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UNDERWRITING AGREEMENT

Effective as of September 1, 2005

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 9,230,800 common shares in
the capital of the Corporation (the "Initial Shares") by way of private
placement (the "Offering").

The Initial 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 Initial Shares for sale on the Closing Date (as hereinafter
defined), at a price of $1.30 per Initial Share, provided that in the event that
less than all of the Initial Shares are sold by the Underwriter as agent, the
Underwriter hereby agrees to purchase the Initial 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 Initial Shares for an
aggregate consideration of $12,000,040.

In addition, subject to the terms
and conditions hereof, the Corporation hereby grants to the Underwriter an
option (the "Underwriter's Option"), exercisable in whole or in part
until 72 hours prior to the Closing Time, to purchase up to an additional
2,307,700 common shares in the capital of the Corporation (the "Option
Shares") at a price of $1.30 per share for additional aggregate
consideration of up to $3,000,010 and, if the Underwriter's Option is exercised,
the Corporation hereby agrees to issue and sell to the Underwriter and the
Underwriter agrees to purchase, that number of Option Shares set out in the
notice of exercise on the basis herein provided and may arrange substitute
purchasers for such shares as contemplated herein. The Initial Shares, together
with any Option Shares that are issued upon exercise of the Underwriter's
Option, are referred to herein as the "Offered Shares".

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

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Closing the purchase price for each Offered Share subscribed
for by them. The Underwriter agrees that each Subscriber:

| | (a) | resident in, 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;                                              
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                             
| | (b) | who is resident in the United States or U.S. Persons 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 Rule 506 of Regulation D of
      the U.S. Securities Act; and
| |     |                                                                                                                                                                                                                                                                                                                                             
| | (c) | resident in, 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 (as hereinafter
defined)) 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)               

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| | (e) | "Closing Date" means September 22, 2005, or such
      other date or dates as the Underwriter and the Corporation may agree to in
      writing;                                                                                                                                                                                                                                                                  
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                   
| | (f) | "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;                                                                                                                                                                                                                                                              
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                   
| | (g) | "Common Shares" means the common shares in the
      capital of the Corporation;                                                                                                                                                                                                                                                                                                                                  
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                   
| | (h) | "Corporation Documents" shall have the meaning
      assigned thereto in Section 5(aaa) hereof;                                                                                                                                                                                                                                                                                                                   
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                   
| | (i) | "Corporation's counsel" means Lang Michener LLP or
      such other legal counsel as the Corporation may appoint;                                                                                                                                                                                                                                                                                                 
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                   
| | (j) | "Documents"means, collectively:                                                                                                                                                                                                                                                                                                                                                                                   
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                   
| |     | (i)                                                                                                                                                                                                                                                                                                                                                                                                               
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                   
| |     | (ii)                                                                                                                                                                                                                                                                                                                                                                                                              
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                   
| |     | (iii)                                                                                                                                                                                                                                                                                                                                                                                                             
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                   
| |     | (iv)                                                                                                                                                                                                                                                                                                                                                                                                              
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                   
| |     | (v)                                                                                                                                                                                                                                                                                                                                                                                                               
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                   
| | (k) | "Due Diligence Session" shall have the meaning set
      forth in Section 3(h) of this Agreement;                                                                                                                                                                                                                                                                                                                 
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                   
| | (l) | "Environmental Laws" shall have the meaning set
      forth in Section 5(hh) of this Agreement;                                                                                                                                                                                                                                                                                                                   
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                   
| | (m) | "Exchange" means the TSX Venture
  Exchange;                                                                                                                                                                                                                                                                                                                                                                      
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                   
| | (n) | "FCPA" shall have the meaning set forth in Section
      5(ccc) of this Agreement;                                                                                                                                                                                                                                                                                                                                
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                   
| | (o) | "Financial Statements" means, collectively: (i)
      the unaudited interim consolidated financial statements of the Corporation
      for the three months ended June 30, 2005, together with the notes thereto;
      and (ii) the audited consolidated financial statements of the Corporation
      for the year ended March 31, 2005, together with the notes thereto and the
      auditors' report thereon;
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                   
| | (p) | "Financing" shall have the meaning set forth in
      Section 12 of this Agreement;                                                                                                                                                                                                                                                                                                                               
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                   
| | (q) | "Hazardous Substances" shall have the meaning set
      forth in Section 5(hh) of this Agreement;                                                                                                                                                                                                                                                                                                                 
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                   
| | (r) | "Indemnified Parties" shall have the meaning set
      forth in Section 6(a) of this Agreement;                                                                                                                                                                                                                                                                                                                   
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                   
| | (s) | "Interests" shall have the meaning set forth in
      Section 5(cc) of this Agreement;                                                                                                                                                                                                                                                                                                                            

