---

S h a r e  P u r
c h a s e  A g r e e m e n t

South Pacific Lease Operations
LimitedSeller

and

TAG Oil (NZ) LimitedPurchaser

and

TAG Oil LimitedTAG Oil

Date: 9 May 2006

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|Contents                                                                        
|--------------------------------------------------------------------------------
|                                                                                
|1.                                                                              
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|2.                                                                              
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|3.                                                                              
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|4.                                                                              
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|5.                                                                              
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|6.                                                                              
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|7.                                                                              
|                                                                                
|8.                                                                              
|                                                                                
|Schedule **1:**                                                                 
|                                                                                
|Schedule **2:**                                                                 
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|Schedule **3:**                                                                 
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|Schedule **4:**                                                                 
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|Schedule **5:**                                                                 
|                                                                                
|Schedule **6:**                                                                 
|                                                                                
|Schedule **7:**                                                                 
|                                                                                
|Schedule **1:**                                                                 
|                                                                                
|Schedule **2:**                                                                 
|                                                                                
|Schedule **3:**                                                                 
|                                                                                
|Schedule **4:**                                                                 
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|Schedule **5:**                                                                 
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|Schedule **6:**                                                                 
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|Schedule **7:**                                                                 
|                                                                                
|Annexure 8.1(1) and (2): Disclosure
        Schedule to Share Purchase Agreement

1

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|Annexure 8.2: Disclosure Schedule to Share Purchase
      Agreement | 50
|------------------------------------------------------------------- | --

2

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ThisShare Purchase Agreement is made on 9 May 2006

|between | (1) | South Pacific Lease Operations Limited(Seller)
|------- | --- | ----------------------------------------------
|        |     |                                               
|and     | (2) | TAG Oil (NZ) Limited(Purchaser)               
|        |     |                                               
|and     | (3) | TAG Oil Limited(TAG Oil)                      

Introduction

The Seller has agreed to sell all of the shares in each of
Cheal Petroleum Limited, PEP 38757 Limited, and PEP 38758 Limited to the
Purchaser, and the Purchaser has agreed to purchase those shares, for the
consideration (to be satisfied partly by the issue of shares in TAG Oil), and on
and subject to the terms and conditions, set out in this Agreement.

It is agreed

|1.  | Interpretation
|--- | --------------
|    |               
|1.1 | Definitions   

In this Agreement, unless the context
otherwise requires:

Agreement means this Share
Purchase Agreement together with the schedules and annexures;

Assets means, in respect of each
Company, all assets owned by such Company as at the Closing Date;

Balance Date means 31 March
2005;

Bill Rate means the average rate
(expressed as a percentage per annum) as quoted on Reuters page BKBM (or any
successor page displaying substantially the same information) under the heading
FRA for bank accepted bills having a term of 30 days as fixed at 10.45 am on
the first business day of the interest period in respect of which that rate is
to be calculated;

Business, in respect of each
Company, means the business of holding its Assets and operating as a party to
the Joint Venture Agreements and as the holder of the relevant interest in the
Permits;

Closing has the meaning set
forth in clause 2.4;

Closing Date has the meaning set
forth in clause 2.4;

Companies means Cheal Petroleum
Limited, PEP 38757 Limited and PEP 38758 Limited; Companies Act means the
Companies Act 1993; Conditions means the conditions to Closing set forth
in clause 6;

Confidential Information means
the know-how, trade secrets, technical processes, information relating to
products, finances, contractual arrangements and other information

3

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relating to the Companies which by its
nature, or by the circumstances of its disclosure to the holder of the
information, is or could reasonably be expected to be regarded as confidential;

Confidentiality Agreementmeans
the confidentiality agreement between Calgary Petroleum Limited and the
Purchaser entered into by such persons in contemplation of the transactions
described herein;

Consent means:

| | (a) | any authorisation, approval, consent, licence, permit,
      franchise, permission, order, notification, filing, registration,
      lodgement, agreement, declaration or exemption from, by or with a Public
      Authority; and                                                                                 
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                    
| | (b) | in relation to anything which will be prohibited or
      restricted in whole or part by law if a Public Authority intervenes or
      acts in any way within a specified period after lodgement, filing,
      registration, or notification, the expiry of such period without such
      intervention or action;

Default Rate means the Bill Rate
(calculated as at the first date on which the relevant default interest
commences to accrue and recalculated at intervals of 30 days after that date)
plus a margin of ten percentage points;

Deposit means the meaning set
forth in clause 2.2(c);

Disclosure Schedule means
schedule 1 hereto;

Distribution has the meaning
specified in section 2(1) of the Companies Act;

Environment has the meaning
specified in the Resource Management Act 1991;

Environmental Law means any law,
and any regulations and documents with the force of regulations, relating to the
Environment (including the Resource Management Act 1991 and the Hazardous
Substances and New Organisms Act 1996);

Financial Statements means:

| | (a) | the consolidated audited statement of financial position
      of Calgary Petroleum Limited as at the Balance Date;                          
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                              
| | (b) | the consolidated audited statement of financial
      performance of Calgary Petroleum Limited for the year ending on the
      Balance Date;

together with all notes and
information, and directors and auditorsreports, relating to those
statements, all as contained in the Disclosure Schedule;

Goodwill means the goodwill of
the Companies including, but not limited to, the benefit of all pending
contracts, orders and engagements relating to the Companies and the right to all
Intellectual Property Rights;

GST means tax as defined in the
Goods and Services Tax Act 1985;

