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UNDERWRITING AGREEMENT

Effective as of May 12, 2006

TAG Oil Ltd.Suite 400, 534  17th Avenue
S.W.Calgary, Alberta T2S 0B1

Attention: Drew Cadenhead, President and Chief Executive
Officer

Dear Sir:

**Re:**            
**Private Placement of Common Shares of TAG Oil Ltd.**

Canaccord Capital Corporation ("Canaccord" or the "Underwriter")
understands that TAG Oil Ltd. (the "Corporation") proposes to issue and
sell 40,000,000 common shares in the capital of the Corporation (the "Offered
Shares") by way of private placement (the "Offering").

The Offered Shares will be offered to purchasers resident in the Selling
Jurisdictions and such other provinces or territories of Canada as may be agreed
to by the Underwriter and the Corporation, as evidenced by the Corporation's
acceptance of a subscription agreement with respect thereto, on a private
placement basis pursuant to exemptions from prospectus, registration and
equivalent requirements.

Subject to the terms and conditions hereof, the Underwriter hereby agrees to act
as, and the Corporation hereby appoints the Underwriter as, the sole exclusive
agent of the Corporation to offer the Offered Shares for sale on the Closing
Date, at a price of $0.75 per Offered Share, provided that in the event that
less than all of the Offered Shares are sold by the Underwriter as agent, the
Underwriter hereby agrees to purchase the Offered Shares from the Corporation,
and the Corporation hereby agrees to issue and sell to the Underwriter, subject
to Section 16 hereof, all but not less than all of the Offered Shares for an
aggregate consideration of $30,000,000. The Corporation shall be entitled to
provide to the Underwriter a president's list of subscribers for up to 6,666,666
Offered Shares, which subscribers shall be afforded an opportunity to
participate in the Offering upon the due execution of a Subscription Agreement
and the fulfillment of the terms thereof.

Although this offer is made by the Underwriter, as purchaser, the Underwriter
will endeavour, prior to the Closing Date, to arrange for qualified purchasers
(which, together with the Underwriter, are sometimes collectively referred to
herein as the "Subscribers") who will subscribe for the Offered Shares
directly from the Corporation on a "private placement" basis.

It is understood and agreed that the obligations of the Underwriter hereunder
will not be discharged or reduced by any substitution of Subscribers as
purchasers except in respect of payment of the purchase price for the Offered
Shares and then only to the extent that the Subscribers pay at the Closing the
purchase price for each Offered Share subscribed for by them. The Underwriter
agrees that each Subscriber:

| | (a) | resident in a Selling Province or otherwise subject to
      the Applicable Securities Laws of a Selling Province, will be eligible to
      and will purchase the Offered Shares under applicable prospectus and
      registration exemptions of the Applicable Securities Laws of such Selling
      Province;
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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- 2 -

| | (b) | who is resident in the United States or is a U.S. Person
      or purchasing the Offered Shares for the account or benefit of a U.S.
      Person, will be eligible to purchase and will purchase the Offered Shares
      pursuant to an exemption from registration provided by Section 4(2) of the
      U.S. Securities Act and Rule 506 of Regulation D promulgated thereunder
      for offerings to accredited investors; and
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | (c) | resident in any other jurisdiction or otherwise subject
      to the securities laws of any other jurisdiction, will be eligible to and
      will purchase Offered Shares on a basis which does not require the filing
      of a prospectus, registration statement or similar document in such
      jurisdiction.                                                                                                               

If the Underwriter purchases any Offered Shares pursuant to this Agreement, the
Underwriter may not offer or sell such Offered Shares except in compliance with
Rule 903 of Regulation S or Rule 144A under the U.S. Securities Act, and in each
case in compliance with Schedule "A" hereto.

The Underwriter shall be entitled, in connection with the offering and sale of
the Offered Shares, to retain as sub-underwriter other registered investment
dealers or brokers to participate in the solicitation of offers to purchase the
Offered Shares and may receive (for delivery to the Corporation at the Closing
Time) subscriptions for Offered Shares from other registered investment dealers
or brokers. The Underwriter will have the exclusive right to select such
sub-underwriter and the fees payable to such sub-underwriter shall be for the
account of the Underwriter.

In consideration for its service hereunder, the Underwriter shall be entitled to
the compensation provided for in accordance with Section 2 hereof. For greater
certainty, the services provided by the Underwriter in connection herewith will
not be subject to the Goods and Services Tax provided for in the Excise Tax
Act (Canada) and any taxable supplies provided will be incidental to the
exempt financial services provided.

|1.  | Definitions       
|--- | ------------------
|    |                   
|1.1 | In this Agreement:
|    |                   
|    | (a)               
|    |                   
|    | (b)               
|    |                   
|    | (c)               
|    |                   
|    | (d)               
|    |                   
|    | (e)               
|    |                   
|    | (f)               

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- 3 -

| | (g) | "Closing Time" means 8:00 a.m. (Calgary time) or
      such other time, on the Closing Date, as the Underwriter and the
      Corporation may agree;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | (h) | "Common Shares" means the common shares in the
      capital of the Corporation;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | (i) | "Corporation Documents" shall have the meaning
      assigned thereto in Section 5(ggg) hereof;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | (j) | "Corporation's counsel" means Blake, Cassels &
      Graydon LLP or such other legal counsel as the Corporation may
    appoint;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | (k) | "Corporations U.S. counsel" means Davis Wright
      Tremaine LLP, or such other legal counsel as the Corporation may
      appoint;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | (l) | "Documents"means, collectively:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |     | (i)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |     | (ii)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |     | (iii)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |     | (iv)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |     | (v)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | (m) | "Due Diligence Session" shall have the meaning set
      forth in Section 3(g) of this Agreement;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | (n) | "Environmental Laws" shall have the meaning set
      forth in Section 5(gg) of this Agreement;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | (o) | "Exchange" means the TSX Venture
  Exchange;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | (p) | "FCPA" shall have the meaning set forth in Section
      5(iii) of this Agreement;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | (q) | "Financial Statements" means, collectively: (i)
      the unaudited interim consolidated financial statements of the Corporation
      for the nine months ended December 31, 2005, together with the notes and
      management's discussion and analysis relating thereto; (ii) the unaudited
      interim consolidated financial statements of the Corporation for the six
      months ended September 30, 2005, together with the notes and management's
      discussion and analysis relating thereto; (iii) the unaudited interim
      consolidated financial statements of the Corporation for the three months
      ended June 30, 2005, together with the notes and management's discussion
      and analysis relating thereto; and (iv) the audited consolidated financial
      statements of the Corporation for the year ended March 31, 2005, together
      with the notes and management's discussion and analysis relating thereto
      and the auditors' report thereon;
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | (r) | "Financing" shall have the meaning set forth in
      Section 12 of this Agreement;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              

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| | (s)  | "Hazardous Substances" shall have the meaning set
      forth in Section 5(gg) of this Agreement;                                                                                                                                                                                                                                 
| | ---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                                                                                                                                                                                                   
| | (t)  | "Indemnified Parties" shall have the meaning set
      forth in Section 6(a) of this Agreement;                                                                                                                                                                                                                                   
| |      |                                                                                                                                                                                                                                                                                                                                   
| | (u)  | "Interests" shall have the meaning set forth in
      Section 5(bb) of this Agreement;                                                                                                                                                                                                                                            
| |      |                                                                                                                                                                                                                                                                                                                                   
| | (v)  | "Material Agreements" means, collectively, this
      Agreement, the Subscription Agreements and the Purchase and Sale
      Agreement;                                                                                                                                                                                           
| |      |                                                                                                                                                                                                                                                                                                                                   
| | (w)  | "Material Contracts" shall have the meaning set
      forth in Section 5(kk) of this Agreement;                                                                                                                                                                                                                                   
| |      |                                                                                                                                                                                                                                                                                                                                   
| | (x)  | "PEP 38738" means permit number 38738 issued by
      the Ministry of Economic Development of New Zealand;                                                                                                                                                                                                                        
| |      |                                                                                                                                                                                                                                                                                                                                   
| | (y)  | "Public Record" means all information filed with
      the Securities Commissions, including without limitation, the Documents
      and any other information filed with any such securities commission or
      similar regulatory authority in compliance, or intended compliance, with
      any Applicable Securities Laws;  
| |      |                                                                                                                                                                                                                                                                                                                                   
| | (z)  | "Purchase and Sale Agreement" means the purchase
      and sale agreement dated May 9, 2006 between the Corporation, TAG Oil (NZ)
      Limited and South Pacific Lease Operations Ltd. in respect of the
      Acquisition;                                                                                                      
| |      |                                                                                                                                                                                                                                                                                                                                   
| | (aa) | "Regulation S" means Regulation S under the U.S.
      Securities Act;                                                                                                                                                                                                                                                            
| |      |                                                                                                                                                                                                                                                                                                                                   
| | (bb) | "Responses" shall have the meaning set forth in
      Section 3(g) of this Agreement;                                                                                                                                                                                                                                             
| |      |                                                                                                                                                                                                                                                                                                                                   
| | (cc) | "SEC" means the United States Securities and
      Exchange Commission;                                                                                                                                                                                                                                                           
| |      |                                                                                                                                                                                                                                                                                                                                   
| | (dd) | "Securities Commissions" means, collectively, the
      securities commissions or similar regulatory authorities in the Selling
      Provinces and "Securities Commission" means any one of
  them;                                                                                                                              
| |      |                                                                                                                                                                                                                                                                                                                                   
| | (ee) | "Selling Dealer Group" means the dealers and
      brokers other than the Underwriter who participate in the offer and sale
      of the Offered Shares pursuant to this Agreement;                                                                                                                                               
| |      |                                                                                                                                                                                                                                                                                                                                   
| | (ff) | "Selling Jurisdictions" means the Selling
      Provinces and, to the extent permitted by this Agreement, offshore and in
      the United States;                                                                                                                                                                                
| |      |                                                                                                                                                                                                                                                                                                                                   
| | (gg) | "Selling Provinces" means the Provinces of British
      Columbia, Alberta and Ontario;                                                                                                                                                                                                                                           
| |      |                                                                                                                                                                                                                                                                                                                                   
| | (hh) | "Subscriber" means any person or entity who
      executes a Subscription Agreement which is accepted by the
    Corporation;                                                                                                                                                                                                     
| |      |                                                                                                                                                                                                                                                                                                                                   
| | (ii) | "Subscription Agreements" means the agreements to
      be entered into at the Closing Time between the Corporation and each of
      the Subscribers setting out the contractual relationship between the
      Corporation and the Subscribers, in form and substance satisfactory to the
      Corporation and the Underwriter;

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- 5 -

| | (jj) | "Subsidiaries" means TAG Oil (NZ) Limited, TAG Oil
      (Canterbury) Limited and Durum Energy (PNG) Limited;                                                
| | ---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                              
| | (kk) | "Transfer Agent" means Computershare Trust Company
      of Canada;                                                                                          
| |      |                                                                                                                                                              
| | (ll) | "Underwriter's counsel" means Bennett Jones LLP or
      such other legal counsel as the Underwriter may appoint;                                            
| |      |                                                                                                                                                              
| | (mm) | "Underwriter's U.S. counsel" means Dorsey &
      Whitney LLP or such other legal counsel as the Underwriter may
    appoint;                                
| |      |                                                                                                                                                              
| | (nn) | "Underwriter's Fee" shall have the meaning set
      forth in Section 2(a) of this Agreement;                                                                
| |      |                                                                                                                                                              
| | (oo) | "United States" means the United States of
      America, its territories and possessions, any State of the United States
      and the District of Columbia;
| |      |                                                                                                                                                              
| | (pp) | "U.S. Exchange Act" means the United States
      Securities Exchange Act of 1934, as amended;                                                               
| |      |                                                                                                                                                              
| | (qq) | "U.S. Person" shall have the meaning set forth in
      Schedule "A" hereto; and                                                                             
| |      |                                                                                                                                                              
| | (rr) | "U.S. Securities Act" means the United States
      Securities Act of 1933, as amended.                                                                      

1.2               In
  this Agreement, "affiliated", "misrepresentation", "material change", "material
  fact" and "subsidiary" have the meanings ascribed thereto under the Applicable
  Securities Laws of the Selling Provinces, and "distribution" means "distribution"
  or "distribution to the public", as the case may be, as defined under the Applicable
  Securities Laws of the Selling Provinces, and "distribute" has a corresponding
  meaning.