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| | (t)  | "Material Agreements" means, collectively, this
      Agreement, the Subscription Agreements and the Warrant
  Certificates;                                                                                                                                                                                                      
| | ---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                                                                                                                                                                                                   
| | (u)  | "Material Contracts" shall have the meaning set
      forth in Section 5(ll) of this Agreement;                                                                                                                                                                                                                                   
| |      |                                                                                                                                                                                                                                                                                                                                   
| | (v)  | "PEP 38480" means permit number 38480 issued by
      the Ministry of Economic Development of New Zealand;                                                                                                                                                                                                                        
| |      |                                                                                                                                                                                                                                                                                                                                   
| | (w)  | "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;  
| |      |                                                                                                                                                                                                                                                                                                                                   
| | (x)  | "Regulation S" means Regulation S under the U.S.
      Securities Act;                                                                                                                                                                                                                                                            
| |      |                                                                                                                                                                                                                                                                                                                                   
| | (y)  | "Responses" shall have the meaning set forth in
      Section 3(h) of this Agreement;                                                                                                                                                                                                                                             
| |      |                                                                                                                                                                                                                                                                                                                                   
| | (z)  | "SEC" means the United States Securities and
      Exchange Commission;                                                                                                                                                                                                                                                           
| |      |                                                                                                                                                                                                                                                                                                                                   
| | (aa) | "Securities Commissions" means, collectively, the
      securities commissions or similar regulatory authorities in the Selling
      Provinces and "Securities Commission" means any one of
  them;                                                                                                                              
| |      |                                                                                                                                                                                                                                                                                                                                   
| | (bb) | "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;                                                                                                                                               
| |      |                                                                                                                                                                                                                                                                                                                                   
| | (cc) | "Selling Jurisdictions" means the Selling
      Provinces and, to the extent permitted by this Agreement, offshore and in
      the United States;                                                                                                                                                                                
| |      |                                                                                                                                                                                                                                                                                                                                   
| | (dd) | "Selling Provinces" means the Provinces of British
      Columbia, Alberta and Ontario;                                                                                                                                                                                                                                           
| |      |                                                                                                                                                                                                                                                                                                                                   
| | (ee) | "Subscriber" means any person or entity who
      executes a Subscription Agreement which is accepted by the
    Corporation;                                                                                                                                                                                                     
| |      |                                                                                                                                                                                                                                                                                                                                   
| | (ff) | "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;
| |      |                                                                                                                                                                                                                                                                                                                                   
| | (gg) | "Subsidiaries" means TAG Oil (NZ) Limited, TAG Oil
      (Canterbury) Limited and Durum Energy (PNG) Limited;                                                                                                                                                                                                                     
| |      |                                                                                                                                                                                                                                                                                                                                   
| | (hh) | "Transfer Agent" means Computershare Trust Company
      of Canada;                                                                                                                                                                                                                                                               
| |      |                                                                                                                                                                                                                                                                                                                                   
| | (ii) | "Underwriter's counsel" means Bennett Jones LLP or
      such other legal counsel as the Underwriter may appoint;                                                                                                                                                                                                                 
| |      |                                                                                                                                                                                                                                                                                                                                   
| | (jj) | "Underwriter's Fee" shall have the meaning set
      forth in Section 2(a) of this Agreement;                                                                                                                                                                                                                                     
| |      |                                                                                                                                                                                                                                                                                                                                   
| | (kk) | "United States" means the United States of
      America, its territories and possessions, any State of the United States
      and the District of Columbia;                                                                                                                                                                     

