the Cheal Area of New Zealand (As of December 31, 2008) is based on my geological knowledge and the data provided to me by the Company, from public sources, and from the non-confidential files of Sproule International Limited. I did not undertake a field inspection of the properties. 6. I have no interest, direct or indirect, nor do I expect to receive any interest, direct or indirect, in the properties described in the above-named report or in the securities of Tag Oil Ltd.
Douglas J. Carsted, P.Geol.

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Introduction Page 10
Certificate
John L. Chipperfield, B.Sc., P.Geol.
I, John L. Chipperfield, Senior Vice-President and Director of Sproule International Limited, 900, 140 Fourth Ave SW, Calgary, Alberta, declare the following: 1. I hold the following degree:
a. B.Sc. (Honours) Geology (1972) University of Alberta, Edmonton AB, Canada
a. Professional Geologist (P.Geol.) Province of Alberta, Canada

a. b. c. d. e. f. Association of Professional Engineers, Geologists and Geophysicists of Alberta (APEGGA) Canadian Society of Petroleum Geologists (CSPG) American Association of Petroleum Geologists (AAPG) Petroleum Society of Canadian (PetSoc) Canadian Well Logging Society (CWLS) Ontario Petroleum Institute (OPI)
4. I am a qualified evaluator and auditor as defined in National Instrument 51-101. 5. My contribution to the report entitled Evaluation of the P&NG Reserves of Tag Oil Ltd. in the Cheal Area of New Zealand (As of December 31, 2008) is based on my geological knowledge and the data provided to me by the Company, from public sources, and from the non-confidential files of Sproule International Limited. I did not undertake a field inspection of the properties. 6. I have no interest, direct or indirect, nor do I expect to receive any interest, direct or indirect, in the properties described in the above-named report or in the securities of Tag Oil Ltd.
John L. Chipperfield, P.Geol.
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Summary - Page 1
Summary
Table S-1, on the following page, summarizes our evaluation of the P&NG reserves associated with the Companys interest in the Cheal Field, New Zealand. The Company has informed us that their tax pools exceed the forecasted taxable income from the Cheal property and therefore, income taxes have not been deducted in this report. The effective date of the evaluation is December 31, 2008. A map showing the location of the Companys Petroleum Exploration Permit encompassing the Cheal property is included as Figure S-1. The reserves were estimated deterministically for the proved, proved plus probable, and proved plus probable plus possible reserves categories. The oil reserves are presented in thousands of barrels, at stock tank conditions. The pipeline gas reserves are presented in millions of cubic feet, at base conditions of 14.65 psia and 60 degrees Fahrenheit. The reserves definitions and ownership classification used in this evaluation are in accordance with the standards defined by COGEH reserves definitions and are consistent with NI 51-101. The net present values of the reserves are presented in thousands of United States dollars, and are based on annual projections of net revenue, which were discounted at various rates using the mid-period discounting method. The price forecasts that formed the basis for the revenue projections in the evaluation were based on Sproules December 31, 2008 pricing model. Table S-2 presents a summary of the forecasts used. Operating and capital costs were escalated at 2 percent per year as set out in Table S-2. Well abandonment and disconnect costs were included in this report for wells which have reserves assigned. No allowances for reclamation or salvage values were made. Summary forecasts of production and cash flow for the various reserves categories are included as Tables S-3 through S-3B. Figures S-2 through S-4 present the results of our evaluation in graphical form.
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Summary - Page 2
Table S-1
Austral Pacific Energy Ltd Summary of the Evaluation of the Company's P&NG Reserves In the Cheal Area of New Zealand (As of December 31, 2008)
Remaining Reserves Company Gross Light/Medium Oil (Mbbl) Proved Probable Total (2P) Possible Total (3P)
180 315 495 412 907 55 96 151 126 277 53 91 144 112 256 1,315 3,097 4,412 5,415 9,827 1,280 2,871 4,151 4,907 9,058 1,247 2,672 3,919 4,472 8,391 1,216 2,497 3,713 4,096 7,809
Net Present Values Before Income Taxes (M$) At 0% At 5.0% At 10.0% At 15.0%
Gross
Net
Solution Gas (MMcf) - values included with lt/med oil Proved Probable 350 107 100 Total (2P) 350 107 100 Possible 340 103 92 Total (3P) 690 210 192 GRAND TOTAL (Mboe) Total Proved Total Probable Total (2P) Total Possible Total (P3)
180 373 553 469 1,022 55 114 169 143 312 53 108 161 127 288 1,315 3,097 4,412 5,415 9,827 1,280 2,871 4,151 4,907 9,058 1,247 2,672 3,919 4,472 8,391 1,216 2,497 3,713 4,096 7,809
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Summary - Page 3
Table S-2 Summary of Selected Price Forecasts and Inflation Rate Assumptions (Effective December 31, 2008)
TAPIS Malaysia ($US/bbl) Cheal Natural Gas (2) ($US/Mcf)
Inflation Rate (%/Yr)
(2)
Year
Historical
2006 2007 2008 70.12 77.26 104.61 1.5 2 2
Forecast
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 57.73 67.49 73.69 83.84 96.34 98.26 100.23 102.23 104.28 106.36 108.49
1.45 1.45 1.45 1.45 1.45 1.45 1.45 1.45 1.45 1.45
1.45 Escalation rate of 2.0% thereafter
2 2 2 2 2 2 2 2 2 2 2
(1) Inflation rates for forecasting prices and costs. (2) Gas price was provided by the company
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NZ Economic Summary (Company)