**2.
    **Commission****

In consideration for its services hereunder, including underwriting the
Offering, the Corporation agrees that on the Closing Date in respect of each
Offered Share issued hereunder, it shall pay to the Underwriter a fee of 6% of
the aggregate gross proceeds received by the Corporation on the sale of the
Offered Shares, including any Offered Shares sold to a Subscriber included on
the president's list forwarded by the Corporation, being an amount equal to
$0.045 per Offered Share or $1,800,000 in the aggregate for the Offered Shares
(the "Underwriter's Fee").

|3. | The Offering                
|-- | ----------------------------
|   |                             
|   | The Corporation agrees that:
|   |                             
|   | Offered Shares              
|   |                             
|   | (a)                         
|   |                             
|   | Material Agreements         
|   |                             
|   | (b)                         

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- 6 -

Conduct of the Private
Placement

| | (c) | as soon as reasonably possible, and in any event by the
      Closing Date, the Corporation shall take all such steps as may reasonably
      be necessary to enable the Offered Shares to be offered for sale and sold
      on a private placement basis in the Selling Jurisdictions, through the
      Underwriter in the manner contemplated herein by way of the exemptions
      from the prospectus requirements set forth in the Applicable Securities
      Laws, and the Corporation shall not take any action that would prevent the
      Corporation and the Underwriter from relying upon the exemptions from the
      prospectus requirements of Applicable Securities Laws in connection with
      the Offering;
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Regulatory Approvals

| | (d) | it will use its best efforts to obtain, prior to the
      Closing Time, all necessary regulatory approvals for the distribution of
      the Offered Shares and the listing of the Offered Shares on the
      Exchange;
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Status as Reporting Issuer and
Listing

| | (e) | it shall (subject to any corporate reorganization in
      which the successor corporation maintains such status), use its reasonable
      best efforts to maintain its status as a reporting issuer (or equivalent)
      not in default of any Applicable Securities Laws until the first
      anniversary of the Closing Date;                                    
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                        
| | (f) | it shall (subject to any corporate reorganization in
      which the successor corporation maintains such status), use its best
      efforts to maintain the listing of its Common Shares on the Exchange (or
      the Toronto Stock Exchange if it obtains a listing thereon subsequent to
      the date hereof) until the first anniversary of the Closing
  Date;

Diligence Review

| | (g) | prior to the Closing Time, the Corporation shall allow
      the Underwriter (and its counsel and consultants) to conduct all due
      diligence inquiries and investigations which the Underwriter may
      reasonably require or consider necessary or appropriate in order to
      fulfill the Underwriter's obligations as a registrant to complete the
      Offering as provided herein. The Corporation will provide to the
      Underwriter (and its counsel and consultants) reasonable access to the
      Corporation's and the Subsidiaries' properties (if any), senior management
      personnel and corporate, financial and other records, for the purposes of
      conducting such due diligence. Without limiting the scope of the due
      diligence inquiry, the Underwriter (or its counsel and consultants) may
      conduct, the Corporation shall also make available its directors and
      senior management to answer any questions which the Underwriter may have
      and to participate in one or more due diligence sessions to be held prior
      to the Closing Date (the "Due Diligence Session"). The Underwriter
      shall distribute a list of written questions to be answered in advance of
      such Due Diligence Session and the Corporation shall provide written
      responses to such questions and shall use its best efforts to have its
      audit committee, auditors and independent engineers provide written
      responses to such questions in advance of the Due Diligence Session (the
      "Responses"). The Underwriter shall have the option to terminate
      this Agreement prior to the Closing Time if its due diligence inquiries or
      investigations identify a material adverse
circumstance;
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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- 7 -

Issuance of Share
Certificates

| | (h) | it shall cause the Transfer Agent to make all necessary
      arrangements for the issuance (at the sole cost and expense of the
      Corporation) of the definitive certificates representing the Offered
      Shares delivered for certificates representing, in the aggregate, the same
      number of Common Shares in such denominations, registered in such name and
      to be released at such of the offices of the Transfer Agent as the
      Underwriter may direct at any time and from time to time, but not less
      than twenty-four (24) hours prior to the Closing Time, provided such
      issuances are pursuant to exempt trades under the Applicable Securities
      Laws; and
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Documents

| | (i) | the Corporation shall cause to be provided to the
      Underwriter such number of copies of the Documents as the Underwriter may
      reasonably request and such delivery shall constitute the Corporation's
      authorization to use the Documents in connection with the sale of the
      Offered Shares.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4. | Corporation's Covenants as to Changes
|-- | -------------------------------------
|   |                                      
|   | The Corporation agrees that:         
|   |                                      
|   | (a)                                  
|   |                                      
|   |                                      
|   |                                      
|   |                                      
|   |                                      
|   |                                      
|   |                                      
|   |                                      
|   |                                      
|   |                                      
|   |                                      
|   |                                      
|   |                                      
|   |                                      
|   |                                      
|   | (b)                                  

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- 8 -

| | (i)                                                                                                                                                                                                                                                                               | any request of any Securities Commission, other
      securities commission, similar regulatory authority, the Exchange or other
      competent authority for any amendment to the Public Record or for any
      information which may be material to the distribution of the Offered
      Shares;                                                                            
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                   |                                                                                                                                                                                                                                                                                                                                                                                  
| | (ii)                                                                                                                                                                                                                                                                              | the issuance by any Securities Commission,
      other securities commission, similar regulatory authority, the Exchange or
      other competent authority of any order to cease or suspend trading of any
      securities of the Corporation (including the Offered Shares) or of the
      institution or threat of institution of any proceedings for that purpose;
      or
| |                                                                                                                                                                                                                                                                                   |                                                                                                                                                                                                                                                                                                                                                                                  
| | (iii)                                                                                                                                                                                                                                                                             | the receipt by the Corporation of any
      communication from any Securities Commission, other securities commission,
      similar regulatory authority, the Exchange or other competent authority
      relating to any part of the Public Record or the distribution of the
      Offered Shares;                                                                            
| |                                                                                                                                                                                                                                                                                   |                                                                                                                                                                                                                                                                                                                                                                                  
| | and except as otherwise agreed by the
      Underwriter, the Corporation will use its reasonable commercial efforts to
      prevent the issuance of any such cease trading order or suspension order
      and, if issued, to obtain the withdrawal thereof as soon as possible;

|       | (c)                                                         | it will promptly comply, to the reasonable satisfaction
      of the Underwriter and the Underwriter's counsel, with the Applicable
      Securities Laws with respect to any material change, change of a material
      fact, occurrence or event of the nature referred to in Sections 4(a) and
      (b) above;                                                                                                                                                                                                                                                                                                             
|------ | ----------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|       | (d)                                                         | until the Closing Date, the Corporation will promptly
      provide to the Underwriter, for review and comment by Underwriter and the
      Underwriter's counsel, prior to the publication, filing or issuance
      thereof, any document that will, when filed or issued, constitute part of
      the Public Record or press release or other communication to the public or
      to the Corporation's securityholders;                                                                                                                                                                                                    
|       |                                                             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|       | (e)                                                         | it will promptly advise the Underwriter if it becomes
      aware that any of the representations and warranties of any parties to the
      Purchase and Sale Agreement cease to be true and correct in any material
      respect or if the Corporation becomes aware of a material fact or event or
      that there is any change of any material fact or event which is, or may
      become of such a nature as to render any such representations and
      warranties or any information provided to the Underwriter in respect of
      the Acquisition, untrue, false or misleading in any material respect;
      and
|       |                                                             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|       | (f)                                                         | it will promptly inform the Underwriter in writing if the
      Purchase and Sale Agreement is terminated or the Corporation determines it
      will not be proceeding with the Acquisition.                                                                                                                                                                                                                                                                                                                                                                                                                                   
|       |                                                             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|**5.** | **Representations and Warranties of the
      Corporation**

The Corporation represents and warrants to the Underwriter, as at the date hereof
  and at the Closing Time, and acknowledges that the Underwriter is relying upon
  such representations and warranties, that:

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- 9 -

Corporate Matters

| | (a) | each of the Corporation and the Subsidiaries has been
      duly incorporated, continued or amalgamated and organized and is validly
      existing under the laws of the jurisdiction of its incorporation,
      continuation or amalgamation and has all requisite corporate authority and
      power to carry on its business, as now conducted and as presently proposed
      to be conducted by it, and to own, lease and operate its properties and
      assets;                                                                                                                                                                                                                                                                  
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | (b) | each of the Corporation and the Subsidiaries is duly
      registered and qualified to carry on business and is validly subsisting
      under the laws of each jurisdiction in which it carries on its
      business;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | (c) | the Corporation has no subsidiaries other than TAG Oil
      (NZ) Limited, TAG Oil (Canterbury) Limited and Durum Energy (PNG) Limited
      and, other than the Subsidiaries, the Corporation is not affiliated with,
      nor is it a holding corporation of, any other body corporate, nor is it a
      partner of any partnership nor does it own any securities of any other
      entity;                                                                                                                                                                                                                                                                                                                                           
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | (d) | other than TAG Oil (NZ) Limited and TAG Oil (Canterbury)
      Limited, none of the Subsidiaries conducts any active business
      operations;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | (e) | the minute book of the Corporation and each of the
      Subsidiaries contains full, true and correct copies of the articles and
      by-laws or other constating documents of the Corporation and each of the
      Subsidiaries and, on or before the Closing Time, will contain copies of
      all minutes of all meetings and all consent resolutions of the directors,
      committees of directors and shareholders of the Corporation and all such
      meetings were duly called and properly held and all such resolutions were
      properly adopted except to the extent that any such failure could not
      reasonably be expected to have a material adverse effect on the
      Corporation or any of the Subsidiaries;

Issuance of Securities

| | (f) | the Offered Shares will be duly and validly authorized
      and issued as fully paid and non-assessable Common Shares at the Closing
      Time;                                                                                                                                         
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                           
| | (g) | at the Closing Time, the form and terms of the definitive
      certificates representing the Common Shares will have been duly approved
      and adopted by the Corporation and comply with all legal requirements
      relating thereto, including the requirements of the
  Exchange;

No Breach

| | (h) | neither the Corporation nor any of the Subsidiaries is in
      default or breach or violation of, and the execution and delivery of, and
      the performance and compliance with the terms of any of the Material
      Agreements and the Offering do not and will not:
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                            
| |     | (i)                                                                                                                                                                                                                                                                        

---

- 10 -

or other document to which the
Corporation or any of the Subsidiaries is a party or by which it is bound, or
any judgment, decree, order, statute, rule or regulation applicable to the
Corporation or any of the Subsidiaries, which default or breach might reasonably
be expected to materially adversely affect the assets, liabilities, business,
operations, capital or condition (financial or otherwise) of the Corporation or
the properties or assets of the Corporation together with the Subsidiaries
(taken as a whole);

| | (ii) | create a right for any other party to terminate,
      accelerate or in any way alter any other rights existing under any
      indenture, mortgage, note, contract, agreement (written or oral),
      instrument, lease or other document to which the Corporation or any of the
      Subsidiaries is a party or by which any of them is bound which, upon
      exercise of such right, might reasonably be expected to materially
      adversely affect the assets, liabilities, business, operations, capital or
      condition (financial or otherwise) of the Corporation together with the
      Subsidiaries (taken as a whole) or the properties or assets of the
      Corporation together with the Subsidiaries (taken as a
  whole);
| | ---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Corporate Authority and
Effect

| | (i) | the Corporation has full corporate power and authority to
      enter into the Material Agreements and to perform its obligations set out
      herein and therein, and this Agreement and the Purchase and Sale Agreement
      have been and the Subscription Agreements, when entered into, shall be
      duly authorized, executed and delivered by the Corporation, and this
      Agreement and the Purchase and Sale Agreement are, and the Subscription
      Agreements, when entered into, shall be, legal, valid and binding
      obligations of the Corporation enforceable against the Corporation in
      accordance with their respective terms subject to the general
      qualifications that:
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |     | (i)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |     | (ii)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |     | (iii)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | (j) | the representations and warranties made by the
      Corporation in the Material Agreements are, or will be, correct as of the
      date they are made;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           