Income Tax Act means the Income
Tax Act 2004;

Intellectual Property Rights
means all trade marks, trade names, patents, designs, licences, inventions and
technical information (whether registered or not) and any copyright material,
the right to all lists of customers and suppliers of the Companies and all other
intellectual property rights and Confidential Information, used or owned by the
Companies;

4

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Interim Period means the period
commencing on the date of this Agreement and ending at Closing;

IRD means the Inland Revenue
Department;

Joint Venture Agreements has the
meaning set forth in section 10.2 of Schedule 1;

NZ GAAP means generally accepted
accounting practice as defined in section 3 of the Financial Reporting Act 1993;

Overriding Royalty means the
overriding royalty on the interest held by Cheal Petroleum Limited in PEP38738
Deep, referred to in clause 2.2(a);

Permitsmeans the petroleum
exploration permits or petroleum mining permits, issued under the Crown Minerals
Act 1991, in which Cheal Petroleum Limited holds a participating interest or
other interest at the date of this Agreement, being PEP38738 Shallow and
PEP38738 Deep (which permits may have expired, and may be renewed or
substituted, with the Purchasers consent and therefore use of these
descriptions includes any new or substitute permits);

Public Authority means:

| | (a) | any government in any jurisdiction whether national,
      regional, territorial or local;                                                                                        
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                   
| | (b) | any minister, department, office, commission, delegate,
      instrumentality, agency, board, authority or organisation of any
      government or any state-owned enterprise; and
| |     |                                                                                                                                                                                   
| | (c) | any court, tribunal, or similar body of competent
      jurisdiction;                                                                                                             

Purchase Price has the meaning
set forth in clause 2.2(a);

Purchase Price Bank Account
means the New Zealand dollar bank account with a registered bank in New Zealand
specified in a notice to the Purchaser from the Seller as being the "Purchase
Price Bank Account" no later than one business day prior to the due date of
payment;

Purchaser Warranties means the
representations and warranties in Schedule 2;Related Company has the
meaning specified in section 2(3) of the Companies Act; Relief includes:

| | (a) | any relief, loss, allowance, credit, deduction, or
      set-off taken into account in computing, any tax liability, or any grant
      conferred on any person, or
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                    
| | (b) | any right to repayment of tax (whether or not including
      interest) available to that person,                                                                  

whether in New Zealand or elsewhere.

Seller Warranties means the
representations and warranties given by the Seller in Schedule 4, referenced in
clauses 4.1 and 8.2;

5

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Shares means:

| | (i)   | 1,000 fully paid ordinary shares in the capital of Cheal
      Petroleum Limited; and
| | ----- | -------------------------------------------------------------------------------------
| |       |                                                                                      
| | (ii)  | 1,000 fully paid ordinary shares in the capital of PEP
      38757 Limited; and      
| |       |                                                                                      
| | (iii) | 1,000 fully paid ordinary shares in the capital of PEP
      38758 Limited;          

Tax Act means the Income Tax
Act, the Tax Administration Act 1994 and the Goods and Services Tax Act 1985;

Tax Authority means a Public
Authority that is responsible for administering or levying Tax, whether in New
Zealand or elsewhere, and in particular (but without limitation), the IRD, the
Customs Department, the Accident Rehabilitation and Compensation Insurance
Corporation in New Zealand and any overseas bodies with similar functions or
powers;

Tax Indemnity means the
indemnity contained in clause 5;

Tax Saving means a taxation
saving in any past, current or future income year and, without limiting the
generality of the term,

| | (a) | includes, where the amount of a loss, liability, cost or
      expense suffered or incurred is wholly or partly deductible for income tax
      purposes, the amount of deduction to which the relevant person is entitled
      multiplied by the relevant taxation rate (and that deduction is to be
      treated as arising in the same tax year as the relevant loss, liability,
      cost or expense is suffered or incurred); and
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | (b) | includes any recovery, credit or benefit obtained by the
      Purchaser or Company in respect of any taxation liability subject to a
      taxation claim; and                                                                                                                                                                                                                                                                          
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | (c) | includes the amount of any relevant GST input tax credit
      or other deduction from output tax;                                                                                                                                                                                                                                                                                                                                       

Tax Warranties means the Seller
Warranties contained in paragraph 18 of Schedule 4; and

Transactions means the
transactions contemplated by the Transaction Documents;

Transaction Documentsmeans this
Agreement, and each of the documents, instruments and agreements required to be
delivered by the parties in connection herewith and therewith.

|1.2 | Construction of certain references
|--- | ----------------------------------

In this Agreement, unless the context
otherwise requires:

an agreement includes a
contract, deed, licence, undertaking and other document or legally enforceable
arrangement (in each case, whether or not in writing, present and future) and
includes that document as amended, assigned, novated or substituted from time to
time;

a business day means a day
(other than a Saturday or Sunday) on which registered banks are open for general
banking business in Wellington and, where payment is required in foreign
currency, banks are open for business in the required place of payment;

costs incurred by a person
include all commissions, charges, losses, expenses (including legal fees on a
solicitor and own client basis) and taxes incurred by that person;