TAG 3P (December 31, 2008)
(Nominal values)
Table S - 3
NZ Company Economic Indicators::New Zealand R/T (1995)

Disc. Rate (%) 0 5.0 10.0 15.0 20.0 25.0 AT ROR (%) AT Payout (yrs) BT NPV (M$US) 9,827 9,058 8,391 7,809 7,298 6,846 >800.00 0.00 AT NPV (M$US) 9,827 9,058 8,391 7,809 7,298 6,846 BT PIR (fraction) 3.15 3.11 3.06 3.01 2.96 2.90 AT PIR (fraction) 3.15 3.11 3.06 3.01 2.96 2.90
NZComp. Economics (per Unit)::New Zealand R/T (1995)

Net Revenue Less: Bonuses & Fees Operating Costs Tariffs Prod & Asset Taxes Capital Costs Other Income/Expense Before Tax Cash Flow Less Income Tax After Tax Cash Flow (M$US) 17,763 0 4,818 0 0 3,118 0 9,827 0 9,827 (%) 100.00 0.00 27.12 0.00 0.00 17.55 0.00 55.33 0.00 55.33 ($US/BOE) 61.60 0.00 16.71 0.00 0.00 10.81 0.00 34.08 0.00 34.08
NZ Prod Summary::New Zealand R/T (1995)

Date 2009(12) 2010(12) 2011(12) 2012(12) 2013(12) Total Oil /# Wells 6.3 8.0 9.0 9.0 9.0 --Proj. Oil Rate Bbl/d 751.5 954.9 473.9 215.8 105.0 --Proj. Oil Volume MSTB 274 349 173 79 32 907 Comp. Oil Volume MSTB 84 106 53 24 10 277 Net Oil Volume MSTB 79 101 45 21 10 256 Net Oil Price $US/Bbl 57.73 67.49 73.69 83.84 96.34 --Proj. Sol'n Gas Rate mcf/d 504.4 763.9 379.1 172.7 84.0 --Proj. Sol'n Gas Volume MMSCF 184 279 138 63 26 690 Comp. Sol'n Gas Volume MMSCF 56 85 42 19 8 210 Net Sol'n Gas Volume MMSCF 52 80 35 17 8 192 Net Sol'n Gas Price $US/mcf 1.45 1.48 1.51 1.54 1.57 ---
NZ Comp Cash Flow::New Zealand R/T (1995)

Date 2009(12) 2010(12) 2011(12) 2012(12) 2013(12) Total WI WI Total BOE Rate BOE Prod Price / BOE BOE/d MSTB $US/Bbl 255 93.0 52.10 330 120.5 60.74 164 59.8 66.23 75 27.3 75.21 36 11.0 86.26 --311.6 --Sales Revenue Total M$US 4,922 7,318 3,960 2,054 952 19,205 Royalty Total M$US 246 366 591 239 0 1,442 Operating Costs M$US 1,102 1,245 978 839 654 4,818 Capital Costs M$US 1,761 821 0 0 0 2,583 Capital Aband. Total M$US 0 0 0 0 535 535 Before Tax Cash Flow M$US 1,813 4,886 2,390 976 -238 9,827 Income Taxes M$US 0 0 0 0 0 0 After Tax Cash Flow M$US 1,813 4,886 2,390 976 -238 9,827
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Tag 2P (December 31, 2008)
(Nominal values)
Table S - 3A



Date 2009(12) 2010(12) 2011(12) 2012(12) Total Oil /# Wells 6.3 7.6 8.0 8.0 --Proj. Oil Rate Bbl/d 623.5 465.1 199.3 101.2 --Proj. Oil Volume MSTB 228 170 73 25 495 Comp. Oil Volume MSTB 69 52 22 8 151 Net Oil Volume MSTB 66 49 21 8 144 Net Oil Price $US/Bbl 57.73 67.49 73.69 83.84 --Proj. Sol'n Gas Rate mcf/d 374.0 372.1 159.4 81.0 --Proj. Sol'n Gas Volume MMSCF 137 136 58 20 350 Comp. Sol'n Gas Volume MMSCF 42 41 18 6 107 Net Sol'n Gas Volume MMSCF 38 39 17 6 100 Net Sol'n Gas Price $US/mcf 1.45 1.45 1.45 1.45 ---

Date 2009(12) 2010(12) 2011(12) 2012(12) Total WI WI Total BOE Rate BOE Prod Price / BOE BOE/d MSTB $US/Bbl 209 76.4 52.10 161 58.7 60.72 69 25.1 66.18 35 8.5 75.13 --168.7 --Sales Revenue Total M$US 4,076 3,563 1,664 641 9,944 Royalty Total M$US 204 178 83 0 465 Operating Costs M$US 1,027 954 812 512 3,305 Capital Costs M$US 1,359 0 0 0 1,359 Capital Aband. Total M$US 0 0 200 204 404 Before Tax Cash Flow M$US 1,486 2,431 569 -74 4,412 Income Taxes M$US 0 0 0 0 0 After Tax Cash Flow M$US 1,486 2,431 569 -74 4,412
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(Nominal values)
Table S - 3B


Net Revenue Less: Bonuses & Fees Operating Costs Tariffs Prod & Asset Taxes Capital Costs Other Income/Expense Before Tax Cash Flow Less Income Tax After Tax Cash Flow (M$US) 3,226 0 1,575 0 0 336 0 1,315 0 1,315 (%) 100.00 0.00 48.81 0.00 0.00 10.42 0.00 40.77 0.00 40.77 ($US/BOE) 60.81 0.00 29.68 0.00 0.00 6.34 0.00 24.80 0.00 24.80