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- 5 -

| | (ll) | "U.S. Exchange Act" means the United States
      Securities Exchange Act of 1934, as amended;     
| | ---- | ---------------------------------------------------------------------------------------------------
| |      |                                                                                                    
| | (mm) | "U.S. Person" shall have the meaning set forth in
      Schedule "A" hereto;                       
| |      |                                                                                                    
| | (nn) | "U.S. Securities Act" means the United States
      Securities Act of 1933, as amended;            
| |      |                                                                                                    
| | (oo) | "Warrant Certificates" means the certificates
      representing the Broker Warrants;              
| |      |                                                                                                    
| | (pp) | "Warrant Expiry Time" shall have the meaning set
      forth in Section 2(b) of this Agreement; and
| |      |                                                                                                    
| | (qq) | "Warrant Shares" shall have the meaning set forth
      in Section 2(b) of this Agreement.         

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:

|   | (a)          | pay to the Underwriter a fee of 6% of the aggregate
        gross proceeds received by the Corporation on the sale of the Offered
        Shares, being an amount $0.078 per Offered Share or $720,002.40 in the
        aggregate for the Initial Shares and $900,003.00 in the aggregate for
        the Offered Shares, if the Underwriter's Option is exercised (the "Underwriter's
        Fee"); and                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|-- | ------------ | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | (b)          | issue to the Underwriter 400,000 warrants (the "Broker
        Warrants"), each such Broker Warrant entitling the holder thereof
        to acquire one Common Share (a "Warrant Share") from the Corporation
        at a price of $1.30 per Warrant Share for a period of one year from the
        Closing Date (the "Warrant Expiry Time"). The Underwriter understands
        and agrees that: (i) it is not in the United States or a U.S. Person and
        is not acquiring Broker Warrants for the account or benefit of a U.S.
        Person; (ii) the Broker Warrants and the Warrant Shares issuable upon
        the exercise of the Broker Warrants will not be registered under the U.S.
        Securities Act; (iii) the Broker Warrants may not be exercised in the
        United States or by or on behalf of a U.S. Person unless pursuant to an
        effective registration statement under the U.S. Securities Act or unless
        an exemption from registration from registration is available, and the
        Corporation has received an opinion of counsel of recognized standing
        reasonably satisfactory to it to such effect; and (iv) the Underwriter
        will not sell or otherwise transfer the Broker Warrants or Warrant Shares
        in the United States or to or for the account or benefit of a U.S. Person
        unless an exemption from registration under the U.S. Securities Act is
        available.
|   |              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|3. | The Offering

| | The Corporation agrees that:
| | ----------------------------

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- 6 -

| | Offered Shares
| | --------------

| | (a) | upon receiving full payment for the Offered Shares, the
      Offered Shares will be issued as fully paid and non-assessable Common
      Shares;                                                                                                                                                                                                                                                                                                                                                      
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | (b) | the Broker Warrants will be duly and validly created and
      issued pursuant to the terms of the Warrant Certificates and each Broker
      Warrant will entitle the holder thereof to acquire one Warrant Share for
      an additional payment of $1.30 per Warrant Share at any time until the
      Warrant Expiry Time. The Warrant Shares will be duly and validly created
      and, upon payment of such exercise price, will be issued as fully paid and
      non-assessable Common Shares;

| | Material Agreements
| | -------------------

| | (c) | it will comply with all covenants of the Corporation set
      forth in the Material Agreements and duly, punctually and faithfully
      perform all the obligations to be performed by it under the Material
      Agreements;
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Conduct of the Private Placement
| | --------------------------------

| | (d) | 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
| | --------------------