6

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a disposal of property includes:

| | (a) | assigning, leasing, lending, subordinating, parting with
      possession of, granting an option in respect of or otherwise dealing with
      that property;
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                              
| | (b) | the payment of money or any distribution by way of
      dividend; and                                                                                       
| |     |                                                                                                                                                              
| | (c) | an agreement for any of these,                                                                                                                               

but excludes the creation of a security
interests;

financial statements has the
meaning specified in section 8(1) of the Financial Reporting Act 1993;

the liquidation of a person
includes the dissolution, winding-up and bankruptcy of that person and any
analogous procedure under the law of any jurisdiction in which that person is
incorporated, domiciled, carries on business or has property;

a material adverse effect means
a material adverse effect on the consolidated financial condition or operations
of the Companies as a whole and references to material adverse change are
to be construed accordingly;

a person includes an individual,
body corporate, an association of persons (whether corporate or not), a trust, a
state, an agency of a state and any other entity (in each case, whether or not
having separate legal personality);

property includes the whole and
any part of the relevant persons business, assets, undertaking, revenues and
rights (in each case, present and future), and reference to any property
includes any legal or equitable interest in it;

a security interest includes:

| | (a) | a mortgage, pledge, charge, lien, hypothecation,
      encumbrance, deferred purchase, title retention, finance lease,
      contractual right of set-off, flawed asset arrangement,
      sale-and-repurchase and sale-and-leaseback arrangement, order and other
      arrangement of any kind, the economic effect of which is to secure a
      creditor; and
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                  
| | (b) | security interests as defined in section 17(1)(a) of
      the Personal Property Securities Act 1999 in respect of which the relevant
      person is the debtor,                                                                                                                                                                                              

but does not include:

| | (c) | a lien arising solely by operation of law; or                                                                                                                                                                                                                                                                                       
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                     
| | (d) | a security interest taken in collateral by a seller to
      the extent that it secures the obligation to pay all or part of the
      purchase price of that collateral, where that collateral is purchased in
      the ordinary course of business of the buyer and the purchase price is
      paid within 60 days of supply; or
| |     |                                                                                                                                                                                                                                                                                                                                     
| | (e) | a netting or set-off arrangement entered into in the
      ordinary course of a persons banking arrangements for the purpose of
      netting debit and credit balances;                                                                                                                                                           

tax includes:

| | (a) | all forms of taxation (whether direct or indirect),
      duties, charges, dues, imposts, levies, rates or other governmental
      impositions of whatever nature, imposed in New Zealand or elsewhere and,
      in particular (but without limitation), income tax, withholding
    tax,,
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

7

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| |     | fringe benefit tax, stamp duty, GST, gift duty, customs
      or excise duties, regional or local taxes, municipal taxes and accident
      compensation levies; and
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                     
| | (b) | all interest, penalties, additional tax, fines and
      expenses incidental and relating to, or arising in connection with, any
      such taxes                  
| |     |                                                                                                                                                                     
| |     | and taxationhas the same
  meaning;                                                                                                                                 

taxation claim includes any
notice, demand, assessment, letter or other document issued, or action taken
(including an IRD audit), by or on behalf of any Tax Authority, whereby the
Purchaser or a Company may be, or be sought to be, placed under any or any
increased liability to Tax or may be deprived or sought to be deprived of any
Relief which might otherwise have been available;

writing includes a facsimile
transmission, an email communication and any means of reproducing words in a
tangible and permanently visible form;

a reference to a party,
clause, schedule or annexure is a reference to a party to,
clause of, schedule to or annexure to, this Agreement;

the word including when
introducing an example does not limit the meaning of the words to which the
example relates;

an agreement, representation or
undertaking given by a party in favour of two or more persons is for the benefit
of them jointly and each of them severally;

a reference to any monetary amount is
to New Zealand currency, unless otherwise stated; a gender includes each other
gender; the singular includes the plural and vice versa;

where a word or phrase is defined, its
other grammatical forms have a corresponding meaning;

any legislation includes a modification
and re-enactment of, legislation enacted in substitution for, and a regulation,
order-in-council and other instrument from time to time issued or made under,
that legislation; and

a party to this Agreement or another
agreement includes its successors and its permitted assignees and transferees.

Headings and the table of contents are
to be ignored in construing this Agreement.

|1.3 | Sellers knowledge
|--- | ------------------

A reference in this Agreement to the
knowledge, belief or awareness (or similar expression) of the Seller is a
reference to the actual knowledge, at the date of execution of this Agreement,
of the board of directors and senior management of the Seller and the Companies
only, and does not include any facts or circumstances of which any person has
constructive knowledge only.

8

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|2.  | Sale and purchase       
|--- | ------------------------
|    |                         
|2.1 | Agreement to sell Shares

On the Closing Date, the Seller shall
sell to the Purchaser and the Purchaser shall purchase from the Seller the
Shares free from encumbrances on the terms and conditions contained in this
Agreement.

|2.2 | Purchase Price
|--- | --------------

| | (a) | Amount                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |     | The aggregate consideration for the purchase
        of the Shares (the Purchase Price) shall be comprised of the following:                                                                                                                                                                                                                                                                                                                                                                                          
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |     | (i)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |     | (ii)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |     | The Seller acknowledges that the TAG Oil
        Shares will be subject to a four month hold period under the TSX Venture
        Exchange requirements.                                                                                                                                                                                                                                                                                                                                                              
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |     | In addition to the Purchase Price, with
        effect from Closing, the Purchaser shall grant, or procure the grant,
        to either the Seller or a specific trust established by, or a subsidiary
        of, the Seller, a 5% of 8/8 interest gross overriding royalty equal to
        0.755% on the 15.1% held by Cheal Petroleum Limited in PEP38738 Deep.
        Such royalty shall be calculated in the same manner as the Crown AVR,
        automatically calculated each year and audited by the Crown.
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | (b) | Purchase Price Allocation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |     | The Purchase Price (excluding the value of
        the Overriding Royalty) shall be allocated amongst the Assets in the manner
        set forth in Schedule 3.                                                                                                                                                                                                                                                                                                                                                       
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | (c) | Payment                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |     | The Purchase Price shall be paid as follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |     | (i)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |     | (ii)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |     | (iii)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