Date 2009(12) 2010(12) Total Oil /# Wells 6.0 6.0 --Proj. Oil Rate Bbl/d 343.2 164.5 --Proj. Oil Volume MSTB 125 55 180 Comp. Oil Volume MSTB 38 17 55 Net Oil Volume MSTB 36 17 53 Net Oil Price $US/Bbl 57.73 67.49 --Proj. Sol'n Gas Rate mcf/d 0.0 0.0 --Proj. Sol'n Gas Volume MMSCF 0 0 0 Comp. Sol'n Gas Volume MMSCF 0 0 0 Net Sol'n Gas Volume MMSCF 0 0 0 Net Sol'n Gas Price $US/mcf 0.00 0.00 ---

WI WI Total Date BOE Rate BOE Prod Price / BOE BOE/d MSTB $US/Bbl 2009(12) 105 38.2 57.73 2010(12) 50 16.8 67.49 Total --55.0 --Sales Revenue Total M$US 2,205 1,131 3,337 Royalty Total M$US 110 0 110 Operating Costs M$US 864 711 1,575 Capital Costs M$US 0 0 0 Capital Aband. Total M$US 0 336 336 Before Tax Cash Flow M$US 1,231 85 1,315 Income Taxes M$US 0 0 0 After Tax Cash Flow M$US 1,231 85 1,315
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Figure S-1
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PEP 38738 47.6 square miles
Cardiff Cheal
Map of New Zealand Highlighting Petroleum Exploration Permit (PEP) 38783

70536
Figure S-2
DAILY EQUIVALENT (BOE) FORECAST boepd
350 300 250 200 150 100 50 0 2009 2010 2011

YEAR Proved Plus Probable Plus Possile Proved Plus Probable Proved
2012
2013
Daily Company Gross Barrels of Oil Equivalent (BOE) Forecast

70536
Figure S-3
ANNUAL CASH FLOW PROJECTIONS M$US
5000 4000 3000 2000 1000 0 -1000 2009 2010 2011

YEAR Proved Plus Probable Plus Possile Proved Plus Probable Proved
2012
2013
Annual Cash Flow (Before Income Tax)

70536
Figure S-4
NET PRESENT VALUE - M$US
10000
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0 5 10 15 DISCOUNT RATES (%)

Proved Plus Probable Plus Possile Proved Plus Probable Proved
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Net Present Value (Before Income Tax)