No Change

| | (k) | there has not been any adverse material change in the
      capital, assets, liabilities or obligations (absolute, accrued, contingent
      or otherwise) of the Corporation and the Subsidiaries (taken as a whole),
      from the position set forth in the Financial Statements or as otherwise
      disclosed in the Public Record and there has not been any adverse material
      change in the business, operations, capital or condition (financial or
      otherwise) or results of the operations of the Corporation since March 31,
      2005, which have not been disclosed in the Public
Record;
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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- 11 -

| | (l) | since March 31, 2005, there have been no material facts,
      transactions, events or occurrences which could materially adversely
      affect the capital, assets, liabilities (absolute, accrued, contingent or
      otherwise), business, operations or condition (financial or otherwise) or
      results of the operations of the Corporation and the Subsidiaries (taken
      as a whole), which have not been disclosed in the Public Record;
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | (m) | the Corporation and each Subsidiary has not entered into
      any transaction which is or may be material to the Corporation and the
      Subsidiaries (taken as a whole) and is not in the ordinary course of
      business, which have not been disclosed in the Public
  Record;                                                                                                                                                                   

Share Capital

| | (n) | the authorized capital of the Corporation consists of an
      unlimited number of Common Shares, of which as of the Closing Date
      (without giving effect to the Offering or the Acquisition), there will be
      46,631,081 Common Shares issued and outstanding as fully paid and
      non-assessable shares;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | (o) | other than pursuant to the provisions of this Agreement,
      there are no outstanding securities convertible or exchangeable into any
      securities of the Corporation or the Subsidiaries or any agreement,
      warrant, option, right or privilege being or capable of becoming an
      agreement, warrant, option or right for the purchase of any unissued
      securities of the Corporation or the Subsidiaries, except for 1,125,000
      Common Shares reserved for issuance upon the exercise of stock options
      currently issued pursuant to the Corporation's stock option plan, 200,000
      Common Shares to be reserved for issuance upon the exercise of stock
      options to be issued upon the Corporation graduating to Tier 1 of the
      Exchange and 400,000 Common Shares reserved for issuance upon the exercise
      of Common Share purchase warrants of the Corporation;
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | (p) | the Corporation is the beneficial owner and holder of
      record of all of the issued and outstanding securities in the capital of
      each of the Subsidiaries, with good and valid title to all such
      securities, free and clear of all liens and
encumbrances;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           

General Tax Matters

| | (q) | each of the Corporation and the Subsidiaries has duly
      filed all tax returns required to be filed by it, has paid all taxes due
      and payable by it and has paid all assessments and re-assessments and all
      other taxes, governmental charges, penalties, interest and other fines due
      and payable by it and which are claimed by any governmental authority to
      be due and owing and adequate provision has been made for taxes payable
      for any completed fiscal period for which tax returns are not yet required
      and there are no agreements, waivers, or other arrangements providing for
      an extension of time with respect to the filing of any tax return or
      payment of any tax, governmental charge or deficiency by the Corporation
      or the Subsidiaries and there are no actions, suits, proceedings,
      investigations or claims threatened or pending against the Corporation or
      the Subsidiaries in respect of taxes, governmental charges or assessments
      or any matters under discussion with any governmental authority relating
      to taxes, governmental charges or assessments asserted by any such
      authority;
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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- 12 -

Legal Compliance

| | (r) | there are no actions, suits, proceedings or inquiries
      pending or threatened against or involving or affecting the Corporation or
      the Subsidiaries, at law or in equity or before or by any federal,
      provincial, state, county, municipal or other governmental department,
      commission, board, bureau, agency or instrumentality which in any way
      materially adversely affect, or may in any way materially adversely
      affect, the assets, liabilities, business, operations, capital or
      condition (financial or otherwise) of the Corporation together with the
      Subsidiaries (taken as a whole) or the properties or assets of the
      Corporation together with the Subsidiaries (taken as a whole) or which
      affect or may affect the distribution of the Offered Shares or which would
      impair the ability of the Corporation to consummate the transactions
      contemplated hereby or to duly observe and perform any of its covenants or
      obligations contained in the Material Agreements and the Corporation is
      not aware of any existing ground on which such action, suit, proceeding or
      inquiry might be commenced with any reasonable likelihood of
    success;
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | (s) | the Corporation and the Subsidiaries have conducted and
      are conducting their business in compliance in all material respects with
      all applicable laws, rules and regulations and are fully licensed,
      registered or qualified to transact business and are in good standing in
      all jurisdictions in which the conduct of its business requires such
      qualification except to the extent that the failure to so comply or to be
      so licensed, registered or qualified would not have a material adverse
      effect on the Corporation or the Subsidiaries (taken as a whole), all such
      licenses, registrations or qualifications which are material are valid and
      existing in good standing, and the Corporation is not aware of any
      legislation, regulation, rule or lawful requirements presently in force or
      proposed to be brought into force which the Corporation anticipates that
      the Corporation or the Subsidiaries will be unable to comply with without
      materially adversely affecting the Corporation and the Subsidiaries (taken
      as a whole);                                                                                                                    
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | (t) | to the best of the knowledge of the Corporation, no other
      party is in default in the observance or performance of any term or
      obligation to be performed by it under any contract to which the
      Corporation or the Subsidiaries is a party or by which any of them is
      bound which is material to the business of the Corporation and the
      Subsidiaries (taken as a whole);                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | (u) | no event has occurred which after notice or lapse of time
      or both would directly or indirectly constitute such a default, in any
      such case which default or event would reasonably be expected to have a
      material adverse effect on the assets or properties, business, results of
      operations, prospects or condition (financial or otherwise) of the
      Corporation and the Subsidiaries (taken as a
whole);                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

Securities Compliance
Matters

| | (v) | none of the Securities Commissions, other securities
      commission, similar regulatory authority, the Exchange or other competent
      authority has issued any order which is currently outstanding preventing
      or suspending trading in any securities of the Corporation, no such
      proceeding is, to the knowledge of the Corporation, pending, contemplated
      or threatened, the Corporation is not in default of any requirement of
      Applicable Securities Laws which would have a material adverse effect on
      the Offering or the Corporation or any of the
  Subsidiaries;
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

- 13 -

| | (w) | other than the conditional approval of the Exchange with
      respect to the Offering, no authorization, approval or consent of any
      court or governmental authority or agency is required to be obtained by
      the Corporation in connection with the sale and delivery of the Offered
      Shares;                                                                                                                                                   
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | (x) | the Corporation is a "reporting issuer" not in default of
      Applicable Securities Laws in the Provinces of British Columbia and
      Alberta;                                                                                                                                                                                                                                                                                                               
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | (y) | the Corporation has taken or will take prior to the
      Closing Date all such steps as may be necessary to comply with such
      requirements of Applicable Securities Laws such that the Offered Shares
      may, in accordance with Applicable Securities Laws, be offered for sale
      and sold on a private placement basis in the Selling Jurisdictions through
      the Underwriter by way of the exemptions from the prospectus
      requirements;
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | (z) | the Corporations Common Shares are registered under
      Section 12 of the U.S. Exchange Act and the Corporation has filed with or
      furnished to the SEC all reports and other information required to be
      filed or furnished pursuant to the U.S. Exchange
Act;                                                                                                                                                                                     

Exchange Compliance

| | (aa) | the issued and outstanding Common Shares of the
      Corporation are listed and posted for trading on the Exchange and the
      Corporation is in compliance with the bylaws, rules and regulations of the
      Exchange;
| | ---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Oil & Gas Operations

| | (bb) | although it does not warrant title, the Corporation does
      not have reason to believe that each of the Corporation and the
      Subsidiaries does not have good and marketable title to or the irrevocable
      right to produce and sell its petroleum, natural gas and related
      hydrocarbons (for the purposes of this clause, the foregoing are referred
      to as the "Interests") and does represent and warrant that the
      Interests are free and clear of all liens, charges, encumbrances,
      restrictions or adverse claims created by, through or under the
      Corporation or any of the Subsidiaries, except as disclosed in the Public
      Record or those arising in the ordinary course of business, which are not
      material in the aggregate;
| | ---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | (cc) | the Corporation is not aware of any defects, failures or
      impairments in the title of the Corporation or the Subsidiaries to their
      respective oil and natural gas properties, whether or not an action, suit,
      proceeding or inquiry is pending or threatened or whether or not
      discovered by any third party which, in aggregate, could have a material
      adverse effect on the value of the Corporation's or each Subsidiary's
      interests in such property or their ability to exploit such interests or
      property;                                                                                                                                                                                                                                 
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | (dd) | in respect of the assets and properties of the
      Corporation and the Subsidiaries that are operated by the Corporation or
      any of the Subsidiaries:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |      | (i)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

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- 14 -

| |  | (ii)  | all such licenses, registrations, permits, authorizations
        and qualifications are valid and existing and in good standing and none
        of such licenses, registrations, permits, authorizations or qualifications
        contains any burdensome term, provision, condition or limitations which
        has or is likely to have a material adverse effect on the business of
        the Corporation or the Subsidiaries (taken as a whole) as now conducted,
        or as proposed to be conducted; and
| |  | ----- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |  | (iii) | the Corporation and the Subsidiaries have not received
        notice of any proceedings relating to the revocation or modification of
        any such licenses, registrations, permits, authorizations or qualifications
        which, if the subject of an unfavourable decision, ruling or finding,
        would materially adversely affect the business, operations, financial
        condition or prospects of the Corporation and the Subsidiaries (taken
        as a whole);                              

| | (ee) | all filings by the Corporation and the Subsidiaries
      pursuant to which the Corporation and the Subsidiaries have received, or
      are entitled to receive, government incentives have been made in
      accordance, in all material respects, with all applicable laws and contain
      no misrepresentations of material fact or omit to state any material fact
      which could cause any amount previously paid to the Corporation or the
      Subsidiaries, or previously accrued on the accounts thereof to be
      recovered or disallowed;            
| | ---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | (ff) | any and all operations of the Corporation and the
      Subsidiaries and, to the best of the Corporation's knowledge, any and all
      operations by third parties, on or in respect of the assets and properties
      of the Corporation and the Subsidiaries, have been conducted in accordance
      with good oil and gas industry practices applicable in the jurisdictions
      which such operations occur and in material compliance with applicable
      laws, rules, regulations, orders and directions of government and other
      competent authorities;

Environmental Compliance

| | (gg) | each of the Corporation and the Subsidiaries has
      conducted, and is conducting, its business in compliance in all material
      respects with all legislation, regulations or by-laws or other lawful
      requirements of any governmental or regulatory bodies ("Environmental
      Laws") of each jurisdiction in which it carries on business relating
      to the protection of the environment, occupational health and safety or
      the processing, use, treatment, storage, disposal, discharge, transport or
      handling of any pollutants, contaminants, chemicals or industrial, toxic
      or hazardous wastes or substance ("Hazardous Substances") or the
      licensing thereof;
| | ---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | (hh) | The Corporation and each of the Subsidiaries:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |      | (i)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |      | (ii)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |      | (iii)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           