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

| | Status as Reporting Issuer and Listing
| | --------------------------------------

| | (f) | 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;                                    
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                        
| | (g) | 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
| | ----------------

| | (h) | 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
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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- 7 -

| | 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;
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|

| | Issuance of Share Certificates
| | ------------------------------

| | (i) | it shall cause the Transfer Agent to make all necessary
      arrangements for the issuance (at the sole cost and expense of the
      Corporation, other than any applicable transfer taxes) 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
| | ---------

| | (j) | 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)                                  
|   |                                      
|   |                                      
|   |                                      
|   |                                      
|   |                                      
|   |                                      

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- 8 -

| | (A) | render any portion of the Public Record or the Responses
      untrue, false or misleading in a material respect;
| | --- | -----------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                  
| | (B) | result in a misrepresentation in the Public Record;
    or                                                       
| |     |                                                                                                                  
| | (C) | result in the Public Record not complying with the
      Applicable Securities Laws;                             

| | provided that if the Corporation is uncertain as to
      whether a material change, change in a material fact, occurrence of a
      material fact or event of the nature referred to in this Section 4(a) has
      occurred, the Corporation shall promptly inform the Underwriter of the
      full particulars of the occurrence giving rise to the uncertainty and
      shall consult with the Underwriter as to whether the occurrence is of such
      nature;
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
|
|
|

| | (b) | during the period commencing with the date hereof and
      ending on the Closing Date, the Corporation will promptly inform the
      Underwriter of the full particulars of:                                                                                                                                                                                                                                              
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                             
| |     | (i)                                                                                                                                                                                                                                                                                                                                                                                                                         
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                             
| |     | (ii)                                                                                                                                                                                                                                                                                                                                                                                                                        
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                             
| |     | (iii)                                                                                                                                                                                                                                                                                                                                                                                                                       
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                             
| |     | 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; and                                                                                                     
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                             
| | (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.

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- 9 -

|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:

| | 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, 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) | the Broker Warrants will be duly and validly created,
      authorized and issued at the Closing Time;                                                                                                                                                      
| |     |                                                                                                                                                                                                                                                             
| | (h) | when issued pursuant to the terms of the Warrant
      Certificates (including payment of the exercise price thereof) the Warrant
      Shares will be duly and validly created, authorized and issued as fully
      paid and non-assessable Common Shares;
| |     |                                                                                                                                                                                                                                                             
| | (i) | at the Closing Time, the form and terms of the definitive
      certificates representing the Common Shares, Broker Warrants and Warrant
      Shares will have been duly approved and                                                                      

---

- 10 -

| | adopted by the Corporation and comply
      with all legal requirements relating thereto, including the requirements
      of the Exchange;
| | -------------------------------------------------------------------------------------------------------------------------------------------
|

| | No Breach
| | ---------

| | (j) | 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)                                                                                                                                                                                                                                                                        
| |     |                                                                                                                                                                                                                                                                            
| |     | (ii)                                                                                                                                                                                                                                                                       

| | Corporate Authority and Effect
| | ------------------------------

| | (k) | 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 has been and the Subscription
      Agreements and the Warrant Certificates, when entered into, shall have
      been duly authorized, executed and delivered by the Corporation, and this
      Agreement is, and the Subscription Agreements and the Warrant
      Certificates, 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)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     