70536
Discussion - Page 1
Discussion
1.0 General
The Companys reserves are associated with the Cheal Field, New Zealand. The field is located in the onshore portion of the Taranaki Basin, which lies along the west coast of the North Island (Figure 1). The basin, which contains Cretaceous to Recent sediments, covers an area of some 32,800 square miles, most of which lies offshore. The Company owns a 30.5% working interest in the shallow rights of PEP 38738. The shallow rights include all strata from Recent to base of Miocene, which encompasses the Intra Urenui and Mt. Messenger reservoirs in the Cheal Field. The Cheal structure has been penetrated by a total of nine wells, Cheal-1, 2, A3X, A4, A6, A7, B1, B2 and B3. Eight of these wells encountered oil pay of which six are currently on production with a cumulative oil volume of 429 Mbbl. The three wells drilled from the B-Pad location were drilled in 2006 and put on production throughout 2007. An additional well, Cheal B4, was drilled outside of the current pool boundaries; however, no reserves have been assigned to this well. Two new wells, Cheal-A6 and A7, were drilled from the A-pad location. The A6 well and the subsequent sidetrack A6ST1 did not encounter sufficient reservoir quality sand to be productive and were abandoned. Well A7 intersected oil pay in the Mt. Messenger 2 Sandstone and was cased as a future producer. Permanent facilities and gathering systems have been installed and commissioned in the field. No new data which would allow reserves to be assigned to the Urenui reservoir has been provided at this time.
2.0
Geophysics
Data Control
Over the past year, no additional seismic data has been acquired over the Cheal Field. Data from the two new wells resulted in minor changes to the structural interpretation. Figure 2 shows the outline of PEP 38738 and the location of the Cheal Field with respect to the 2D and 3D seismic coverage.
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Discussion - Page 2
Geophysical Interpretation
Figure 3 presents a perspective view, looking west, of the depth structure on the top of the Mt. Messenger Sandstone 3, showing the well penetrations and interpreted faults. The main bounding fault on the western flank of the field is intersected by a series of SSW-NNE trending splay faults in the vicinity of the field. The magenta colored fault in this figure can be seen to separate the wells of the A Block (Cheal-1, 2, A3X, A4, A6, A6ST1, and A7) from those of the B Block (Cheal-B1, B2 and B3). A multi-layer depth conversion was conducted within Petrel to convert from time to depth using the well control. Figure 4 shows the well tops and the depth structure at the Mt. Messenger Sandstone 3. Depth structure maps on Sandstone 3 and Sandstone 2 are provided in Figures 5 and 6, respectively.
3.0
Geology
Cheal-1 was drilled in 1995 by New Zealand Oil & Gas Services Ltd. Good oil and gas shows led to the testing of the Urenui Formation. This formation was tested over a nine-day period at a steady rate of 48 bopd, with gas declining from 2.7 MMscfd to 1.05 MMscfd. The Mt. Messenger Formation was not tested in this well, although shows and petrophysical analysis indicate approximately 16 feet of net pay. The Urenui Formation was further tested for 1.2 days in December 2005 at 0.14 MMscfd of gas, with no oil reported. Cheal-2 was drilled in 1995 by New Zealand Oil & Gas Services Ltd. as a step-out to Cheal1. The well was tested over the Intra Urenui Sandstone for a period of 6 days and flowed at initial rates of 1.8 MMscfd of gas with slugs of oil. The gas rates declined to 0.9 MMscfd with oil rates of approximately 20 bopd. No water was produced during the test. Petrophysical analysis indicates that the Mt. Messenger Sandstone is wet in this well and defines the limits of the pool to the east. The Company plans to convert this well to water disposal. Cheal-A3X was drilled in April 2004 to test the hydrocarbon potential of the Intra Urenui and Mt. Messenger sandstones in an updip position from the Cheal-1 and Cheal-2 wells. This well was directionally drilled from the Cheal A pad toward the NNE, intersecting the Intra Urenui Sandstones between 4,603 and 4,737 feet MD and the Mt. Messenger Sandstone between 5,800 and 5,863 feet MD. Good oil and gas shows were noted over the two target intervals. The Mt. Messenger Sandstone produced a total of 6,900 bbl of oil on test in June and July of 2004 and was then shut-in until May 2005. The Mt. Messenger was further
3219.70535.SOE.dmm
Discussion - Page 3
tested from May to August 2005, at an average oil rate of 350 bopd with gas-oil ratios increasing from 475 to 825 scf/bbl. Water-cuts were less than one percent. The Company subsequently participated in the drilling of Cheal-A4 in October 2004 to further evaluate the hydrocarbon potential of the Intra Urenui and Mt. Messenger sandstones. This well was directionally drilled from the Cheal A pad toward the NE, intersecting the target horizons approximately halfway between the Cheal A3X well and the downdip Cheal-2 well. The well was completed in the uppermost Intra Urenui Formation and the Mt. Messenger Formation. It was tested from the Mt. Messenger Formation from November 2004 to May 2005 and from September 2005 to December 2005. Over this period, oil production averaged 265 bopd with gas-oil ratios increasing from 500 to 730 scf/bbl. Water-cuts had increased to 24 percent by December 2005. The Urenui Formation was also tested in April, May, October and November 2005 at gas rates of 0.1 to 1.1 MMscfd with very little oil. During October and November 2006, the Company participated in the drilling of three deviated wells (Cheal-B1, B2 and B3) from the Cheal B pad, approximately 0.8 miles to the north of the Cheal A pad. All three wells intersected the Mt. Messenger sandstones north of the northeast-southwest trending fault that transects the field. From petrophysical analysis, Cheal B-1 and Cheal B-3 intersected the thicker and better quality Mt. Messenger sandstones. Cheal B-2 encountered only about 6 feet of net pay in the Mt. Messenger Sandstone 3, but did encounter 16 feet of net pay in the Mt. Messenger Sandstone 2.