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- 15 -

| | (ii) | to the knowledge of the Corporation (after inquiry that
      is consistent with sound environmental practices for businesses engaged in
      exploration for, and production of, oil & gas in the applicable
      jurisdictions) there has not occurred any material spills, emissions or
      pollution of any property of the Corporation or the Subsidiaries, or for
      which the Corporation or the Subsidiaries is or may be responsible, nor is
      the Corporation or the Subsidiaries the subject of any outstanding stop
      orders, control orders, clean-up orders or reclamation orders under
      applicable environmental laws and regulations;
| | ---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Disclosure and Records

| | (jj) | the books of account and other records of the Corporation
      and the Subsidiaries, whether of a financial or accounting nature or
      otherwise, have been maintained in accordance with prudent business
      practices;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | ---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | (kk) | the Corporation has provided the Underwriter and its
      advisors with true and complete copies of all indentures, mortgages,
      notes, contracts, agreements (written or oral), instruments, leases or
      other documents to which each of the Corporation or the Subsidiaries is a
      party that can reasonably be regarded as presently material to the
      Corporation or the Subsidiaries (collectively, the "Material
      Contracts") and each of the Material Contracts constitutes a legal,
      valid and binding obligation of the Corporation and the Subsidiaries, as
      applicable, enforceable in accordance with their respective terms and, to
      the best of the knowledge of the Corporation, no party thereto is in
      default thereunder;
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | (ll) | the information in respect of the assets, liabilities,
      business, operations and capital of the Corporation and the Subsidiaries
      provided by the Corporation and its representatives to the Underwriter or
      its representatives is true and correct in all material respects, as at
      the respective dates thereof and as at the date hereof and does not omit
      any data or information necessary to make the data and information
      provided, taken as a whole, not misleading in any material
  respect;                                                                                                                                                                                                                                               
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | (mm) | the description of the assets and liabilities of the
      Corporation and the Subsidiaries (taken as a whole) set forth in the
      Financial Statements fairly presents, in accordance with generally
      accepted accounting principles in Canada, the financial position and
      condition of the Corporation and the Subsidiaries on a consolidated basis
      as at the dates thereof and reflects all material liabilities (absolute,
      accrued, contingent or otherwise) of the Corporation and the Subsidiaries
      as at the dates thereof required to be disclosed in accordance with
      generally accepted accounting principles in Canada;                                                                                                                
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | (nn) | the information and statements set forth in the Public
      Record were true, correct, and complete and did not contain any
      misrepresentation, as of the date of such information or statements and no
      material change has occurred in relation to the Corporation and the
      Subsidiaries (taken as a whole) which is not disclosed in the Public
      Record, and the Corporation has not filed any confidential material change
      reports which continue to be confidential;                                                                                                                                                                                                                                                                                  

Registrar and Transfer Agent

| | (oo) | Computershare Trust Company of Canada at its principal
      office in the cities of Calgary and Vancouver is the duly appointed
      registrar and transfer agent of the Corporation with respect to its Common
      Shares;
| | ---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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- 16 -

Other Liabilities

| | (pp) | other than as provided for in this Agreement, the
      Corporation has not incurred any obligation or liability, contingent or
      otherwise, for brokerage fees, finder's fees, Underwriter's commission or
      other similar forms of compensation with respect to the
Offering;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | ---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | (qq) | the Corporation and the Subsidiaries are not a party to
      or bound by any agreement of guarantee, indemnification (other than an
      indemnification of directors and officers in accordance with the by-laws
      of the Corporation and applicable laws and indemnities arising in the
      ordinary course including pursuant to industry agreements such as
      operating agreements and indemnification provisions in favour of trustees
      under warrant indentures and similar agreements, registrar and transfer
      agency agreements and agency and underwriting agreements and similar
      arrangements which, taken together, do not have a material adverse effect
      on the Corporation and the Subsidiaries (taken as a whole)) or any other
      like commitment of the obligations, liabilities (contingent or otherwise)
      or indebtedness of any other person;
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | (rr) | except as set forth in the Documents, the Corporation
      does not have any loans or other indebtedness outstanding which have been
      made to or from any of its shareholders, officers, directors or employees
      or any other person not dealing at arm's length with the Corporation or
      the Subsidiaries that are currently outstanding;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | (ss) | no director, officer or other non-arm's length party to
      the Corporation or the Subsidiaries is entitled to receive any royalties,
      net profits interest or other payments or has any other rights based on
      production from properties or assets in which the Corporation or the
      Subsidiaries has an interest;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

Acquisition Related

| | (tt) | assuming all required approvals and consents are obtained
      and all other conditions to completing the Acquisition are satisfied or
      waived, the completion of the Acquisition is scheduled to occur on or
      about June 16, 2006, and the Corporation has no reason to believe that the
      Acquisition will not be completed in accordance with the terms and
      conditions of the Purchase and Sale Agreement;                                                                                                                                                                                                                                                                                                                                                                                 
| | ---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | (uu) | in the course of the due diligence conducted to date by
      the Corporation in respect of the Acquisition (which the Corporation
      believes is in scope consistent with sound industry practice and
      transactions of a similar value and which has been substantially
      completed), other than with respect to PEP 38738, which has been disclosed
      to the Underwriter, no matters have arisen from such review which
      constitutes something that has (or would reasonably be expected, given the
      present knowledge of the Corporation regarding the assets to be acquired
      pursuant to the Acquisition, to have) a material adverse effect on the
      value of the Acquired Assets or constitute a basis or reason for the
      Corporation not completing the Acquisition;
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | (vv) | there have been no amendments to the Purchase and Sale
      Agreement nor any waivers of any material covenants or agreements
      contained therein;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | (ww) | the representations and the warranties of the Corporation
      in the Purchase and Sale Agreement, a true copy of which has been provided
      to the Underwriter, are true and                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

---

- 17 -

correct as of the date hereof, except
as such would not have a material adverse effect on the business, operations,
capital, properties, assets, liabilities (absolute, accrued, contingent or
otherwise), condition (financial or otherwise) or results of operations of the
Corporation;

| | (xx) | the Corporation has no reason to believe that the
      representations and warranties of South Pacific Lease Operations Ltd. in
      the Purchase and Sale Agreement are not true and correct as of the date
      hereof or that South Pacific Lease Operations Ltd. is in breach of any of
      its covenants in the Purchase and Sale Agreement, except such as would not
      have a material adverse effect on the business, operations, capital,
      properties, assets, liabilities (absolute, accrued, contingent or
      otherwise) or results of the operations of Cheal Petroleum Limited, PEP
      38757 Ltd., PEP 38758 or the Corporation;   
| | ---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | (yy) | except in respect of PEP 38738, the Corporation is not
      aware of any defects, failures or impairments in the title of Cheal
      Petroleum Limited, PEP 38757 Ltd., PEP 38758, or any of their
      subsidiaries, to the Acquired Assets, whether or not an action, suit,
      proceeding or inquiry is pending or threatened or whether or not
      discovered by any third party which in aggregate could have a material
      adverse effect on: (A) the quantity and pre-tax present worth values of
      the Acquired Assets; (B) the current production volumes of the Acquired
      Assets; or (C) the current cash flow of the Acquired Assets;
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | (zz) | the Corporation believes that the report prepared by
      Sproule International Limited and dated May 2006 reasonably presents the
      quantity and pre-tax present worth values of oil and gas reserves of the
      Acquired Assets as at April 30, 2006 based upon the assumptions as to
      commodity prices and costs contained therein and the Corporation has no
      knowledge of any material adverse change in any of the information set
      forth in the report prepared by Sproule International
  Limited;                                                                                                                                   

Other

| | (aaa) | to the knowledge of the Corporation, as at the date of
      this Agreement, no insider (as the term is defined in the Securities
      Act(Alberta)) of the Corporation or the Subsidiaries has the present
      intention to sell any securities of the Corporation;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | ----- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | (bbb) | to the knowledge of the Corporation, none of its
      directors or officers, are now, or have ever been, subject to an order or
      ruling of any securities regulatory authority or stock exchange
      prohibiting such individual from acting as a director or officer of a
      public company or of a company listed on a particular stock
    exchange;                                                                                                                                                                                                                                                                                                                                                                                                                               
| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | (ccc) | the Corporation and each of its Subsidiaries maintain a
      system of internal accounting controls sufficient to provide reasonable
      assurance that (i) transactions are executed in accordance with
      management's general or specific authorizations, (ii) transactions are
      recorded as necessary to permit preparation of financial statements in
      conformity with generally accepted accounting principles and to maintain
      asset accountability, (iii) access to assets is permitted only in
      accordance with management's general or specific authorization and (iv)
      the recorded accountability for assets is compared with the existing
      assets at reasonable intervals and appropriate action is taken with
      respect to any differences;
| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | (ddd) | since the date of the Corporation's latest audited
      financial statements, there has been no change in the Corporation's
      internal controls over financial reporting that has
  materially                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              

---

- 18 -

affected, or is reasonably likely to
materially affect, the Corporation's internal controls over financial
reporting;

| | (eee) | the Corporation has established and maintains disclosure
      controls and procedures (as such term is defined in Rule 13a-15(e) under
      the U.S. Exchange Act), (ii) such disclosure controls and procedures are
      designed to ensure that information required to be disclosed by the
      Corporation in the reports that the Corporation will file or furnish under
      the U.S. Exchange Act is recorded, processed, summarized and reported,
      within the time periods specified in the SEC's rules and forms, and are
      designed to ensure that information required to be disclosed by the
      Corporation in the reports that it will file or furnish under the Exchange
      Act is accumulated and communicated to the Corporation's management,
      including the Corporation's principal executive and principal financial
      officers, or persons performing similar functions, as appropriate to allow
      timely decisions regarding required disclosure, and (iii) such disclosure
      controls and procedures are effective in all material respects to perform
      the functions for which they were established;                                                                                                                                                                                                                       
| | ----- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | (fff) | the Corporation is in compliance in all material respects
      with all applicable provisions of the Sarbanes-Oxley Act of 2002
      (including, without limitation, the provisions of Sections 302 and 906
      thereof concerning certification and Section 402 thereof concerning loans)
      and the rules and regulations of the SEC that pertain thereto that are
      effective, and is actively taking steps to ensure that it will be in
      compliance in all material respects with other applicable provisions of
      the Sarbanes-Oxley Act of 2002 and the rules and regulations of the SEC
      that pertain thereto upon the effectiveness of such provisions;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | (ggg) | all forms, reports, schedules, prospectuses, circulars,
      statements and other documents (together with any amendments thereto)
      filed by the Corporation with or furnished by it to any of the Securities
      Commissions, the SEC and the Exchange since December 31, 2003 and any
      correspondence related thereto (such forms, reports, schedules,
      prospectuses, circulars, statements and other documents, including any
      financial statements or other documents, including any schedules included
      therein, are referred to as the "Corporation Documents"), at the
      time filed or furnished (and if amended or superseded by a filing or
      furnishing of another Corporation Document prior to the date of this
      Agreement then, on the date of such filing or furnishing), (i) did not
      contain any misrepresentation of a material fact (as defined in Applicable
      Securities Laws of the Selling Provinces), did not at the time they were
      filed contain any untrue statement of a material fact or omit to state a
      material fact required to be stated therein or necessary in order to make
      the statements therein, in light of the circumstances under which they
      were made not misleading and (ii) complied in all material respects with
      the requirements of Applicable Securities Laws;
| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | (hhh) | the Corporation has not filed any confidential material
      change report with the Securities Commissions, the SEC or any other
      securities authority or regulator or any stock exchange or other
      self-regulatory authority, which as of the date hereof remains
      confidential. None of the Subsidiaries is required to file any reports or
      other documents with any of the Securities Commissions, the SEC or the
      Exchange; and                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | (iii) | neither the Corporation nor any of the Subsidiaries is
      aware of or has taken any action, directly or indirectly, that would
      result in a violation by such persons of the U.S. Foreign Corrupt
      Practices Act of 1977 (the "FCPA"), including, without limitation,
      making use of the mails or any means or instrumentality of interstate
      commerce corruptly in furtherance of an offer, payment, promise to pay or
      authorization of the payment of any                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     

---

- 19 -

money, or other property, gift, promise
to give, or authorization of the giving of anything of value to any "foreign
official" (as such term is defined in the FCPA) or any foreign political party
or official thereof or any candidate for foreign political office, in
contravention of the FCPA, and neither the Corporation nor any of the
Subsidiaries is aware of or has taken any action, directly or indirectly, that
has involved the payment of any bribe, kickback, or other unlawful payment to
any person. The Corporation and the Subsidiaries have conducted their businesses
in compliance with the FCPA, and have instituted and maintained policies and
procedures designed to ensure, and which are reasonably expected to ensure
continued compliance therewith.