---

- 11 -

| | (l) | 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
| | ---------

| | (m) | 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;
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | (n) | 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);                                                                                                                                                          
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | (o) | 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
| | -------------

| | (p) | the authorized capital of the Corporation consists of an
      unlimited number of Common Shares, which as of the Closing Date (without
      giving effect to the Offering and assuming that all of the warrants issued
      by the Corporation on March 18, 2005 have been exercised), there will be
      35,092,581 Common Shares issued and outstanding as fully paid and
      non-assessable shares;                                                                                                                                                                                                                                                                                                                              
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | (q) | 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 725,000
      Common Shares reserved for issuance upon the exercise of stock options
      currently issued pursuant to the Corporation's stock option plan and
      542,495 Common Shares reserved for issuance upon the exercise of Common
      Share purchase warrants of the Corporation;
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | (r) | 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
| | -------------------

| | (s) | 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
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

- 12 -

| | 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;
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
|
|
|
|
|

| | Legal Compliance
| | ----------------

| | (t) | 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;
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | (u) | 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);                                                                                                                    
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | (v) | 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);                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | (w) | except in respect of PEP 38480, 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);                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            

---

- 13 -

| | Securities Compliance Matters
| | -----------------------------

| | (x)  | 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;
| | ---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | (y)  | 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;                                                                                                                                                                                                                                                                                             
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | (z)  | the Corporation is a "reporting issuer" not in default of
      Applicable Securities Laws in the Provinces of British Columbia and
      Alberta and the Yukon Territory;                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | (aa) | 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;                                                                                                                                          

| | Exchange Compliance
| | -------------------

| | (bb) | 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
| | --------------------

| | (cc) | 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;
| | ---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | (dd) | 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, other than with respect to PEP 38480, which has been disclosed
      to the Underwriter;                                                                                                                                        
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | (ee) | in respect of the assets and properties of the
      Corporation and the Subsidiaries that are operated by the Corporation or
      any of the Subsidiaries:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              

---

- 14 -

| |      | (i)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        | the Corporation and the Subsidiaries hold all valid
      licenses, registrations, permits authorizations and qualifications that
      are required and necessary under applicable law to operate the assets and
      properties of the Corporation and the Subsidiaries as presently
      operated;                                                                                                                                                                                                      
| | ---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |      | (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)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      | except in respect of PEP 38480, 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);
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | (ff) | 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;            
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | (gg) | 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
| | ------------------------

| | (hh) | 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;
| | ---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | (ii) | The Corporation and each of the Subsidiaries:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |      | (i)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |      | (ii)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            

---

- 15 -

| |      | (iii)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         | has not received notice of any orders or directions
      relating to environmental matters requiring any work, repairs,
      construction or capital expenditures to be made with respect to any of its
      assets;
| | ---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |                                                                                                                                                                                                                        
| | (jj) | to the knowledge of the Corporation (after inquiry that
      is consistent with sound environmental practices for businesses engaged in
      exploration and 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
| | ----------------------

| | (kk) | 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;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | ---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | (ll) | 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;
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | (mm) | 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;                                                                                                                                                                                                                                               
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | (nn) | 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;                                                                                                                
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | (oo) | 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;                                                                                                                                                                                                                                                                                  

---

- 16 -

| | Registrar and Transfer Agent
| | ----------------------------

| | (pp) | 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;
| | ---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Other Liabilities
| | -----------------

| | (qq) | 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;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | ---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | (rr) | 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;
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | (ss) | 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;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | (tt) | 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;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

| | Other
| | -----

| | (uu) | 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;                                                                                                                                                                                                                                                                                                            
| | ---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | (vv) | 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;                                                                                                                                                                                                                 
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | (ww) | 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

---

- 17 -

| | 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;
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
|

| | (xx)  | 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 affected, or is reasonably
        likely to materially affect, the Corporation's internal controls over
        financial reporting;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | ----- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | (yy)  | 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;                                                                                                                                                                                                                             
| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | (zz)  | 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;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | (aaa) | 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;
| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | (bbb) | 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                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

---

- 18 -

| | (ccc) | 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 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)      
|   |          
|   |          
|   |          
|   |          
|   |          
|   |          