During 2008, the Company drilled two new wells, Cheal-A6 and A7. The A6 well did not encounter reservoir quality sandstone within the Mt. Messenger. It was subsequently sidetracked towards the south, however, the sidetrack also did not encounter sufficient net pay to be productive. The A7 well, drilled to the north and east of A6, did encounter productive Mt. Messenger sandstones. This new well data resulted in changes to the net pay maps previously drawn using the well data available at the end of 2007, which resulted in a decrease in OOIP for the field. The oil-water contact established for the Mt. Messenger Sandstone 3 in the A pad wells is 4,605 feet subsea (-1404m), while the B fault block wells did not encounter an oil-water contact but established an oil-down-to elevation of 4,592 feet subsea (-1400m). This oildown-to elevation was used to calculate the oil-in-place within the B fault block. For the Mt. Messenger Sandstone 2, which is the deeper oil-bearing sand, an oil-water contact of 4,625 feet subsea (-1410m) was established. The oil-in-place estimated for this
3219.70535.SOE.dmm
Discussion - Page 4
reservoir has been classified as probable, because the reservoir has not been tested in the B fault block, which contains the majority of the in-place oil volumes. The net pay maps used to estimate the original oil-in-place were generated from a 3D geological model and are displayed in Figures 7 and 8 for the Mt. Messenger Sandstones 3 and 2, respectively. The location of the Cheal B4 well, shown on Figure 7, is the projected intersection of the well at the Mt. Messenger Sandstone 3 level. The well did not encounter a Mt. Messenger 3 sandstone at this location.
4.0
Estimation of Reserves and Production Forecasts
Oil reserves were estimated volumetrically for the Mt. Messenger Formation using volumetric data from Petrel model and net pay thicknesses based on well logs and seismic interpretation. Reservoir porosity and water saturation were obtained from well logs. Eight productive wells have been drilled in the Cheal Field. Six out of the eight wells are currently on production, with cumulative production of 429 Mbbl. Proved, probable and possible reserves were assigned to the producing wells. The company plans to fracture stimulate all six producing wells and this is expected to result in improved oil rate and incremental reserves. The incremental reserves associated with wells B1 and B3 were booked as probable. The incremental reserves associated with wells B2, A1, A4 and A7 were booked in the possible category since the fracturing of these wells depends on the success of B1 and B3. Probable and possible reserves were also assigned to two undrilled locations, B4 and B5. A third location, B7, which will be drilled if B4 and B5 are successful, was assigned possible reserves. Recovery factors were estimated to be 8.5 percent in the proved (1P) case, 10 percent in the proved plus probable (2P) case and 12 percent in the proved plus probable plus possible (3P) case. These recovery factors are based on the production performance of the existing wells in the field. These recovery factors are lower than those estimated previously, which were based on analogue field data and early production results from the Cheal wells. Currently, the Company does not have a gas sales contract, but expects to have one in place in April 2009. As a result, no proved gas reserves have been assigned to the field. The Company currently consumes all of the produced gas. In anticipation of the gas contract, gas reserves have been assigned in the probable and possible categories, using a solution gas-oil ratio (GOR) of 800 scf/bbl.
3219.70535.SOE.dmm
Discussion - Page 5
5.0
Pricing
Sproules short-term outlook for oil prices adopts the NYMEX futures market for the forecast period ending December 31, 2011. The forecast used in this evaluation was derived as of December 31, 2008, and reflects the arithmetic average of the futures market at the close of trading each day, for the month prior to the Termination of Trading date for a January 2009 contract. The oil price forecasts are based on the NYMEX Division light, sweet (lowsulphur) crude oil futures contract, which specifies the West Texas Intermediate crude as a deliverable. Sproule then applies a historical offset to generate the Tapis forecast. The NYMEX oil futures prices are the foundation of Sproules energy pricing models in the early years. This data is combined with Sproules assumptions respecting long-term prices, inflation rates, and exchange rates, together with estimates of transportation costs and prices of competing fuels, to forecast wellhead prices for oil production. The following paragraphs briefly describe some of the key considerations included in Sproules long-term outlook for oil price forecasts. In the long term, the price of oil will be governed by supply and demand, and the degree that OPEC is able to manage supply will be a major determinant in establishing oil prices in the future. Crude oil demand, world economy conditions and the cost of exploration and development generally served to determine the price of crude oil throughout the world. In recognition of these factors, Sproule's long-term forecast for Tapis has been set at $US 89 per barrel (2009 dollars). The oil price forecasts are based on a forecast of prices for Tapis crude. The actual wellhead price of oil will vary with the quality of the crude and the cost of the transportation from the wellhead to the delivery point. The Company instructed us to use the Sproule Tapis (Malaysia) crude price forecast in the evaluation without an offset for quality or transportation.
3219.70535.SOE.dmm
Discussion - Page 6
6.0
Operating and Capital Costs
The Company provided estimates of capital investments and operating expenses required to continue development and operation of the field. A fixed costs of US$ 181,500 per month and variable costs of US$ 5.24 per barrel, which include trucking, shipping and handling, were used in the evaluation. The capital costs used in the evaluation are summarized below. All wells are scheduled to be fracture stimulated at a cost of US$ 220,000 per well. Three wells are scheduled to be drilled and completed at a total cost of US$ 6.44MM. Well abandonment and disconnect costs of US$ 180,000 per well was used. No allowances for reclamation or salvage values were made.
Capital Costs US$M (2009 Dollars)