9

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|2.3 | Closing
|--- | -------

Subject to the terms and conditions of
this Agreement, the sale and purchase of the Shares contemplated by this
Agreement shall take place at a closing (the Closing) to be held at the
offices of Bell Gully in Wellington at 10:00 a.m. on the second business day
following the date on which the satisfaction or waiver of all conditions to the
obligations of the parties set forth in clause 6 occurs (other than those
conditions that, by their nature, are to be satisfied at Closing, but subject to
the satisfaction or waiver of those conditions) or at such other place or time
as may be agreed upon by the parties in writing (the day on which the Closing
takes place being the Closing Date).

|2.4 | Closing Deliveries by the Seller
|--- | --------------------------------

At the Closing, the Seller shall
deliver to the Purchaser:

| | (a) | Seller certificate:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |     | an unqualified certificate executed by the Seller
      confirming that as at the Closing Date no Seller Warranty is untrue,
      misleading or has been breached and the Seller has complied with all
      covenants and conditions to be complied with by the Seller on or prior to
      the Closing Date;                                                                                                                                                                                                                                                                                          
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | (b) | Share transfers and certificates:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |     | registrable transfers of the Shares executed by the
      Seller in favour of the Purchaser, or the Purchasers designated nominee,
      together with the relevant share certificates or a certificate from a
      director of the relevant Company certifying that no share certificates
      have been issued, and a copy of a signed valid resolution of each of the
      Companies board of directors, certified by a director, approving the
      transfer of Shares and directing that the name of the Purchaser (or its
      nominee) be entered in each of the Companies share register;
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | (c) | Waivers:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |     | any waivers or consents under each Companys
      constitution, which are required to enable the Purchaser or its nominee to
      be registered as the holder of the Shares, each waiver or consent to be in
      a form reasonably acceptable to the Purchaser;                                                                                                                                                                                                                                                                                                                                      
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | (d) | Resignations:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |     | if the Seller or the Sellers appointee or alternate
      occupies a position as a director of a Company, the written resignations
      of such Seller, appointee or alternate from their respective offices as
      director of the relevant Company with written confirmation that they are
      owed no money by the Company and have no claim against the Company, in a
      form reasonably acceptable to the Purchaser;                                                                                                                                                                       
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | (e) | Releases:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |     | releases of any encumbrances over the Shares and releases
      of any guarantees or indemnities given by any Company in favour of the
      Seller or any Related Company of the Seller or any Associated Person or
      any of them (other than the Companies), in a form reasonably acceptable to
      the Purchaser;                                                                                                                                                                                                                                                                               
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | (f) | Repayment of debt:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |     | evidence acceptable to the Purchaser that all moneys have
      been repaid or otherwise discharged under clause
3.2;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

10

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| | (g) | Termination of management agreement:                                                                                                                                                                                                                                                                                                                        
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                             
| |     | evidence acceptable to the Purchaser that the management
      agreement between Calgary Petroleum Limited and Cheal Petroleum Limited
      has been terminated and that there are no outstanding rights or
      obligations under it;                                                                                                                    
| |     |                                                                                                                                                                                                                                                                                                                                                             
| | (h) | Other records:                                                                                                                                                                                                                                                                                                                                              
| |     |                                                                                                                                                                                                                                                                                                                                                             
| |     | all documents, items or records as may reasonably be
      required by the Purchaser (and notified to the Seller) to implement this
      Agreement or in relation to the Companies or the Permits or other Assets
      and which are held by or under the control of the Seller (including all
      seismic data and other confidential information); and
| |     |                                                                                                                                                                                                                                                                                                                                                             
| | (i) | Transaction Documents:                                                                                                                                                                                                                                                                                                                                      
| |     |                                                                                                                                                                                                                                                                                                                                                             
| |     | counterparts of any Transaction Documents required to be
      executed by a Seller or a Company, in each case, duly executed by all such
      persons.                                                                                                                                                                                                    

|2.5 | Closing Deliveries of Purchaser
|--- | -------------------------------

At the Closing, the Purchaser shall
deliver to the Seller:

| | (a) | Closing Payment:                                                                                                                                                                                                                                                                                                                                                                                                                            
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |     | the Closing Date Payment by wire transfer in immediately
      available funds to the Purchase Price Bank Account once the Seller has
      complied with clause 2.4;                                                                                                                                                                                                                                                                       
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | (b) | TAG Oil Resolution and Share
Certificates                                                                                                                                                                                                                                                                                                                                                                                                   
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |     | a copy of such signed valid resolution or minutes
      of a meeting of the TAG Oil board or its shareholders authorising the
      issue of the TAG Oil Shares to the Purchaser and a TAG Oil share
      certificate certifying that TAG Oil has issued the TAG Oil Shares to the
      Seller;                                                                                                                                           
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | (c) | Overriding Royalty:                                                                                                                                                                                                                                                                                                                                                                                                                         
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |     | a document, duly executed by the Purchaser or Cheal
      Petroleum Limited, evidencing the Overriding Royalty, in a form previously
      approved by the Seller, such approval not to be unreasonably withheld
      (and, in the event of any dispute as to formal content, the document shall
      be as determined by an independent appropriately qualified lawyer, having
      regard to the principles of the Overriding Royalty);
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | (d) | Transaction Documents                                                                                                                                                                                                                                                                                                                                                                                                                       
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |     | a counterpart of any document referred to in clause
      2.4(i) that is required to be executed by the Purchaser or TAG Oil, duly
      executed by such person; and                                                                                                                                                                                                                                                                       
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | (e) | Purchaser certificate                                                                                                                                                                                                                                                                                                                                                                                                                       
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |     | an unqualified certificate executed by the Purchaser
      confirming that as at the Closing Date no Purchaser Warranty is untrue,
      misleading or has been breached and the Seller has complied with all
      covenants and conditions to be complied with by the Purchaser on or prior
      to the Closing Date.                                                                                                                    