It is further agreed by the Corporation that all representations and warranties
in this Section 5 made by the Corporation to the Underwriter shall also be
deemed to be made for the benefit of the Subscribers as if the Subscribers were
also parties hereto (it being agreed that the Underwriter is acting for and on
behalf of the Subscribers for this purpose).

|6. | Indemnity
|-- | ---------
|   |          
|   | (a)      
|   |          
|   |          
|   |          
|   |          
|   |          
|   |          
|   |          
|   |          

---

- 20 -

| | (v)  | any misrepresentation contained herein or any breach of,
      default under or non-compliance by the Corporation with any
      representation, warranty, term or condition of the Material Agreements or
      any requirement of Applicable Securities Laws; or
| | ---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                                                                                                                                   
| | (vi) | the exercise by any Subscriber of any contractual or
      statutory right of rescission in connection with the purchase of the
      Offered Shares;                                                                                                             

provided that in the event and to the
extent that a court of competent jurisdiction in a final judgment from which no
appeal can be made or regulatory authority in a final ruling from which no
appeal can be made shall determine that any proceedings or liabilities in
respect of which indemnity may be sought resulted solely from the gross
negligence, fraud or willful misconduct of any party entitled to indemnity
hereunder, this indemnity shall not apply (provided that, for greater certainty,
the foregoing shall not disentitle the Underwriter from claiming indemnification
hereunder to the extent that gross negligence, if any, relates to the failure of
the Underwriter to conduct adequate "due diligence").

| | (b) | The Underwriter shall be entitled, as trustee, to enforce
      the obligations contained herein on behalf of any other party entitled to
      indemnity or contribution hereunder.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | (c) | The Corporation agrees that in case any legal proceedings
      or investigation shall be brought against or initiated against the
      Corporation by any securities commission, regulatory authority, stock
      exchange, court, or other entity having regulatory authority, and any
      representative of the Underwriter shall be required to testify in
      connection therewith or shall be required to respond to procedures
      designed to discover information regarding, in connection with, or by
      reason of the performance of professional services rendered to the
      Corporation by the Underwriter, the Corporation shall pay the Underwriter
      the reasonable costs thereof (including an amount to reimburse the
      Underwriter for time spent by its personnel in connection therewith on
      such individuals' usual per diem rates and out-of-pocket expenses incurred
      by their personnel in connection therewith), as they occur provided such
      legal proceedings or investigations do not arise solely as the result of
      the gross negligence, fraud or willful misconduct of any Indemnified
      Party.                                                                                                                                                                                           
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | (d) | If any claim contemplated by Section 6(a) shall be
      asserted against any of the Indemnified Parties, such person shall notify
      the Corporation, in writing, as soon as possible of the nature of such
      claim (provided that any failure to so notify shall not relieve the
      Corporation from liability, except and only to the extent that the failure
      materially prejudices the Corporation) and the Corporation shall be
      entitled (but not required) to assume the defense of any suit brought to
      enforce such claim, provided however, that the defence shall be through
      legal counsel selected by the Corporation and acceptable to the
      Indemnified Party, acting reasonably. If the Corporation assumes conduct
      of the defence for an Indemnified Party, the Indemnified Party shall fully
      cooperate in the defence, including, without limitation, the provision of
      documents, appropriate officers and employees to give witness statements,
      attend examinations for discovery, make affidavits, meet with counsel,
      testify and divulge all information reasonably required to defend or
      prosecute the proceedings. The Indemnified Party shall have the right to
      retain its own counsel in any proceeding relating to a claim contemplated
      by Section 6(a) if:

---

- 21 -

| | (i)   | the Indemnified Party has been advised by counsel that
      there may be a reasonable legal defence available to the Indemnified Party
      which is different from or additional to a defence available to the
      Corporation (in which case the Corporation shall not have the right to
      assume the defence of such proceedings on the Indemnified Party's
      behalf);
| | ----- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |       |                                                                                                                                                                                                                                                                                                                                                                                      
| | (ii)  | the Corporation shall not have taken the defence of such
      proceedings and employed counsel within ten (10) days after receiving
      notice of such proceedings; or                                                                                                                                                                                                            
| |       |                                                                                                                                                                                                                                                                                                                                                                                      
| | (iii) | the employment of such counsel has been authorized by the
      Corporation in connection with the defence of such
  proceeding;                                                                                                                                                                                                                                                     

and, in any such event, the reasonable
fees and expenses of such Indemnified Party's counsel (on a solicitor and his
client basis) shall be paid by the Corporation, provided that the Corporation
shall not, in connection with any one such action or separate but substantially
similar or related actions in the same jurisdiction arising out of the same
general allegations or circumstances, be liable for the fees and expenses of
more than one separate law firm (in addition to any local counsel) for all such
Indemnified Parties.

| | (e) | No admission of liability and no settlement of any
      proceeding shall be made without the consent of the Indemnified Parties
      affected, such consent not to be unreasonably withheld. No admission of
      liability shall be made by an Indemnified Party without the consent of the
      Corporation, such consent not to be unreasonably withheld, and the
      Corporation shall not be liable for any settlement of any proceeding made
      without its consent, such consent not to be unreasonably
  withheld.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|**7.** | **Contribution**
|------ | ----------------

In order to provide for just and equitable contribution in circumstances in
which the indemnification provided for in this Agreement is due in accordance
with its terms but is (in whole or in part), for any reason, held by a court to
be unavailable from the Corporation on grounds of policy or otherwise, each of
the Corporation and the party or parties seeking indemnification shall
contribute to the aggregate liabilities, claims, demands, losses (other than
losses of profit), costs, damages and expenses (including legal or other
expenses reasonably incurred in connection with investigation or defence of the
same) to which they may be subject or which they may suffer or incur:

| | (a) | in such proportion as is appropriate to reflect the
      relative benefit received by the Corporation on the one hand, and by the
      party or parties seeking indemnity on the other hand, from the Offering;
      or                                                                                                                                                                                                                                                                                                                                                                                                                             
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | (b) | if the allocation provided by Section 7(a) above is not
      permitted by applicable law, in such proportion as is appropriate to
      reflect not only the relative benefits referred to in Section 7(a) above
      but also to reflect the relative fault of the party or parties seeking
      indemnity, on the one hand, and the parties from whom indemnity is sought,
      on the other hand, in connection with the statements, commissions or
      omissions or other matters which resulted in such liabilities, claims,
      demands, losses, costs, damages or expenses as well as any other relevant
      equitable considerations.

The relative benefits received by the Corporation, on the one hand, and the
Underwriter, on the other hand, shall be deemed to be in the same proportion
that the total proceeds of the Offering received

---

- 22 -

by the Corporation (net of fees but before deducting expenses)
bear to the fees received by the Underwriter.

The Corporation agrees that it would not be just and equitable if contributions
pursuant to this Agreement were determined by pro rata allocation or by any
other method of allocation which does not take into account the equitable
considerations referred to in the immediately preceding paragraphs. The rights
to contribution provided in this Section 7 shall be in addition to, and without
prejudice to, any other right to contribution which the Underwriter may
have.

Any liability of the Underwriter under this Section 7 shall be limited to the
amount payable to the Underwriter under Section 2(a).

The rights to indemnity and the right of contribution provided in the foregoing
paragraphs shall be in addition to and not in derogation of any other right to
contribution which the Indemnified Parties may have by statute or otherwise at
law or in equity. The Corporation waives all rights of contribution that it may
have against any Indemnified Party relating to any liability in respect of which
the Corporation has agreed to indemnify the Indemnified Parties hereunder.

The obligations under the indemnity and right of contribution provided herein
shall apply whether or not the transactions contemplated by this Agreement are
completed and shall survive the completion of the transactions contemplated
under this Agreement and the termination of this Agreement.



|**8.** | **Expenses**
|------ | ------------

Whether or not the transactions contemplated herein shall be completed, all
costs and expenses of or incidental to the creation, issuance and distribution
of the Offered Shares, shall be borne by the Corporation, including, without
limitation, the fees payable to the Exchange, the fees payable pursuant to the
Applicable Securities Laws, the fees and expenses of the Corporation's counsel,
the reasonable fees and expenses of local counsel retained by the Corporation's
counsel, the fees and expenses of the Corporation's auditors, the Transfer
Agent, engineers, specialists and other outside consultants, the reasonable fees
and expenses of the Underwriter's counsel, the reasonable fees and expenses of
the Underwriter's U.S. counsel and the other reasonable out-of-pocket expenses
of the Underwriter relating to this transaction, including the fees of any
consultants and specialists, if required.

|9. | Termination
|-- | -----------
|   |            
|   | (a)        
|   |            
|   |            
|   |            
|   |            

---

- 23 -

authority if, in the reasonable
opinion of the Underwriter, the announcement, commencement or threatening
thereof materially adversely affects or may materially adversely affect the
trading or distribution of the Offered Shares;

| | (iii) | there shall have occurred any adverse material change
      (actual, contemplated or threatened) or any change in a material fact or
      occurrence of a material fact or event or event of the nature described in
      Section 4(a), as determined by the Underwriter in its sole discretion,
      acting reasonably, that could reasonably be expected to have a material
      adverse effect on the assets, liabilities, business, operations, capital
      or condition (financial or otherwise) of the Corporation and the
      Subsidiaries (taken as a whole);                   
| | ----- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | (iv)  | there should develop, occur or come into effect or
      existence any event, action, state, condition or financial occurrence, or
      any catastrophe of national or international consequence, any law or
      regulation, or any other occurrence of any nature whatsoever, which, in
      the sole opinion of the Underwriter, acting reasonably, materially
      adversely affects, or involves, or will materially adversely affect, or
      involve, the financial markets or the business, operations or affairs of
      the Corporation and the Subsidiaries (taken as a whole);
| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | (v)   | the state of the financial markets or of the oil and gas
      industry is such that the Offered Shares cannot, in the sole opinion of
      the Underwriter, acting reasonably, be marketed successfully or
      profitably;                                                                                                                                                                                                                                                                                                                                                                  
| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | (vi)  | the Corporation shall be in breach of, default under or
      non-compliance with, in any material respect, any representation,
      warranty, covenant, term or condition of the Material Agreements;
  or                                                                                                                                                                                                                                                                                                                                                                                    
| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | (vii) | the Underwriter shall become aware, as a result of its
      due diligence review or otherwise, of any adverse material change with
      respect to the Corporation (in the sole opinion of the Underwriter, acting
      reasonably) which has not been disclosed to the Underwriter or disclosed
      to the public prior to the date hereof.                                                                                                                                                                                                                                               

| | (b) | The Underwriter may exercise any or all of the rights
      provided for in Section 9(a), 10 and 14(a) notwithstanding any adverse
      material change, change, event or state of facts and notwithstanding any
      act or thing taken or done by the Underwriter or any inaction by the
      Underwriter, whether before or after the occurrence of any adverse
      material change, change, event or state of facts including, without
      limitation, any act of the Underwriter related to the Offering and the
      Underwriter shall only be considered to have waived or be estopped from
      exercising or relying upon any of such rights if such waiver or estoppel
      is in writing and specifically waives or estoppes such exercise or
      reliance.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | (c) | Any termination pursuant to the terms of this Agreement
      shall be effected by notice in writing delivered to the Corporation,
      provided that no termination shall discharge or otherwise affect any
      obligation of the Corporation under Sections 6, 7, 8 or 15 herein. The
      right the Underwriter to terminate its obligations hereunder are in
      addition to, and without prejudice to, any other remedies it may
    have.                                                                                                                                                                                                                                                                                                                             

---

- 24 -

|10. | Closing Documents
|--- | -----------------

The
obligations of the Underwriter hereunder shall be conditional upon the
Underwriter receiving, and the Underwriter shall have the right on the Closing
Date on behalf of the Subscribers to withdraw all Subscription Agreements
delivered and not previously withdrawn by Subscribers unless the Underwriter
receives, on the Closing Date:

Legal Opinion

| | (a) | A legal opinion of the Corporation's counsel addressed to
      the Underwriter and the Subscribers, in form and substance reasonably
      satisfactory to the Underwriter and the Underwriter's counsel, with
      respect to such matters as the Underwriter and the Underwriter's counsel
      may reasonably request relating to the Offered Shares, including, without
      limitation, that:
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                       
| |     | (i)                                                                                                                                                                                                                                                                                                                                                                                                   
| |     |                                                                                                                                                                                                                                                                                                                                                                                                       
| |     | (ii)                                                                                                                                                                                                                                                                                                                                                                                                  
| |     |                                                                                                                                                                                                                                                                                                                                                                                                       
| |     | (iii)                                                                                                                                                                                                                                                                                                                                                                                                 
| |     |                                                                                                                                                                                                                                                                                                                                                                                                       
| |     | (iv)                                                                                                                                                                                                                                                                                                                                                                                                  
| |     |                                                                                                                                                                                                                                                                                                                                                                                                       
| |     | (v)                                                                                                                                                                                                                                                                                                                                                                                                   