Probable New Frac Drill 440 1,595 Possible New Frac Drill 440 1,595
Date March 2009 June 2009
Comments Frac B1 and B3 Drill & tie in B4 Frac A3, A4, A7, B2 and B4, if B1& B3 fracs are successful Drill & tie in B5 Frac B5 Drill & tie in B6 Frac B6
July 2009 October 2009 November 2009 February 2010 March 2010 Total 440
1,100 2,420 220 2,420 220 4,015 1980 6,435 2,420
Operating and capital costs were escalated at 2.0 percent per year.
7.0
Royalties and Taxes
The Companys tax pool of 5.7 million US Dollars was included as input to this evaluation; which resulted in no income taxes being deducted in the cash flows in this report. The New Zealand royalty regime stipulates the payment of either a five percent ad valorem royalty (AVR) or a 20 percent accounting profits royalty (APR), whichever is the greater in
3219.70535.SOE.dmm
Discussion - Page 7
any given year. The AVR is calculated at five percent of the net sales price received. The APR is a mechanism whereby the resource owner receives a share of profits once all significant costs have been recovered by the producer. It is payable on the net accumulated accounting profit of production from a petroleum field. In calculating the accounting profit, deductions are made and may include associated production costs, capital costs (exploration costs, development costs, permit acquisition costs and feasibility costs), indirect costs, abandonment costs, operating and capital overhead allowance, operating costs and capital costs carried forward and abandonment costs carried back. The APR royalty was calculated from forecasts of cash flow. A Net Allowable Deduction in the sum of 6.7 million US$ or 12 New Zealand Dollars was carried forward from 2008. This deduction was used in the Royalty calculations. This resulted in an AVR Royalty regime for the 1P, 2P and for the first two years in the 3P case. The APR Royalty Regime was then applied for the third and fourth year in the 3P case.
8.0
Net Present Values
The estimates of the P&NG reserves and their respective net present values, summarized by reserves category, are presented in Tables 1 and 2. Detailed forecasts of production and cash flow are presented in Tables 3 to 3B. Well abandonment and disconnect costs were included for wells which have reserves assigned. No allowances for reclamation or salvage values were made.
3219.70535.SOE.dmm
Table 1 Cheal, New Zealand Volumetric Reservoir Data and Estimates of Reserves (As of December 31, 2008)
Drainage Area (ac) Net Pay Porosity Water Saturation (%) Oil FVF RB/STB Original Oil In Place Mbbls Recovery Factor % Original Recoverable Oil Mbbls
Pool/Location
(ft)
(%)
Cheal A Block* Proved Lands Mount Messenger 3 PDP 2P 3P Mount Messenger 2 PDP 2P 3P Cheal B Block** Proved Lands Mount Messenger 3 PDP 2P 3P Mount Messenger 2 PDP 2P 3P Probable Lands Mount Messenger 3 2P 3P Possible Lands Mount Messenger 3 3P Mount Messenger 2 3P
211 211 211 96 96 96
18.8 18.8 18.8 9.8 9.8 9.8
23 23 23 21 21 21
37 37 37 46 46 46
1.22 1.22 1.22 1.22 1.22 1.22
3,663 3,663 3,663 684 684 684
128 128 128 85 85 85
23.9 23.9 23.9 9.5 9.5 9.5
23 23 23 21 21 21
37 37 37 46 46 46
1.22 1.22 1.22 1.22 1.22 1.22
2,823 2,823 2,823 551 551 551
88 88
22.57 22.57
23 23
37 37
1.22 1.22
1,830 1,830
86 54
17.89 7.04
23 21
37 46
1.22 1.22
1,422 294
Field Total Proved Developed Producing Proved + Probable Proved + Probable + Possible 520 608 748 16.90 17.70 15.70 22 22 22 40 40 40 1.22 1.22 1.22 7,720 9,550 11,266 8.5 10 12 656 955 1,352
* Cheal A3, A4 and A7 producing wells, commingled in the MM2 and MM3 zones. **Cheal B1, B2 and B3 producing wells, commingled in the MM2 and MM3 zones. Undriilled locations B4, B5 and B6.
Table 2 Cheal, New Zealand Estimates of Reserves and Net Present Values (As of December 31, 2008)
Original Oil In Place Recovery Factor Original Cum Prod Recoverable Oil to Dec. Oil 31, 2008 Mbbls Mbbls Total Field Technical Reserves (100% Mbbls Total Field Economic Reserves (100%) Company Working Interest (%) Company Gross (Economic) Oil Reserves Mbbls Lessor Royalties and Burden (%) Company Net Oil Recoves Mbbls 0% 5% Net Present Values Before Taxes (USM$) 10% 15% 20%
Pool/Location
Mbbls Cheal A Block* Proved Lands Mount Messenger 3 PDP 2P 3P Mount Messenger 2 PDP 2P 3P Cheal B Block** Proved Lands Mount Messenger 3 PDP 2P 3P Mount Messenger 2 PDP 2P 3P Probable Lands Mount Messenger 3 2P 3P Possible Lands Mount Messenger 3 3P Mount Messenger 2 3P Field Total Proved Developed Producing Proved + Probable Proved + Probable + Possible 7,720 9,550 11,266
3,663 3,663 3,663 684 684 684
2,823 2,823 2,823 551 551 551
1,830 1,830
1,422 294
8.5 10 12
656 955 1,352
429 429 429
227 526 923
180 495 907
69.5 69.5 69.5
55 151 277
AVR/APR AVR/APR AVR/APR
53 144 256
1,315 4,412 9,827
1,280 4,151 9,058
1,247 3,919 8,391
1,216 3,713 7,809
1,188 3,527 7,298
Table 2 Cheal, New Zealand Estimates of Reserves and Net Present Values (As of December 31, 2008)
Producing Gas Oil Ratio Pool/Location Tota Field Economic Gas Reserves (100%) Company Working Interest Lessor Company Economic Gas Royalties and Burden Reserves Company Net Gas Recoves
Net Present Values Before Taxes
scf/bbl
MMcf
(%)
MMcf
(%)
Mbbls
0%
5%
10%
15%
20%
Cheal A Block* Proved Lands Mount Messenger 3 PDP 2P 3P Mount Messenger 2 PDP 2P 3P Cheal B Block** Proved Lands Mount Messenger 3 PDP 2P 3P Mount Messenger 2 PDP 2P 3P Probable Lands Mount Messenger 3 2P 3P Possible Lands Mount Messenger 3 3P Mount Messenger 2 3P Field Total Proved Developed Producing Proved + Probable Proved + Probable + Possible Producing GORof 800 scf/bbl 350 690 69.5 69.5 107 210 AVR/APR AVR/APR 100 192 No sales Gas booked for the PDP category Values included with Oil Reserves Values included with Oil Reserves