11

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|2.6 | No capitalised interest (lowest price
      clause)
|--- | ---------------------------------------------------

For the purposes of the financial
arrangement rules in the Income Tax Act, the parties agree that:

| | (a) | the Purchase Price is the lowest price (within the
      meaning of section EW 32(3) of the Income Tax Act) the parties would have
      agreed for the sale and purchase of the Shares, on the date this Agreement
      was entered into, if payment would have been required in full at the time
      the first right in the Shares was transferred; and
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                             
| | (b) | the Purchase Price is the value of the Shares;
  and                                                                                                                                                                                                                                                                                                        
| |     |                                                                                                                                                                                                                                                                                                                                                             
| | (c) | they will compute their taxable income for the relevant
      period on the basis that the Purchase Price includes no capitalised
      interest and will file their tax returns
accordingly.                                                                                                                                                               

|2.7 | Default Interest
|--- | ----------------

If any party fails to pay on the due
date any sum payable by it under or in accordance with this Agreement
(including, without limitation, the whole or any part of the Purchase Price),
that party is to pay interest on that sum at the Default Rate for the period
from the due date for payment until but excluding the day on which that sum (and
all interest on it) is paid in full. Any interest payable under this Agreement
is to be calculated on a daily basis and is to be capitalised every 30 days.

|2.8 | Payments
|--- | --------

Any payment made under this Agreement
shall be made in cleared immediately available funds before noon on the due date
for payment, unless another time for payment is specified in this
Agreement.

|2.9 | Reduction of Purchase Price
|--- | ---------------------------

Any monetary compensation received by
the Purchaser as a result of any breach by the Seller of any Seller Warranty is
to be in reduction and refund of the Retained Sum and the Purchase Price.

|3.  | Additional Agreements   
|--- | ------------------------
|    |                         
|3.1 | Conduct prior to Closing

Between the date hereof and the Closing
the Seller shall and, where relevant, shall procure that each of the Companies
shall:

| | (a) | Operate the Business:                                                                                                                                                                                                                                                                                                            
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                  
| |     | ensure that each Company operates and conducts the
      Business in accordance with good business practice and in substantially
      the same manner as it has operated up to the date of this Agreement,
      including through compliance with the Crown Minerals Act 1991 and all
      Permit conditions and requirements;
| |     |                                                                                                                                                                                                                                                                                                                                  
| | (b) | Maintain the Goodwill:                                                                                                                                                                                                                                                                                                           
| |     |                                                                                                                                                                                                                                                                                                                                  
| |     | use all reasonable efforts to preserve intact the good
      name and reputation of the Companies, as well as their joint venture and
      supplier relationships;                                                                                                                                                              

12

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| | (c) | Not acquire or dispose of Asset:                                                                                                                                                                                                                                                                                                                                                                                               
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                
| |     | ensure that no Company acquires or disposes of any Assets
      without first obtaining the Purchasers consent;                                                                                                                                                                                                                                                                                                               
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                
| | (d) | No security interests:                                                                                                                                                                                                                                                                                                                                                                                                         
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                
| |     | not create or permit any security interest to arise over
      any of the Assets;                                                                                                                                                                                                                                                                                                                                              
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                
| | (e) | Liabilities:                                                                                                                                                                                                                                                                                                                                                                                                                   
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                
| |     | not incur any financial obligation, whether direct,
      contingent, deferred or otherwise, or make any payment except in the
      ordinary course of business;                                                                                                                                                                                                                                                              
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                
| | (f) | Contracts:                                                                                                                                                                                                                                                                                                                                                                                                                     
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                
| |     | not enter into any new contracts or arrangements or
      materially vary any existing contracts (other than in the ordinary course
      of business) without first obtaining the Purchaser's written
    consent;                                                                                                                                                                                                            
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                
| | (g) | Claims:                                                                                                                                                                                                                                                                                                                                                                                                                        
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                
| |     | promptly notify the Purchaser of any lawsuits, claims,
      proceedings, investigations or adverse events which may occur, be
      threatened, brought, asserted or commenced against it, or any of its
      officers or employees involving the Companies or the Assets in any way,
      and not admit, settle, compromise or otherwise deal with any such matter
      except with the Purchaser's prior written consent;
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                
| | (h) | Staff:                                                                                                                                                                                                                                                                                                                                                                                                                         
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                
| |     | not employ any new employees, without first obtaining the
      Purchaser's written consent;                                                                                                                                                                                                                                                                                                                                   
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                
| | (i) | Constitution:                                                                                                                                                                                                                                                                                                                                                                                                                  
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                
| |     | not alter the Companies constitution without first
      obtaining the Purchaser's written consent;                                                                                                                                                                                                                                                                                                                           
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                
| | (j) | Distributions:                                                                                                                                                                                                                                                                                                                                                                                                                 
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                
| |     | not authorise any dividends or make any Distributions
      (whether of income or capital) or returns of capital to its
      shareholders;                                                                                                                                                                                                                                                                                    
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                
| | (k) | Notify Purchaser:                                                                                                                                                                                                                                                                                                                                                                                                              
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                
| |     | promptly notify the Purchaser of any events which may be
      material to the Shares, the Business or to any Company;                                                                                                                                                                                                                                                                                                         
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                
| | (l) | Rights attaching to shares:                                                                                                                                                                                                                                                                                                                                                                                                    
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                
| |     | ensure that (x) no Shares are transferred, disposed of or
      encumbered, and (y) no action is taken, or omitted to be taken, by any
      Company or the Seller or any other person which may adversely affect the
      rights attaching to the Shares;                                                                                                                                                                    