---

- 25 -

consents or authorizations are
required to be obtained in any of the Selling Provinces to permit such offering,
sale and issuance of the Offered Shares by the Corporation to the Subscribers in
the Selling Provinces, except for the filing by the Corporation, within the
prescribed time periods, of the required reports of such sale and the payment by
the Corporation of applicable fees relating thereto; and

| | (vi) | the first trade in the Offered Shares may be completed in
      certain circumstances after holding the Offered Shares for four
    months;
| | ---- | -------------------------------------------------------------------------------------------------------------------------------------------

It is understood that the
Corporation's counsel may rely on the opinions of local counsel acceptable to
them as to matters governed by the laws of jurisdictions other than British
Columbia, Alberta and Ontario and on certificates of public officials, of
officers of the Corporation and of the Transfer Agent for the Offered Shares as
to relevant matters of fact.

| | (b) | A legal opinion of the Corporation's U.S. counsel
      addressed to the Underwriter and the Subscribers, in form and substance
      reasonably satisfactory to the Underwriter and the Underwriter's U.S.
      counsel, to the effect that the Offered Shares are not required to be
      registered under the U.S. Securities Act, and with respect to such other
      matters as the Underwriters and the Underwriters U.S. counsel may
      reasonably request.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Certificate

| | (c) | A certificate of the Corporation dated the Closing Date,
      addressed to the Underwriter and signed on the Corporation's behalf by any
      two senior officers or the Corporation, certifying that:
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                         
| |     | (i)                                                                                                                                                                                                     
| |     |                                                                                                                                                                                                         
| |     | (ii)                                                                                                                                                                                                    
| |     |                                                                                                                                                                                                         
| |     | (iii)                                                                                                                                                                                                   
| |     |                                                                                                                                                                                                         
| |     | (iv)                                                                                                                                                                                                    
| |     |                                                                                                                                                                                                         
| |     | (v)                                                                                                                                                                                                     

---

- 26 -

authorities and under any applicable
agreement or document to which the Corporation is a party or by which it is
bound in respect of the execution and delivery of the Material Agreements, the
offering and sale of the Offered Shares and the consummation of the transactions
contemplated hereby (subject to completion of filings with certain regulatory
authorities following the Closing Date);

| | (vi)  | the Corporation has no reason to believe that the
      Acquisition will not be completed in accordance with the terms of the
      Purchase and Sale Agreement on or about June 16, 2006; and
| | ----- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |       |                                                                                                                                                                                               
| | (vii) | the Purchase and Sale Agreement has not been amended nor
      have any terms and conditions thereof been waived, other than as disclosed
      to the Underwriter.                           

Other

| | (d) | Executed copies of the Subscription Agreements in form
      and substance reasonably satisfactory to the Underwriter and the
      Underwriter's counsel.                                                                               
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                          
| | (e) | Evidence satisfactory to the Underwriter and the
      Underwriter's counsel that the Corporation has obtained all necessary
      approvals from the Exchange for:                                                                      
| |     |                                                                                                                                                                                                                                          
| |     | (i)                                                                                                                                                                                                                                      
| |     |                                                                                                                                                                                                                                          
| |     | (ii)                                                                                                                                                                                                                                     
| |     |                                                                                                                                                                                                                                          
| |     |                                                                                                                                                                                                                                          
| |     |                                                                                                                                                                                                                                          
| | (f) | Evidence that the Corporation is a reporting issuer in
      British Columbia and Alberta.                                                                                                                                               
| |     |                                                                                                                                                                                                                                          
| | (g) | Confirmation of additional representations and warranties
      as may be reasonably requested by the Underwriter to address issues
      uncovered during the course of the Underwriter's due diligence review of
      the Corporation.
| |     |                                                                                                                                                                                                                                          
| | (h) | The Underwriter's Fee provided for in Section
  2.                                                                                                                                                                                       





|**11.** | **Deliveries**
|------- | --------------

The
sale of the Offered Shares shall be completed at the Closing Time at the offices
of the Underwriter's counsel in Calgary, Alberta or at such other place as the
Corporation and the Underwriter may agree. Subject to the conditions set forth
in this Agreement, the Underwriter, on the Closing Date, shall deliver to the
Corporation:

| | (a) | all completed Subscription Agreements and where
      applicable, all completed forms required by the Applicable Securities Laws
      and the Exchange; and                                       
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                    
| | (b) | a wire transfer in an amount equal to the aggregate
      amount of all the subscriptions for the Offered Shares minus the cash
      portion of the Underwriter's Fee provided for in Section
  2;

against delivery by the Corporation to the Underwriter of:



|**** | (c) | the opinions, certificates and documents referred to in
      Section 10 above;
|---- | --- | -------------------------------------------------------------------------------

---



- 27 -

| | (d) | definitive certificates representing, in the aggregate,
      all of the Offered Shares subscribed for in the name of Canaccord Capital
      Corporation or in such name or names as the Underwriter shall notify the
      Corporation in writing not less than 48 hours prior to the Closing Time
      provided such certificates registered in such names may, subject to
      receipt by the Corporation of a satisfactory indemnity, be delivered in
      advance of the Closing Date to the Underwriter or the Underwriter's agent
      or other parties in such locations as the Underwriter may direct and the
      Underwriter and the Corporation may agree upon;
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | (e) | such further documentation as may be contemplated by this
      Agreement or that may reasonably be requested by Underwriters'
    counsel.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

The
Corporation may not reject any properly completed Subscription Agreement from a
Subscriber resident in the Selling Jurisdictions, unless the number of Offered
Shares subscribed for pursuant to all Subscription Agreements tendered by the
Underwriters exceeds the maximum number of Offered Shares to be sold under this
Agreement, in which case Subscription Agreements representing the over-allotment
shall, in consultation with the Underwriters, be rejected, or unless the
acceptance of such Subscription Agreement may breach or violate any Applicable
Securities Laws.



|**12.** | **Restrictions on
Offerings**
|------- | -----------------------------

The
Corporation hereby irrevocably grants to the Underwriter a right of first
refusal to act as the Corporation's lead agent or underwriter, as the case may
be, in any public or private financing of the Corporation which involves an
agent or underwriter (a "Financing") for a period of 12 months from the
Closing Date. If the Corporation wishes to effect a Financing during such
period, it shall provide the Underwriter with written notice thereof setting
forth the proposed terms thereof, including the proposed terms and conditions
relative to the compensation of the agent or underwriter, as the case may be,
and the Underwriter shall have five Business Days after receipt of such notice
within which to notify the Corporation of its election to exercise its rights
hereunder.

If
the Underwriter elects not to exercise its rights hereunder (and the failure of
the Underwriter to notify the Corporation of its election to exercise its right
hereunder within such five Business Days will be deemed to be an election not to
exercise its right hereunder) or the Corporation and the Underwriter are unable
to agree to the terms of a proposed Financing within such period, then the
Corporation may proceed with the Financing through any other agent or
underwriter, as the case may be, and without the Underwriter's participation
provided that the terms and conditions of such Financing are not less favourable
to the Corporation and the terms and conditions relative to the compensation of
the agent or underwriter, as the case may be, are not more favourable, to such
agent or underwriter, as the case may be, than the terms and conditions proposed
by the Corporation to the Underwriter. If the Financing is completed, the right
of first refusal granted under this Section 12 shall expire.

---

- 28 -

|13. | Notices
|--- | -------

Any
notice or other communication to be given hereunder shall, in the case of notice
to be given to the Corporation, be addressed to the Corporation, Attention: Drew
Cadenhead, President and Chief Executive Officer, at the above address with a
copy to:

Blake, Cassels & Graydon
LLPSuite 2600, Three Bentall Centre595 Burrard StreetVancouver,
British Columbia V7X 1L3Attention: Michael J. Johnson
  Fax No.: (604) 631-3317

and, in the case of notice to be given to the Underwriter, be
addressed to:

Canaccord Capital
CorporationTransCanada Tower, Suite 2200450  1st Street
SWCalgary, Alberta T2P 5P8Attention: Richard Cawkwell
  Fax No.: (403) 508-3866

with a copy to:

Bennett Jones LLP4500, 855 
2ndStreet S.W.Calgary, Alberta T2P 4K7Attention: Mark
Paslawski
  Fax No.: (403) 265-7219

or to such other address as the party may designate by notice
given to the other. Each communication shall be personally delivered to the
addressee or sent by fax transmission to the addressee, and:

| | (a) | a communication which is personally delivered shall, if
      delivered before 5:00 p.m. (local time) on a Business Day, be deemed to be
      given and received on that day and, in any other case be deemed to be
      given and received on the first Business Day following the day on which it
      is delivered; and
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                              
| | (b) | a communication which is sent by fax transmission shall,
      if sent on a Business Day before 5:00 p.m. (local time), be deemed to be
      given and received on that day and, in any other case, be deemed to be
      given and received on the first Business Day following the day on which it
      is sent.         

|14. | Conditions
|--- | ----------
|    |           
|    | (a)       

---

- 29 -

therewith, without prejudice to its
rights in respect of any other representation, warranty, term or condition
hereof or any other breach of, default under or non-compliance with any other
representation, warranty, term or condition hereof, provided that any such
waiver or extension shall be binding on the Underwriter only if the same is in
writing.

| | (b) | All terms and conditions of this Agreement to be
      performed by the Underwriter shall be construed as conditions, and any
      breach or failure to comply with any material terms and conditions shall
      entitle the Corporation to terminate its obligations to sell the Offered
      Shares by written notice to that effect given to the Underwriter prior to
      the Closing Date. The Corporation may waive in whole or in part any breach
      of, default under or non-compliance with any representation, warranty,
      term or condition hereof, or extend the time for compliance therewith,
      without prejudice to its rights in respect of any other representation,
      warranty, term or condition hereof or any other breach of, default under
      or non-compliance with any other representation, warranty, term or
      condition hereof, provided that any such waiver or extension shall be
      binding on the Corporation only if the same is in
  writing.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|15. | Survival of Representations and
  Warranties
|--- | --------------------------------------------

All
representations, warranties, terms, conditions and covenants herein or contained
in certificates or documents submitted pursuant to or in connection with the
transactions contemplated herein shall survive the payment by the Underwriter
for the Offered Shares, if any, and the distribution of the Offered Shares and
shall continue in full force and effect for the benefit of the Underwriter and
the Corporation regardless of any investigation by or on behalf of the
Underwriter with respect thereto.

|16. | Underwriter's Covenants                                                      
|--- | -----------------------------------------------------------------------------
|    |                                                                              
|    | The Underwriter covenants and agrees with the Corporation
      that it will:
|    |                                                                              
|    | (a)                                                                          
|    |                                                                              
|    | (b)                                                                          
|    |                                                                              
|    | (c)                                                                          

---

- 30 -

| | (d) | obtain from each Subscriber a properly completed and
      executed Subscription Agreement and all applicable undertakings,
      questionnaires and other forms required under Applicable Securities Laws
      and by the Exchange and supplied to the Underwriter for completion in
      connection with the distribution of the Offered Shares;                                              
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                   
| | (e) | keep confidential the Responses unless: (i) such
      information is already in the public domain (through no fault of the
      Underwriter); (ii) disclosure of such information is required by law or
      pursuant to a legal proceeding; or (iii) such information is disclosed to
      the Underwriter by another party who is not subject to an obligation of
      confidentiality; and
| |     |                                                                                                                                                                                                                                                                                                                                                                                                   
| | (f) | provide to the Corporation all necessary information in
      respect of the Underwriter and the Subscribers to allow the Corporation to
      file, with the Securities Commissions, if required, reports of the trades
      of the Offered Shares in accordance with Applicable Securities Laws within
      ten (10) days of the Closing Date.                                                

|17. | U.S. Offers
|--- | -----------

In
order to permit the offer and sale of the Offered Shares in the United States in
compliance with exemptions from registration under the U.S. Securities Act and
applicable state securities laws:

| | (a) | the Underwriter makes the representatives, warranties and
      covenants in Schedule "A" hereto and agrees on its own behalf and on
      behalf of its United States affiliate, for the benefit of the Corporation,
      to comply with the selling restrictions set forth in Schedule "A" hereto,
      which forms part of this Agreement; and
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                    
| | (b) | the Corporation makes the representations, warranties and
      covenants set forth in Schedule "A" hereto for the benefit of the
      Underwriter, and agrees to comply with the selling restrictions set forth
      in Schedule "A" hereto, which forms part of this
  Agreement.                                                              

|18. | Severability
|--- | ------------

If
one or more of the provisions contained herein shall, for any reason, be held to
be invalid, illegal or unenforceable in any respect, such invalidity, illegality
or unenforceability shall not affect any other provision of this Agreement, but
this Agreement shall be construed as if such invalid, illegal or unenforceable
provision or provisions had never been contained herein.