---

- 19 -

| | (iv) | any order made or any inquiry, investigation (whether
      formal or informal) or other proceeding commenced or threatened by any one
      or more competent authorities (not based solely upon the activities or the
      alleged activities of the Underwriter or any member of the Selling Dealer
      Group, if any) relating to or materially affecting the trading or
      distribution of the Offered Shares;
| | ---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                          
| | (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                                                                                                                        

---

- 20 -

| | 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:
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
|
|

| | (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

---

- 21 -

| | 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 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 (such fees not to exceed $40,000, excluding disbursements and applicable
taxes), 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
(such fees not to exceed $10,000 excluding applicable taxes). The fees and
expenses of the Underwriter outlined herein shall be paid by the Corporation at
the Closing Time, unless otherwise agreed.

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

---

- 22 -

| | order, by any securities commission,
      similar regulatory authority, the Exchange or other competent authority,
      and has not been rescinded, revoked or withdrawn prior to the Closing
      Time;
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
|

| |     | (ii)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | any inquiry, investigation (whether formal
        or informal) or other proceeding in relation to the Corporation or the
        Subsidiaries or any of their respective directors or senior officers is
        announced, commenced or threatened by any securities commission, similar
        regulatory authority, the Exchange or other competent 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 marked 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, 14(a) and 16
        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.

---

- 23 -

|    | (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.
|--- | ----------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
|
|    |                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|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)                                                                                                                                                                                                                                                                                                                                                                                                  

---

- 24 -

| | (v)    | the Broker Warrants have been validly created, authorized
      and issued;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | ------ | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | (vi)   | the offering, sale, and issuance of the Offered Shares by
      the Corporation to the Subscribers in the Selling Provinces in accordance
      with the Subscription Agreements are exempt (and the issuance of the
      Broker Warrants and Warrant Shares will be similarly exempt), either by
      statute, regulation or order, from the prospectus requirements of the
      Applicable Securities Laws in the Selling Provinces and no prospectus will
      be required and no other document is required to be filed, no proceedings
      are required to be taken and no approvals, permits, 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 (and the issuance
      of the Broker Warrants and Warrant Shares), 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;
| |        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | (vii)  | the offer and sale of the Offered Shares is not required
      to be registered under the U.S. Securities Act; and                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | (viii) | 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, Ontario, or
      United States federal law 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.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
|
|
|

| | Certificate
| | -----------

| | (b) | 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)                                                                                                                                                                                                    

---

- 25 -

| | Exchange or by any other competent authority, and, to the
      knowledge of such officers, no proceedings for such purpose are pending,
      contemplated or threatened; and
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
|

| | (v) | the Corporation has made and/or obtained, on or prior to
      the Closing Time, all necessary filings, approvals, consents and
      acceptances of applicable regulatory 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).
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Other
| | -----

| | (c) | Executed copies of the Subscription Agreements in form
      and substance reasonably satisfactory to the Underwriter and the
      Underwriter's counsel.         
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                    
| | (d) | Evidence satisfactory to the Underwriter and the
      Underwriter's counsel that the Corporation has obtained all necessary
      approvals from the Exchange for:
| |     |                                                                                                                                                                    
| |     | (i)                                                                                                                                                                
| |     |                                                                                                                                                                    
| |     | (ii)                                                                                                                                                               

| | subject only to the filing of documents which
      may be required by the Exchange.
| | ------------------------------------------------------------------------------------

| | (e) | Evidence that the Corporation is a reporting issuer in
      British Columbia, Alberta and the Yukon Territory.                                                                                                                          
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                          
| | (f) | 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.
| |     |                                                                                                                                                                                                                                          
| | (g) | The Underwriter's Fee and Warrant Certificates 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:

| | (a) | to the Corporation, all completed Subscription Agreements
      and where applicable, all completed forms required by the Applicable
      Securities Laws and the Exchange; and                                                                                                                                                     
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                      
| | (b) | a bank draft or certified cheque payable to the
      Corporation at par in the City of Calgary 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(a) and the
      expenses contemplated by Section 8;