13

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| | (m) | Joint Venture Agreements:                                                                                                                                                                                                                                                                                                                     
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                               
| |     | not do anything which might breach any Joint Venture
      Agreement or other agreement or arrangement relevant to the Permits, and
      promptly upon receipt thereof, forward to the Purchaser copies of all
      communications received in connection with the Joint Venture
      Agreements;                                          
| |     |                                                                                                                                                                                                                                                                                                                                               
| | (n) | Transaction Documents:                                                                                                                                                                                                                                                                                                                        
| |     |                                                                                                                                                                                                                                                                                                                                               
| |     | ensure that the Seller, each Company, and each other
      party to a Transaction Document (other than the Purchaser) complies in all
      respects with the provisions of that Transaction Document and consummates
      all Transactions required to be consummated by such persons on or prior to
      the Closing Date; and            
| |     |                                                                                                                                                                                                                                                                                                                                               
| | (o) | Personal Information Form:                                                                                                                                                                                                                                                                                                                    
| |     |                                                                                                                                                                                                                                                                                                                                               
| |     | within 20 days of the date of this Agreement, complete
      and forward to the Purchaser a personal information form (and any other
      required information) from the TSX Venture Exchange (as provided by the
      Purchaser) to ensure any trading halt of the securities of TAG Oil on the
      TSX Venture Exchange can be released.

|3.2 | Repayment of advances
|--- | ---------------------

The following shall be repaid at or
before Closing:

| | (a) | all money owed to any Company by Calgary Petroleum
      Limited, Cheal Petroleum Limited or any related company thereof;
| | --- | -------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                          
| | (b) | all money owed by any Company to the Seller or to Calgary
      Petroleum Limited or any related company thereof; and    
| |     |                                                                                                                          
| | (c) | all money owed by any Company to any registered bank,
      financial institution or other lender.                       

|3.3 | Breach of Warranty
|--- | ------------------

The Seller undertakes with the
Purchaser that:

| | (a) | it will disclose immediately in writing to the Purchaser
      any matter or circumstance which may arise or become known to it after the
      date of this Agreement and before Closing which constitutes a breach of
      any of the Seller Warranties or which has or may have a material adverse
      effect; and
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                         
| | (b) | prior to Closing it will not do, or omit to do, or allow
      anything to be done, as a result of which any Seller Warranty is or may
      become untrue, misleading or inaccurate as at
Closing.                                                                                                                     

|3.4 | Required Approvals
|--- | ------------------

Each party to this Agreement shall:

| | (a) | use its reasonable efforts to obtain as promptly as
      practicable all required approvals and to make all filings with and
      notifications to all Public Authorities that may be or become necessary or
      desirable for its execution and delivery of, and the performance of its
      obligations under, this Agreement and the other Transaction
    Documents;
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

14

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| | (b) | cooperate fully with the other parties to this Agreement
      in promptly seeking to obtain all such required approvals and to make all
      such filings and give such notifications;                                                                                                                                                                                                                                                                           
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | (c) | provide such other information to any Public Authority or
      other persons as such governmental authority or other persons may
      reasonably request;                                                                                                                                                                                                                                                                                                        
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | (d) | promptly notify the other parties when any required
      approval, filing or notice referred to in this clause 3.4 is obtained,
      taken, made, or given and of any communication it or any of its affiliates
      receives from any Public Authority relating to the matters that are the
      subject of this Agreement and permit the other parties to review in
      advance any proposed communication by such party to any Public Authority;
      and
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | (e) | not agree to participate in any meeting with any Public
      Authority in respect of any filings, investigations or required approvals
      unless it consults with the other parties in advance and, to the extent
      permitted by such Public Authority, gives the other party the opportunity
      to attend and participate at such meeting.                                                                                                             

|3.5 | Further Assurances
|--- | ------------------

Each party to this Agreement shall:

| | (a) | use all reasonable efforts and proceed diligently and in
      good faith to satisfy each condition to the obligations of the parties
      hereto contained in clause 6 and not take or fail to take any action that
      could reasonably be expected to result in the non-fulfilment of any such
      condition;                                                                                                              
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | (b) | sign, execute and deliver all deeds, schedules, acts,
      documents and things as may reasonably be required by any other party to
      carry out and give effect to the terms and intentions of the Transaction
      Documents, whether before or after Closing; and                                                                                                                                                          
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | (c) | use all reasonable efforts and proceed diligently and in
      good faith to take, or cause to be taken, all other appropriate actions,
      do or cause to be done all other things necessary, proper or advisable
      under applicable law, and do and perform such other acts, as may be
      required to carry out the provisions of the Transaction Documents and to
      consummate and make effective the
Transactions.