|19. | Relationship Between the Corporation and the
      Underwriter
|--- | --------------------------------------------------------------
|    |                                                               
|    | The Corporation:                                              
|    |                                                               
|    | (a)                                                           
|    |                                                               
|    | (b)                                                           
|    |                                                               
|    | (c)                                                           

To the extent that the Underwriter's (or its affiliates)
statutory obligations as a registrant under the Applicable Securities Laws or
fiduciary relationships with its clients (if any) conflict with its
obligations

---

- 31 -

hereunder, the Underwriter (or its affiliates) shall be
entitled to fulfill its statutory obligations as a registrant under the
Applicable Securities Laws and its duties to its clients. Nothing in this
Agreement shall be interpreted to prevent the Underwriter (or its affiliates)
from fulfilling its statutory obligations as a registrant under the Applicable
Securities Laws or to act as a fiduciary of its clients.

|20. | Ability to Enforce
|--- | ------------------

The
Corporation authorizes the Underwriter to enforce the representations,
warranties and covenants of the Corporation to the Subscribers set forth in the
Material Agreements on behalf of the Subscribers and to seek damages suffered by
them on their behalf (or any other applicable remedy) for any breach of such
representations, warranties and covenants. Such action may be brought by the
Underwriter at its sole discretion (which need not be exercised reasonably) and
there is no obligation of the Underwriter to bring such action.

|21. | Governing Law
|--- | -------------

This
Agreement shall be governed by and construed in accordance with the laws of the
Province of Alberta and the laws of Canada applicable therein, and each of the
parties hereto irrevocably attorns to the jurisdiction of the courts of the
Province of Alberta.

|22. | Time of the Essence                            
|--- | -----------------------------------------------
|    |                                                
|    | Time shall be of the essence of this Agreement.
|    |                                                
|23. | Counterpart Execution                          

This
Agreement may be executed in one or more counterparts, in original or facsimile
form, and each of which so executed shall constitute an original and all of
which together shall constitute one and the same agreement.



|24. | Entire Agreement
|--- | ----------------

This
Agreement represents the entire agreement of the parties hereto relating to the
subject matter hereof and there are no representations, warranties, covenants or
other agreements relating to the subject matter hereof except as stated or
referred to herein. This Agreement shall not be amended or varied in its terms
by oral agreement or by representations or otherwise except by instrument in
writing executed by the duly authorized representatives of the parties hereto or
their respective successors or assigns. It is understood that the terms and
conditions of this Agreement supersede any previous verbal or written agreement
between the Underwriter and the Corporation including the letter agreement dated
May 11, 2006.

---

- 32 -

If
the foregoing is in accordance with your understanding and is agreed to by you,
please confirm your acceptance by signing the enclosed copies of this letter at
the place indicated and by returning the same to the Underwriter.

| | CANACCORD CAPITAL CORPORATION
| | -----------------------------
| |                              
| |                              
| | Per:                         
| |                              
| |                              

|ACCEPTED AND AGREEDto as of this
      12thday
|----------------------------------------------
|of May, 2006.                                 
|                                              
|TAG OIL LTD.                                  
|                                              
|                                              
|Per:                                          
|                                              
|                                              

---

SCHEDULE A

Terms and Conditions for United States Offers and
Salesand Compliance with U.S. Securities Laws

This is Schedule A to the Underwriting Agreement (the
"Underwriting Agreement") between TAG Oil Ltd. (the
"Corporation") and Canaccord Capital Corporation (the
"Underwriter") dated effective as May 12, 2006. All
capitalized terms that are used in this Schedule and not otherwise defined shall
have the meaning ascribed thereto in the Underwriting Agreement.

For the purpose of this Schedule "A", the following terms shall
have the meanings indicated:

|"Accredited Investor"                              | means an "accredited investor", as that term is
      defined in Rule 501(a) of Regulation D;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|-------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|"affiliate"                                        | means an "affiliate" as that term is defined in
      Rule 405 under the U.S. Securities Act;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|                                                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|"Directed Selling Efforts"                         | means "directed selling efforts" as that term
      is defined in Regulation S. Without limiting the foregoing, but for
      greater clarity in this Schedule "A", it means, subject to the exclusions
      from the definition of "directed selling efforts" contained in Regulation
      S, any activity undertaken for the purpose of, or that could reasonably be
      expected to have the effect of, conditioning the market in the United
      States for the Securities, and includes the placement of any advertisement
      in a publication with a general circulation in the United States that
      refers to the offering of any of the Securities;
|                                                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|"Foreign Issuer"                                   | means a "foreign issuer" as that term is
      defined in Regulation S;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|                                                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|"General Solicitation orGeneral
      Advertising" | means "general solicitation or general
      advertising", as used under Rule 502(c) under the U.S. Securities Act,
      including without limitation any advertisements, articles, notices or
      other communications published in any newspaper, magazine or similar media
      or broadcast over radio or television, or any seminar or meeting whose
      attendees had been invited by general solicitation or general advertising;                                                                                                                                                                                                                          
|                                                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|"Institutional Accredited
      Investor"          | means an Accredited Investor that satisfies the
      requirements of Rule 501(a)(1), (2), (3) or (7) of Regulation D;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|                                                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|"Offering Material"                                | means the disclosure and subscription documents
      (including any term sheet, or copies of news releases issued by the
      Corporation in the United States) prepared and provided by the Corporation
      to the Underwriter;                                                                                                                                                                                                                                                                                                                                                                                                                                    
|                                                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|"Qualified Institutional Buyer"                    | means "qualified institutional buyer" as
      defined in Rule 144A;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|                                                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|"Regulation D"                                     | means Regulation D under the U.S. Securities
      Act;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

---

|"Regulation S"                    | means Regulation S under the U.S. Securities
      Act;                                                                                                                                                                                                                
|--------------------------------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                  |                                                                                                                                                                                                                                                                        
|"Rule 144A"                       | means Rule 144A under the U.S. Securities Act;                                                                                                                                                                                                                         
|                                  |                                                                                                                                                                                                                                                                        
|"SEC"                             | means the United States Securities and Exchange
      Commission;                                                                                                                                                                                                      
|                                  |                                                                                                                                                                                                                                                                        
|"Securities"                      | means the Offered Shares;                                                                                                                                                                                                                                              
|                                  |                                                                                                                                                                                                                                                                        
|"Substantial U.S. MarketInterest" | means "substantial U.S. market interest" as
      that term is defined in Regulation S;                                                                                                                                                                                
|                                  |                                                                                                                                                                                                                                                                        
|"United States"                   | means the United States of America, its
      territories and possessions,                                                                                                                                                                                             
|                                  |                                                                                                                                                                                                                                                                        
|"U.S. Affiliate"                  | any state of the United States, and the
      District of Columbia; means a U.S. registered broker-dealer affiliate of
      the Underwriter;                                                                                                                          
|                                  |                                                                                                                                                                                                                                                                        
|"U.S. Exchange Act"               | means the United States Securities Exchange Act
      of 1934, as amended;                                                                                                                                                                                             
|                                  |                                                                                                                                                                                                                                                                        
|"U.S. Person"                     | means "U.S. person" as defined in Regulation S;                                                                                                                                                                                                                        
|                                  |                                                                                                                                                                                                                                                                        
|"U.S. Purchaser"                  | means an Accredited Investor designated by the
      Underwriter to purchase the Securities directly from the Corporation
      pursuant to an executed Subscription Agreement, or a Qualified
      Institutional Buyer purchasing Securities from an Underwriter; and
|                                  |                                                                                                                                                                                                                                                                        
|"U.S. Securities Act"             | means the United States Securities Act of 1933,
      as amended.                                                                                                                                                                                                      



|A. | REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE
      UNDERWRITER
|-- | ------------------------------------------------------------------

The Underwriter acknowledges that the Securities have not been
and will not be registered under the U.S. Securities Act or the securities laws
of any state and may not be offered or sold except in compliance with Rule 903
of Regulation S or pursuant to an exemption from the registration requirements
of the U.S. Securities Act and any applicable state securities laws.
Accordingly, the Underwriter represents, warrants and covenants to the
Corporation that:

|1. | Except for offers and sales of Securities as permitted in
      Sections A.4 through A.12 of this Schedule "A", neither the Underwriter,
      its affiliates nor any persons acting on its or their behalf, has engaged
      or will engage in: (i) any offer to sell or any solicitation of an offer
      to buy, any Securities forming part of its allotment (including any
      Securities purchased by it pursuant to the Underwriting Agreement) to any
      person in the United States or to a U.S. Person, or a person that is
      purchasing for the account or benefit of a U.S. Person; (ii) any sale of
      Securities forming part of its allotment (including any Securities
      purchased by it pursuant to the Underwriting Agreement) to any purchaser
      unless, at the time the buy order was or will have been originated, the
      purchaser was outside the United States and not a U.S. Person, and was not
      purchasing the Securities for the account or benefit of a U.S. Person, or
      the Underwriter, its affiliates or persons acting on its behalf reasonably
      believed that such purchaser was outside the United States and not a U.S.
      Person, and was not purchasing the Securities for the account or benefit
      of a U.S. Person; or (iii) any Directed Selling Efforts during the
      distribution of the Securities. For the purpose of this Schedule A, a
      person that is not a U.S. person by virtue of Rule 902(k)(2)(i) of
      Regulation S
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

|   | shall be deemed to be outside the United States, and the
      Underwriter may make offers and sales to such persons pursuant to Rule 903
      of Regulation S.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|2. | It will not offer or sell the Securities in the United
      States or to U.S. Persons or persons purchasing for the account or benefit
      of U.S. Persons, except that it may offer or sell Securities to Purchasers
      that are U.S. Purchasers in the manner permitted by Section A.4 through
      A.12 of this Schedule "A".                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|3. | It has not entered and will not enter into any
      contractual arrangement with respect to the distribution of the
      Securities, except with its U.S. Affiliates or members of the Selling
      Dealer Group, without the prior written consent of the
  Corporation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|4. | All offers of Securities in the United States or to or
      for the account or benefit of U.S. Persons have been and will be made
      through the Underwriter's U.S. Affiliate and all sales of the Securities
      in the United States or to or for the account or benefit of U.S. Persons
      or persons in the United States shall be made by the Corporation to
      Purchasers designated by the Underwriter's U.S. Affiliate. The U.S.
      Affiliate participating in this offering is duly registered as a broker or
      dealer pursuant to Section 15(b) of the U.S. Exchange Act and under the
      securities laws of each state in which such offers and sales are to be
      made (unless exempted from the respective state's broker- dealer
      registration requirements) and is a member in good standing with the
      National Association of Securities Dealers, Inc. It shall ensure that each
      U.S. Affiliate complies with the same provisions of Schedule "A" as apply
      to the Underwriter as if such provisions applied to such U.S.
      Affiliate.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|5. | It and its affiliates have not, either directly or
      through a person acting on its or their behalf, solicited and will not
      solicit offers for, and have not offered to sell and will not offer to
      sell, Securities in the United States or to or for the account or benefit
      of U.S. Persons by any form of General Solicitation or General Advertising
      or in any manner involving a public offering within the meaning of Section
      4(2) of the U.S. Securities Act.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|6. | Any offer, sale or solicitation of an offer to buy
      Securities that has been made or will be made in the United States or to
      or for the account or benefit of U.S. Persons was or will be made only (i)
      to Accredited Investors or Institutional Accredited Investors with which
      the Underwriter has a pre-existing relationship and who will purchase the
      Securities directly from the Corporation in compliance with Section 4(2)
      of the U.S. Securities Act and/or Rule 506 of Regulation D or (ii) to
      Qualified Institutional Buyers, who will purchase Securities from the
      Underwriter or its U.S. Affiliate (acting as principal) in compliance with
      Rule 144A, and in each case in compliance with any applicable state
      securities laws and in accordance with any applicable U.S. federal or
      state laws or regulations governing the registration or conduct of
      securities brokers or dealers.                                                                                                                           
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|7. | (i)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   | (ii)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