(Nominal values)
Table 3



Date 2009(12) 2010(12) 2011(12) 2012(12) 2013(12) Total Oil /# Wells 6.3 8.0 9.0 9.0 9.0 --Proj. Oil Rate Bbl/d 751.5 954.9 473.9 215.8 105.0 --Proj. Oil Volume MSTB 274 349 173 79 32 907 Comp. Oil Volume MSTB 84 106 53 24 10 277 Net Oil Volume MSTB 79 101 45 21 10 256 Net Oil Price $US/Bbl 57.73 67.49 73.69 83.84 96.34 --Proj. Sol'n Gas Rate mcf/d 504.4 763.9 379.1 172.7 84.0 --Proj. Sol'n Gas Volume MMSCF 184 279 138 63 26 690 Comp. Sol'n Gas Volume MMSCF 56 85 42 19 8 210 Net Sol'n Gas Volume MMSCF 52 80 35 17 8 192 Net Sol'n Gas Price $US/mcf 1.45 1.48 1.51 1.54 1.57 ---

Date 2009(12) 2010(12) 2011(12) 2012(12) 2013(12) Total WI WI Total BOE Rate BOE Prod Price / BOE BOE/d MSTB $US/Bbl 255 93.0 52.10 330 120.5 60.74 164 59.8 66.23 75 27.3 75.21 36 11.0 86.26 --311.6 --Sales Revenue Total M$US 4,922 7,318 3,960 2,054 952 19,205 Royalty Total M$US 246 366 591 239 0 1,442 Operating Costs M$US 1,102 1,245 978 839 654 4,818 Capital Costs M$US 1,761 821 0 0 0 2,583 Capital Aband. Total M$US 0 0 0 0 535 535 Before Tax Cash Flow M$US 1,813 4,886 2,390 976 -238 9,827 Income Taxes M$US 0 0 0 0 0 0 After Tax Cash Flow M$US 1,813 4,886 2,390 976 -238 9,827
Peep 2002 Edition 4
02/12/2009 17:36
Comp Royalty Total

(Nominal values)
Table 3
Date 2009(12) 2010(12) 2011(12) 2012(12) 2013(12) Total
Royalty AVR M$US 246 366 198 103 0 913
Royalty APR M$US 0 115 591 239 0 945
Royalty Total (Max) M$US 246 366 591 239 0 1,442
Sales Rev Split Oil/Total % 98.33 98.05 98.17 98.36 98.54 ---
Royalty Oil M$US 241 359 581 235 0 1,415
Sales Rev Split Gas/Total % 1.67 1.95 1.83 1.64 1.46 ---
Royalty Gas M$US 5 7 11 4 0 27
Sales Rev Split NGL/Total % 0.00 0.00 0.00 0.00 0.00 ---
Royalty NGL M$US 0 0 0 0 0 0
Peep 2002 Edition 4
02/12/2009 17:36

(Nominal values)
Table 3A



Date 2009(12) 2010(12) 2011(12) 2012(12) Total Oil /# Wells 6.3 7.6 8.0 8.0 --Proj. Oil Rate Bbl/d 623.5 465.1 199.3 101.2 --Proj. Oil Volume MSTB 228 170 73 25 495 Comp. Oil Volume MSTB 69 52 22 8 151 Net Oil Volume MSTB 66 49 21 8 144 Net Oil Price $US/Bbl 57.73 67.49 73.69 83.84 --Proj. Sol'n Gas Rate mcf/d 374.0 372.1 159.4 81.0 --Proj. Sol'n Gas Volume MMSCF 137 136 58 20 350 Comp. Sol'n Gas Volume MMSCF 42 41 18 6 107 Net Sol'n Gas Volume MMSCF 38 39 17 6 100 Net Sol'n Gas Price $US/mcf 1.45 1.45 1.45 1.45 ---

Date 2009(12) 2010(12) 2011(12) 2012(12) Total WI WI Total BOE Rate BOE Prod Price / BOE BOE/d MSTB $US/Bbl 209 76.4 52.10 161 58.7 60.72 69 25.1 66.18 35 8.5 75.13 --168.7 --Sales Revenue Total M$US 4,076 3,563 1,664 641 9,944 Royalty Total M$US 204 178 83 0 465 Operating Costs M$US 1,027 954 812 512 3,305 Capital Costs M$US 1,359 0 0 0 1,359 Capital Aband. Total M$US 0 0 200 204 404 Before Tax Cash Flow M$US 1,486 2,431 569 -74 4,412 Income Taxes M$US 0 0 0 0 0 After Tax Cash Flow M$US 1,486 2,431 569 -74 4,412
Peep 2002 Edition 4
02/12/2009 17:36
Comp Royalty Total

(Nominal values)
Table 3A
Date 2009(12) 2010(12) 2011(12) 2012(12) Total
Royalty AVR M$US 204 178 83 0 465
Royalty APR M$US 0 0 0 0 0
Royalty Total (Max) M$US 204 178 83 0 465
Sales Rev Split Oil/Total % 98.50 98.09 98.24 98.45 ---
Royalty Oil M$US 199 175 82 0 456
Sales Rev Split Gas/Total % 1.50 1.91 1.76 1.55 ---
Royalty Gas M$US 5 3 1 0 9
Sales Rev Split NGL/Total % 0.00 0.00 0.00 0.00 ---
Royalty NGL M$US 0 0 0 0 0
Peep 2002 Edition 4
02/12/2009 17:36

(Nominal values)
Table 3B


Net Revenue Less: Bonuses & Fees Operating Costs Tariffs Prod & Asset Taxes Capital Costs Other Income/Expense Before Tax Cash Flow Less Income Tax After Tax Cash Flow (M$US) 3,226 0 1,575 0 0 336 0 1,315 0 1,315 (%) 100.00 0.00 48.81 0.00 0.00 10.42 0.00 40.77 0.00 40.77 ($US/BOE) 60.81 0.00 29.68 0.00 0.00 6.34 0.00 24.80 0.00 24.80

Date 2009(12) 2010(12) Total Oil /# Wells 6.0 6.0 --Proj. Oil Rate Bbl/d 343.2 164.5 --Proj. Oil Volume MSTB 125 55 180 Comp. Oil Volume MSTB 38 17 55 Net Oil Volume MSTB 36 17 53 Net Oil Price $US/Bbl 57.73 67.49 --Proj. Sol'n Gas Rate mcf/d 0.0 0.0 --Proj. Sol'n Gas Volume MMSCF 0 0 0 Comp. Sol'n Gas Volume MMSCF 0 0 0 Net Sol'n Gas Volume MMSCF 0 0 0 Net Sol'n Gas Price $US/mcf 0.00 0.00 ---