|3.6 | Adjustment to Purchase Price
|--- | ----------------------------

| | (a) | In the event that Cheal Petroleum Limited receives any
      request or demand for payment pursuant to the provisions of the Joint
      Venture Agreements (such request or demand being a Cash Call) in
      the Interim Period (other than those Cash Calls already received prior to
      the date hereof, and which are identified in section 8.1(2) of the
      Disclosure Schedule), the Seller shall forward such Cash Call to the
      Purchaser promptly upon receipt, together with a statement of the date on
      which such Cash Call is required to be paid pursuant to the applicable
      Joint Venture Agreement (the Due Date). Upon receipt of
      notification of a Cash Call, the Purchaser shall pay to the Seller the
      amount of the Cash Call prior to the Due Date, (in which case the Seller
      shall forward such amount in payment of the Cash Call), (a Cash Call
      Payment).
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | (b) | Any Cash Call Payment made by the Purchaser in the
      Interim Period shall not reduce the Purchase Price hereunder. If this
      Agreement is terminated pursuant to clause 7.1 (other than pursuant to
      clause 7.1(a)), the amount of all Cash Call Payments shall be repaid or
      reimbursed to the Purchaser, within 6 months of the date of
      termination.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | (c) | The Purchaser shall not be entitled to terminate this
      Agreement, delay Closing or refuse to proceed to Closing or make any claim
      or exercise any other right or remedy (including without limitation, under
      clauses 4 or 5 of this Agreement) under, in                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

15

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connection with, or with respect to
this Agreement by reason of, or to the extent arising out of or in connection
with any failure by the Seller to pay any Cash Call, which Cash Call has been
notified to the Purchaser pursuant to clause 3.6(a) .

|4.  | Representations, Warranties and Indemnities
|--- | -------------------------------------------
|    |                                            
|4.1 | Seller representations                     

| | (a) | The Seller represents and warrants to the Purchaser in
      the terms of the warranties set out in Schedule 4, in the knowledge that
      the Purchaser is entitled to rely on the truth of the statements contained
      in the Seller Warranties.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                       
| | (b) | The Seller Warranties are continuing representations and
      warranties and do not merge on Closing but remain in full force and effect
      notwithstanding Closing.                                                                              

|4.2 | Seller Warranties qualified
|--- | ---------------------------

Each of the Seller Warranties is given
subject to:

| | (a) | Agreement                                                                                                                                                                                                                                                                                                         
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                   
| |     | (i)                                                                                                                                                                                                                                                                                                               
| |     |                                                                                                                                                                                                                                                                                                                   
| |     | (ii)                                                                                                                                                                                                                                                                                                              
| |     |                                                                                                                                                                                                                                                                                                                   
| | (b) | Disclosure                                                                                                                                                                                                                                                                                                        
| |     |                                                                                                                                                                                                                                                                                                                   
| |     | any matter to the extent that it is disclosed in the
      Disclosure Schedule or otherwise disclosed to the Purchaser prior to
      Closing;                                                                                                                                                                    
| |     |                                                                                                                                                                                                                                                                                                                   
| | (c) | Knowledge                                                                                                                                                                                                                                                                                                         
| |     |                                                                                                                                                                                                                                                                                                                   
| |     | any fact, matter or circumstance within the actual
      knowledge of the Purchaser or which ought to have been known by the
      Purchaser having regard to its knowledge of the industry in which the
      Business is conducted and having regard to its opportunities to make
      enquiries of the Seller;
| |     |                                                                                                                                                                                                                                                                                                                   
| | (d) | Public register                                                                                                                                                                                                                                                                                                   
| |     |                                                                                                                                                                                                                                                                                                                   
| |     | any matter recorded in a public register held by any of
      the following bodies (and which would have been disclosed in a search of
      the public records of such body) in relation to a Company,
  namely:                                                                                                 
| |     |                                                                                                                                                                                                                                                                                                                   
| |     | (i)                                                                                                                                                                                                                                                                                                               
| |     |                                                                                                                                                                                                                                                                                                                   
| |     | (ii)                                                                                                                                                                                                                                                                                                              
| |     |                                                                                                                                                                                                                                                                                                                   
| |     | (iii)                                                                                                                                                                                                                                                                                                             
| |     |                                                                                                                                                                                                                                                                                                                   
| |     | (iv)                                                                                                                                                                                                                                                                                                              
| |     |                                                                                                                                                                                                                                                                                                                   
| |     | (v)                                                                                                                                                                                                                                                                                                               

16

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|4.3 | Exclusions from Warranty claims
|--- | -------------------------------

| | (a) | The Seller will not be liable in respect of any claim
      under the Seller Warranties:                                  
| | --- | --------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                           
| |     | (i)                                                                                                                       
| |     |                                                                                                                           
| |     | (ii)                                                                                                                      
| |     |                                                                                                                           
| |     | (iii)                                                                                                                     
| |     |                                                                                                                           
| |     | (iv)                                                                                                                      
| |     |                                                                                                                           
| | (b) | No Seller Warranty claim may be made in respect of
      taxation or taxation claims other than under the Tax
  Indemnity.