---

- 26 -

| | against delivery by the Corporation of:
| | ---------------------------------------

| | (c) | the opinions, certificates and documents referred to in
      Section 10 above;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | (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 24 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) | definitive Warrant Certificates evidencing the Broker
      Warrants; and                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | (f) | a cheque payable to the Underwriter's counsel in respect
      of their fees, disbursements and applicable
tax.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

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

The Corporation agrees that, from
the date hereof to the date that is 120 days after the Closing Date, it shall
not issue or announce any intention to issue or enter into any agreements to
issue any Common Shares or securities, convertible or exchangeable into Common
Shares without the consent of the Underwriter such consent not to be
unreasonably withheld; provided that the Corporation may complete the
non-brokered private placement of up to 2,307,700 Common Shares at a price of
$1.30 per Common Share described in the press release of the Corporation dated
September 1, 2005 These restrictions do not apply to currently outstanding stock
options, options issued pursuant to the existing stock option plan (so long as
they do not exceed 10% of the outstanding number of Common Shares) and the
warrants described herein that are outstanding on the Closing Date and the
Broker Warrants described herein.

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 5 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 5
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.

---

- 27 -

|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:

| | Lang Michener LLP                  
| | -----------------------------------
| | Barristers and Solicitors          
| | 1500  1055 West Georgia Street    
| | Vancouver, British Columbia V6C 4N7
| | Attention: Bernie Zinkhofer        
| | Fax No.: (604) 691-7354            

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

| | Canaccord Capital Corporation
| | -----------------------------
| | TransCanada Tower, Suite 2200
| | 450  1stStreet SW           
| | Calgary, Alberta T2P 5P8     
| | Attention: Richard Cawkwell  
| | Fax No.: (403) 508-3866      

with a copy to:

| | Bennett Jones LLP         
| | --------------------------
| | 4500, 855  2ndStreet S.W.
| | Calgary, Alberta T2P 4K7  
| | Attention: Jon Truswell   
| | 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)       

---

- 28 -

| | 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)                                                                          

---

- 29 -

| | (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 representatives, warrants 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

---

- 30 -

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 August 31,
2005.

---

- 31 -

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: |      
| | ---- | -----
| |      | Name:
| |      | Tile:

ACCEPTED AND AGREEDto as of this 1st day of
September, 2005.

TAG OIL LTD.

|Per: |        | 
|---- | ------ | 
|     | Name:  | 
|     | Title: | 

---

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 September 1, 2005. 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;
|
|
|
|
|
|
|
|
|                                                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|"Distribution Compliance Period"                    | means a 40-day period that begins on the Closing Date,
      except that all offers and sales by an Underwriter, dealer, or other
      person that participates in the distribution of the Securities pursuant to
      a contractual arrangement, of an unsold allotment or subscription of
      Securities (including any Securities purchased by an Underwriter pursuant
      to the Underwriting Agreement) shall be deemed to be made during the
      Distribution Compliance Period;                                                                                                                                                                          
|
|
|
|
|
|
|                                                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|"Foreign Issuer"                                    | means a "foreign issuer" as that term is defined in
      Regulation S;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|                                                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|"General Solicitation or General
      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;                                                                                                                                                                                                                      
|                                   |                                                                                                                                                                                                                                                                        
|"Reporting Issuer"                 | means "reporting issuer" as defined in Regulation S;                                                                                                                                                                                                                   
|                                   |                                                                                                                                                                                                                                                                        
|"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. Market Interest" | 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, any state of the United States, and the District of Columbia;                                                                                                                               
|
|                                   |                                                                                                                                                                                                                                                                        
|"U.S. Affiliate"                   | 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.6 through A.14 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 either during the distribution
        of the Securities or during the Distribution Compliance Period.                                                                                                                                                                                                                                                                                                                
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|2. | It will not offer or sell any Securities prior to
        the expiration of the Distribution Compliance Period (whether or not part
        of its unsold allotment), except in accordance with the provisions of
        Rule 903 of Regulation S, or pursuant to an available exemption from the
        registration requirements of the U.S. Securities Act.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|3. | It shall send to any dealer or other person receiving
        a selling concession, fee or other remuneration to which it sells Securities
        during the Distribution Compliance Period a confirmation or other notice
        setting forth the restrictions on offers and sales of such securities
        in the United States or to or for the account or benefit of U.S. Persons
        in compliance with Rule 903(b)(2) of Regulation S.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|4. | 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.6 through
        A.14 of this Schedule "A".                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|5. | 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|6. | 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.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|7. | 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|8. | 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 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 Rule 506                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               