WI WI Total Date BOE Rate BOE Prod Price / BOE BOE/d MSTB $US/Bbl 2009(12) 105 38.2 57.73 2010(12) 50 16.8 67.49 Total --55.0 --Sales Revenue Total M$US 2,205 1,131 3,337 Royalty Total M$US 110 0 110 Operating Costs M$US 864 711 1,575 Capital Costs M$US 0 0 0 Capital Aband. Total M$US 0 336 336 Before Tax Cash Flow M$US 1,231 85 1,315 Income Taxes M$US 0 0 0 After Tax Cash Flow M$US 1,231 85 1,315
Peep 2002 Edition 4
02/12/2009 17:35
Comp Royalty Total

(Nominal values)
Table 3B
Sales Rev Split NGL/Total % 0.00 0.00 ---
Date 2009(12) 2010(12) Total
Royalty AVR M$US 110 0 110
Royalty APR M$US 0 0 0
Royalty Total (Max) M$US 110 0 110
Sales Rev Split Oil/Total % 100.00 100.00 ---
Royalty Oil M$US 110 0 110
Sales Rev Split Gas/Total % 0.00 0.00 ---
Royalty Gas M$US 0 0 0
Royalty NGL M$US 0 0 0
Peep 2002 Edition 4
02/12/2009 17:35
Figure 1
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PEP 38738 47.6 square miles
Cardiff Cheal
Map of New Zealand Highlighting Petroleum Exploration Permit (PEP) 38738

70535
Figure 2
Stratford-1 well PEP 38738
Cardiff Field
3D seismic
Cheal Field
PEP 38738 With Seismic Control

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Need updated graph

Block A Block B
Cheal Field-Depth Structure at Sandstone 3 with Fault Framework Interpreted by Sproule

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Figure 3
Need updated graph

Well Tops
Cheal Field-Depth Structure at Sandstone 3 with Well Tops

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Figure 4
Figure 5
Cheal Field Mt. Messenger Sandstone 3 Depth Structure Map

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Figure 6
Cheal Field Mt. Messenger Sandstone 2 Depth Structure Map

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Cheal Field Mt. Messenger Sandstone 3 Net pay Map

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Figure 7
Cheal Field Mt. Messenger Sandstone 2 Net pay Map

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Figure 8
Figure 9
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Figure 10
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Figure 11
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Figure 12
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Figure 13
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Figure 14
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EVALUATION OF THE P&NG RESERVES OF TAG OIL Limited IN THE CHEAL AREA OF NEW ZEALAND (As of December 31,

Project No.: Prepared For: Authors:

Table of Contents Page 1

Table of Contents Page 2

Figure S-2 Figure S-3 Figure S-4

Table of Contents Page 3

Historical Data, Interests and Burdens

BOE Cautionary Statement

___________________________________ Sunday O. Edobor, P.Eng., Senior Petroleum Engineer / /2009 dd/mm/yr

___________________________________ Douglas J. Carsted, P.Geol. Vice-President, Geoscience / /2009 dd/mm/yr

Sproule Executive Endorsement

___________________________________ John L.Chipperfield, P.Geol.

3. I am a member of the following professional organizations:

Donald W. Woods, P. Eng.

3. I am a member of the following professional organizations:

Sunday Edobor, P.Eng.

3. I am a member of the following professional organizations:

Douglas J. Carsted, P.Geol.

3. I am a member of the following professional organizations:

John L. Chipperfield, P.Geol.

Inflation Rate (%/Yr)

1.45 Escalation rate of 2.0% thereafter

NZ Economic Summary (Company)

NZ Company Economic Indicators::New Zealand R/T (1995)

NZComp. Economics (per Unit)::New Zealand R/T (1995)

NZ Prod Summary::New Zealand R/T (1995)

NZ Comp Cash Flow::New Zealand R/T (1995)

Peep 2002 Edition 4

NZ Economic Summary (Company)

NZ Company Economic Indicators::New Zealand R/T (1995)

NZComp. Economics (per Unit)::New Zealand R/T (1995)

NZ Prod Summary::New Zealand R/T (1995)

NZ Comp Cash Flow::New Zealand R/T (1995)

Peep 2002 Edition 4

NZ Economic Summary (Company)

NZ Company Economic Indicators::New Zealand R/T (1995)

NZComp. Economics (per Unit)::New Zealand R/T (1995)

NZ Prod Summary::New Zealand R/T (1995)

NZ Comp Cash Flow::New Zealand R/T (1995)

Peep 2002 Edition 4

PEP 38738 47.6 square miles

Map of New Zealand Highlighting Petroleum Exploration Permit (PEP) 38783

DAILY EQUIVALENT (BOE) FORECAST boepd

350 300 250 200 150 100 50 0 2009 2010 2011

Daily Company Gross Barrels of Oil Equivalent (BOE) Forecast

ANNUAL CASH FLOW PROJECTIONS M$US

5000 4000 3000 2000 1000 0 -1000 2009 2010 2011

Annual Cash Flow (Before Income Tax)

NET PRESENT VALUE - M$US

0 5 10 15 DISCOUNT RATES (%)

Net Present Value (Before Income Tax)

Estimation of Reserves and Production Forecasts

Operating and Capital Costs

Capital Costs US$M (2009 Dollars)

Date March 2009 June 2009

1,100 2,420 220 2,420 220 4,015 1980 6,435 2,420

Royalties and Taxes

Net Present Values

211 211 211 96 96 96

18.8 18.8 18.8 9.8 9.8 9.8

1.22 1.22 1.22 1.22 1.22 1.22

3,663 3,663 3,663 684 684 684

128 128 128 85 85 85

23.9 23.9 23.9 9.5 9.5 9.5