---

for its own account or is an
Institutional Accredited Investor purchasing the Securities for its own account
or for the account of an Accredited Investor over which it exercises sole
investment discretion, and in each case, with which the Underwriter or its U.S.
Affiliate had a pre-existing relationship; or (ii) any purchaser purchasing
securities from the Underwriter or its U.S. Affiliate (acting as principal) is a
Qualified Institutional Buyer purchasing the Securities for its own account or
for the account of another Qualified Institutional Buyer over which it exercises
sole investment discretion.

|8.  | Each Underwriter will inform, or will cause its U.S.
      Affiliate and any person acting on its or their behalf to inform each U.S.
      Purchaser of the Securities that neither the Securities or any of the
      Securities have been, nor will any of them be, registered under the
      Securities Act or any applicable state securities laws and that the
      Securities are being sold to them without registration under the
      Securities Act in reliance on Section 4(2) of the U.S. Securities Act
      and/or Rule 506 of Regulation D or Rule 144A (as the case may be) and
      exemptions from registration under applicable state securities
  laws.                                  
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|9.  | Each U.S. Purchaser from the Corporation pursuant to
      Section 4(2) of the U.S. Securities Act and/or Rule 506 of Regulation D
      will be required, prior to the time of purchase of any Securities, to
      execute and deliver a U.S. Subscription Agreement. Each such purchaser
      shall also acknowledge that it understands and acknowledges that it is
      making the representations, warranties and agreements contained therein
      with the intent that it may be relied upon by the Corporation and the
      Underwriter in determining its eligibility to purchase the
    Securities.                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|10. | None of it, any of its affiliates or any person acting on
      its or their behalf has used or will use any Offering Material or other
      document or had made or issued or will make or issue any advertisement in
      connection with the offer or sale of Securities that does not comply with
      Section B.6 of this Schedule "A".                                                                                                                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|11. | None of it, any of its affiliates or any person acting on
      any of their behalf has taken or will take, directly or indirectly, any
      action in violation of Regulation M under the U.S. Exchange Act in
      connection with the offer and sale of the Securities.                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|12. | At the Closing, the Underwriter (together with its U.S.
      Affiliate) will provide a certificate, substantially in the form of
      Exhibit 1to this Schedule "A", relating to the manner of the offer
      and sale of the Securities. The failure of the Underwriter to deliver such
      a certificate shall be deemed a representation to the Corporation that the
      Underwriter did not offer or sell and will not offer or sell any
      Securities in the United States or to or for the account or benefit of a
      U.S. Person and (b) the name and address of all U.S. Subscribers so as to
      enable the Corporation to comply with its obligations under paragraph B.9
      hereunder.



|B. | REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE
      CORPORATION
|-- | ------------------------------------------------------------------

The Corporation represents, warrants, covenants and agrees
that:

|1. | The Corporation is a Foreign Issuer with no Substantial
      U.S. Market Interest in the common shares of the Corporation.                                                                                                                                                                                                                                                                                                               
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                           
|2. | Except as permitted herein, neither the Corporation, its
      affiliates nor any persons acting on its or their behalf (other than the
      Underwriter, its affiliates, members of the Selling Dealers Group or any
      person acting on their behalf, in respect of which no representation is
      made), has engaged or will engage in: (i) any offer to sell or any
      solicitation of an offer to buy, any Securities to
any

---

|   | person in the United States or to a U.S. Person, or a person that is purchasing for the account or benefit of a U.S. Person; (ii) any sale of Securities to any purchaser unless, at the time the buy order was or will have been
originated, the purchaser was outside the United States and not a U.S. Person, and was not purchasing for the account or benefit of a U.S. Person, or the Corporation, its affiliates and any persons acting on its or their behalf reasonably believed
that such purchaser was outside the United States and not a U.S. Person, and was not purchasing for the account or benefit of a U.S. Person; or (iii) any Directed Selling Efforts with respect to any of the Securities.                                                                                           
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|3. | Neither it nor any of its affiliates, nor any person acting on its or their behalf (other than the Underwriter, its U.S. affiliates, members of the Selling Dealer Group or any person acting on their behalf, in respect of which no
representation is made), during the period in which the Securities are offered for sale, has taken or will take any action that would cause the exemptions afforded by Section 4(2) of the U.S. Securities Act and/or Rule 506 of Regulation D to be
unavailable for offers and sales of Securities in the United States in accordance with this Schedule "A", or the exclusion from registration afforded by Rule 903 of Regulation S to be unavailable for offers and sales of the Securities outside the
United States in accordance with the Underwriting Agreement.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|4. | None of the Corporation, any of its affiliates or any person acting on its or their behalf (other than the Underwriter, its affiliates, members of the Selling Dealer Group or any person acting on their behalf, in respect of which
no representation is made) has offered or will offer to sell, or has solicited or will solicit offers to buy, the Securities in the United States by means of any form of General Solicitation or General Advertising or in any manner involving a public
offering within the meaning of Section 4(2) of the U.S. Securities Act.                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|5. | The Corporation has not, since the date that is six months prior to the commencement of the offering of Securities, sold, offered for sale or solicited any offer to buy any of its securities in the United States or to or for the
account or benefit of a U.S. Person, and will not after the date hereof sell, offer for sale or solicit any offer to buy any of its securities in the United States or to or for the account or benefit of a U.S. Person, in a manner that would be
integrated with the offer and sale of the Securities and would cause the exemption from registration set forth in Section 4(2) of the U.S. Securities Act and/or Rule 506 of Regulation D to become unavailable with respect to the offer and sale of the
Securities.                                                
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|6. | None of the Corporation, any of its affiliates or any person acting on any of their behalf (other than the Underwriter, its affiliates, members of the Selling Dealer Group or any person acting on any of their behalf, in respect of
which no representation is made) has taken or will take, directly or indirectly, any action in violation of Regulation M under the U.S. Exchange Act in connection with the offer and sale of the Securities.                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|7. | None of the Corporation or any of its predecessors or affiliates have been subject to any order, judgment, or decree of any court of competent jurisdiction temporarily, preliminarily or permanently enjoining such person for
failure to comply with Rule 503 of Regulation D.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|8. | The Corporation is not, and as a result of the sale of the Securities contemplated hereby will not be, an "investment company" as defined in the United States Investment Company Act of 1940, as amended.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|9. | The Corporation will duly prepare and file a notice on Form D within 15 days after the first sale of Securities in reliance on Rule 506 of Regulation D, and any notice filings required by applicable state securities laws.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

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Exhibit 1to Schedule A

Underwriters' Certificate

In
connection with the private placement in the United States of Securities (the
"Securities") of TAG Oil Ltd. ("Corporation") pursuant to the
Underwriting Agreement effective as of May 12, 2006 (the "Underwriting
Agreement") between the Corporation and Canaccord Capital Corporation (the
"Underwriter"), the undersigned do hereby certify as follows:

| | (i)   | the Securities have been offered and sold in the United
      States only by the U.S. Affiliate, which was on the dates of such offers
      and sales, and is on the date hereof, a duly registered broker or dealer
      pursuant to Section 15(b) of the U.S. Exchange Act and under the
      securities laws of each state in which such offers and sales were made
      (unless exempted from the respective state's broker-dealer registration
      requirements) and was and is a member in good standing with the National
      Association of Securities Dealers, Inc.;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | ----- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | (ii)  | all offers and sales of Securities in the United States
      have been effected in accordance with all applicable United States federal
      and state laws and regulations governing the registration and conduct of
      securities brokers and dealers;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | (iii) | immediately prior to offering the Securities to offerees
      that are in the United States or U. S. Persons, or acting for the account
      or benefit of U.S. Persons, we had reasonable grounds to believe and did
      believe that each such offeree was either (i) an Accredited Investor
      purchasing for its own account or an Institutional Accredited Investor
      purchasing for its own account or for the account of an Accredited
      Investor over which it exercises sole investment discretion, or (ii) a
      Qualified Institutional Buyer acting for its own account or the account of
      another Qualified Institutional Buyer over which it exercises sole
      investment discretion, and, on the date hereof, we have reasonable grounds
      to believe and do believe that (i) each person in the United States or
      that is a U.S. Person or is purchasing for the account or benefit of a
      U.S. Person that we have arranged to purchase Securities from the
      Corporation as a U.S. Purchaser is an Accredited Investor purchasing the
      Securities for its own account or Institutional Accredited Investor
      purchasing for its own account or for the account of an Accredited
      Investor over which it exercises sole investment discretion, and (ii) each
      person in the United States or that is a U. S. Person or is purchasing for
      the account or benefit of a U.S. Person that is purchasing Securities from
      the Underwriter or the U.S. Affiliate (acting as principal) is a Qualified
      Institutional Buyer purchasing the Securities for its own account or the
      account of another Qualified Institutional Buyer over which it exercises
      sole investment discretion;

| | (iv) | no form of General Solicitation or General Advertising
      was used by us in connection with the offer or sale of the Securities in
      the United States nor have we or our affiliates, either directly or
      through a person acting on our or their behalf, solicited offers for, and
      have not offered to sell, the Securities in the United States in any
      manner involving a public offering within the meaning of Section 4(2) of
      the U.S. Securities Act;
| | ---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | (v)  | neither we, our affiliates nor anyone acting on our
      behalf has engaged in any Directed Selling Efforts with respect to the
      Securities nor will any such person engage in any Directed Selling Efforts
      with respect to Securities;                                                                                                                                                                                                                                     

---

| | (vi)   | all offers for the Securities have been solicited only
      from, and all sales of such Securities have been made only to persons in
      the United States or U.S. Persons that have been informed that that the
      Securities have not been and will not be registered under the U.S.
      Securities Act or any applicable state securities laws and are being sold
      to them without registration under the U.S. Securities Act in reliance on
      Section 4(2) of the U.S. Securities Act and/or Rule 506 of Regulation D or
      Rule 144A under the U.S. Securities Act, as the case may be, and
      exemptions from any applicable state securities laws;
| | ------ | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | (vii)  | prior to the time of sale of any Securities in the United
      States or to or for the account or benefit of a U.S. Person or person in
      the United States, we caused each such purchaser purchasing from the
      Corporation as a U.S. Purchaser in reliance on Rule 506 of Regulation D,
      to execute and deliver a U.S. Subscription Agreement;                                                                                                                                                                                                                                                                                                                  
| |        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | (viii) | if we purchase any Securities pursuant to the
      Underwriting Agreement, we will resell those Securities only in compliance
      with the Underwriting Agreement, including Schedule "A" thereto, and, we
      will not resell those Securities in the United States or to or for the
      account or benefit of a U.S. Person except in compliance with Rule 144A
      (if available at the time of resale) or another exemption from
      registration under the U.S. Securities Act and in compliance with
      applicable state securities laws;                                                                                                                   
| |        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | (ix)   | the offering of the Securities has been conducted and
      will be conducted in accordance with the terms of the Underwriting
      Agreement, including Schedule "A" thereto.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

All
capitalized terms not otherwise defined herein shall have the meanings set forth
in the Underwriting Agreement, including Schedule "A" thereto.

Dated
this ______ day of June, 2006

|Canaccord Capital Corporation |        | Canaccord Capital Corporation (USA), Inc.
|----------------------------- | ------ | -----------------------------------------
|                              |        |                                          
|                              |        |                                          
|Per:                          |        |                                          
|                              | Name:  |                                          
|                              | Title: |                                          

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