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| | 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.
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|9. | (i)  | Immediately prior to soliciting offerees that are in the
      United States or U.S. Persons or who are purchasing for the account or
      benefit of a U.S. Person, the Underwriter, its affiliates and any person
      acting on its or their behalf had reasonable grounds to believe and did
      believe that each such offeree was (i) an Accredited Investor, or (ii) a
      Qualified Institutional Buyer; and                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
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|   | (ii) | at the time of completion of each sale to a person in the
      United States or to or for the account or benefit of a U.S. Person, the
      Underwriter, its affiliates, and any person acting on its or their behalf
      will have reasonable ground to believe and will believe, that (i) any
      purchaser designated by the Underwriter or its U.S. Affiliate to purchase
      Securities from the Corporation as a U.S. Purchaser is an Accredited
      Investor purchasing the Securities 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.
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|10. | 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 Rule 506 of Regulation D or Rule 144A (as
      the case may be) and exemptions from registration under applicable state
      securities laws.
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|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|11. | Each U.S. Purchaser from the Corporation pursuant to 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.                                                                
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|12. | 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".                                                                                                                                                                                                                                                                                 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|13. | 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.                                                                                                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|14. | 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                                                                                                                                                                                                                                                                                                 

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| | 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.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|

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

The Corporation represents, warrants, covenants and agrees
that:

|1. | The Corporation is a Foreign Issuer and a Reporting
        Issuer and believes that there is Substantial U.S. Market Interest in
        the common shares of the Corporation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
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|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
        before the end of the Distribution Compliance Period.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|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 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
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|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 Rule 506 of Regulation D to become unavailable
        with respect to the offer and sale of the Securities.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|6. | All Offering Material and documents (other
        than press releases) used in connection with offers and sales of the Securities
        prior to the expiration of the Distribution Compliance Period include,
        or will include, statements to the effect that the Securities have not
        been registered under the U.S. Securities Act and may not be offered or
        sold in the United States or to, or for the account or                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
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|   | benefit of, U.S. Persons unless an exemption from the
      registration requirements of the U.S. Securities Act is available. Such
      statements have appeared, or will appear, (i) on the cover or inside cover
      page of any material or document; (ii) in the plan of distribution section
      of any prospectus or offering memorandum; and (iii) in any advertisement
      made or issued by the Corporation, any of its affiliates or any person
      acting on its or their behalf (other than the Underwriter, its affiliates,
      or any person acting on any of their behalf, in respect of which no
      representation is made).
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|7. | 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.                                                                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|8. | 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.                                                                                                                                                                                                                                                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|9. | 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.                                                                                                                                                                                                                                                                                                                                                                                                                               

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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 September 1, 2005 (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.;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
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| | (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 of the account of
      another Qualified Institutional Buyer, 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 Underwriter (acting as principal) is a Qualified
      Institutional Buyer purchasing the Securities for its own account or the
      account of another Qualified Institutional Buyer;
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| | (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 or 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 during the Distribution Compliance
    Period;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

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| | (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 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;                                
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| |        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | (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 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;
|
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| |        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | (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 September, 2005.
| | ----------------------------------------

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

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