TAG Oil Ltd. report that the Cheal-B5 discovery well is naturally flowing at an average rate of 1,870 barrels of oil equivalent per day, consisting of 1,700 barrels of oil and 1.0 million cubic feet of gas per day flowing through a 40/64" choke over a five-day test period.

TAG perforated and flow tested 20 meters of continuous oil-and-gas pay in the Cheal-B5 well within the 35 meters of net pay intercepted within the primary Mt. Messenger Formation target. This is the most extensive pay interval ever recorded by a Cheal well, and includes record porosities of up to 30% and a record 60% total gas kick encountered while drilling.

The Cheal-B5 well is the third well in the current 10-well drilling campaign, and it was drilled, tested and placed on full-time production in less than 30 days, with capital payback anticipated in less than 14 days. TAG is now making preparations to drill the Cheal-B6 and the Cheal-B7 wells.

"Given the success of our drilling campaigns and the excellent result from Cheal-B5, results indicate substantially more upside potential in the Cheal field than originally anticipated." commented TAG CEO Garth Johnson. "This result has once again exceeded our expectations and could prove to be a game-changer for TAG's asset valuation and the scope of the Company."

The Cheal-B5 well is situated in close proximity to TAG's Cheal Production Facility and existing infrastructure. As a result, TAG was immediately able to place the well on full-time production. With this latest discovery, the Cheal Facility is now producing approximately 2,700 barrels of oil equivalent-predominately oil-per day.

Once the current 10-well campaign is complete, TAG plans to commence the next drilling campaign following approvals for another 18 wells within the Company's 100%-owned Cheal oil and gas field, located in Petroleum Mining Permit 38156 in the Taranaki Basin New Zealand. For further information on the Cheal oil and gas field please visit http://www.tagoil.com/operations.asp.

Tags: TAG Oil Ltd.