|4.4 | Seller's Indemnities
|--- | --------------------

The Seller hereby indemnifies and keeps
indemnified and holds harmless the Purchaser and each Company (and their
respective officers, directors, employees and agents (collectively, the
Seller Indemnified Parties)) against any loss, damage, cost or expense
(including legal or other costs associated with the enforcement of this
Agreement) suffered or incurred by the Seller Indemnified Parties resulting
from, relating to, or arising out of or in connection with:

| | (a) | the breach by the Seller of any Seller Warranty,
      covenant, or agreement contained in any Transaction Document;
and                                                                                                                                       
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                
| | (b) | any claim by another party to the Joint Venture
      Agreements or Gas Supply Agreement referred to in Schedule 1 in respect of
      any breach by Cheal Petroleum Limited on or prior to Closing of any
      confidentiality provision of those agreements.

|4.5 | Limits on Claims
|--- | ----------------

| | (a) | Period for Seller Warranty claims                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |     | The Purchaser may not make any claim under a Seller
      Warranty (other than a Tax Warranty) unless the Purchaser gives the Seller
      notice of the claim in accordance with this clause prior to the end of the
      period of six months following the date of this Agreement and, in any
      case, all Seller Warranty claims made by the Purchaser under this
      Agreement are to be in writing and delivered to the Seller within 30
      Business Days of the Purchaser or any Company becoming aware of the
      circumstances giving rise to the claim and any notice under this
      sub-clause is to specify in reasonable detail the matter which gives rise
      to the breach, the nature of the breach and the amount claimed.
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | (b) | Seller Warranty Claim thresholds                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |     | No claim for breach of a Seller Warranty may be made by
      the Purchaser unless:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

17

---

| | (i)  | the resultant loss is in excess of $50,000 or, being less
      than $50,000, is one of a series of connected claims aggregating more than
      $50,000; and          
| | ---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                                        
| | (ii) | the total of all Seller Warranty claims which have been
      made exceeds $100,000, in which event all Seller Warranty claims in excess
      of $100,000 may be made.

| | (c) | Maximum liability                                                                                                                                                                                                                                                                                                                                                                                          
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                            
| |     | The maximum aggregate amount for which the Seller can be
      liable to the Purchaser under or in relation to this Agreement on any
      account however arising is 50 per cent of the Purchase Price.                                                                                                                                                                                                   
| |     |                                                                                                                                                                                                                                                                                                                                                                                                            
| | (d) | Allowances                                                                                                                                                                                                                                                                                                                                                                                                 
| |     |                                                                                                                                                                                                                                                                                                                                                                                                            
| |     | The liability of the Seller under any claim under clause
      4.4 will be assessed after taking into account the amount by which any
      taxation for which the Purchaser or any Company is or may be liable to be
      assessed or accountable is reduced or extinguished as a result of any such
      liability.                                                                                    
| |     |                                                                                                                                                                                                                                                                                                                                                                                                            
| | (e) | No double claims                                                                                                                                                                                                                                                                                                                                                                                           
| |     |                                                                                                                                                                                                                                                                                                                                                                                                            
| |     | The Purchaser and each Company will only be entitled to
      make a claim against the Seller under clause 4.4 once in respect of the
      same or any inter-related factual circumstances where those circumstances,
      when reasonably considered, should form the basis of a single claim
      against the Seller, with the intent that the same loss should not be
      recovered more than once.

|4.6 | Recovery from Third Party
|--- | -------------------------

If the Seller makes any payment by way
of damages for breach of a Seller Warranty or otherwise or pursuant to any other
term or obligation under this Agreement (the Damages Payment) and the
Purchaser receives any financial benefit otherwise than from the Seller which
would not have been received but for the circumstance giving rise to the claim
in respect of which the Damages Payment was made, the Purchaser will, once it
has received such benefit, immediately pay to the Seller an amount equal to the
lesser of:

| | (a) | the amount of such benefit after deduction of reasonable
      expenses incurred in connection with obtaining the financial benefit and
      any taxes that are payable in respect of it; and
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                               
| | (b) | the Damages Payment.                                                                                                                                                                          

|4.7 | Claims Procedures
|--- | -----------------

If any event occurs or any claim arises
against the Purchaser or a Company in respect of which the Purchaser may seek to
make a claim against the Seller under a Seller Warranty (other than a Tax
Warranty) the following provisions will apply:

| | (a) | the Purchaser will within the relevant period specified
      in clause 4.5(a) give notice to the Seller and will ensure that the
      Purchaser does not make any payment or admission of any liability in
      respect of that event or claim, or take any other steps which may in any
      way prejudice its defence, without the prior written consent of the
      Seller, such consent not to be unreasonably withheld or delayed;
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | (b) | the Seller may, if it accepts it is liable to the
      Purchaser, at its option, in the name of the Seller, but in full
      consultation at all times with the Purchaser so that the reputation
    of                                                                                                                                                                                                                                   

18

---

| |     | the Purchaser is not unfairly harmed, prosecute or defend
      at the Sellers cost any proceedings relating to any such liability or
      claim and the Purchaser will make available to the Seller all such
      information, books and records and employees as the Seller may reasonably
      require for the purpose of such proceedings;
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                   
| | (c) | subject to sub-clause (b) above, the Seller may deal with
      the claim or proceeding and its defence as it sees fit; and                                                                                                                                                                                                                       
| |     |                                                                                                                                                                                                                                                                                                                                                   
| | (d) | the Purchaser and each Company shall take all reasonable
      steps to mitigate its loss in respect of the matter the subject of the
      Seller Warranty claim.                                                                                                                                                                                

|4.8 | Purchasers Reliance on own Judgment
|--- | ------------------------------------

The parties acknowledge that:

| | (a) | in entering into this Agreement and in proceeding to
      Closing, the Purchaser does not rely on any representation, warranty,
      condition, information data, or other conduct which may have been made or
      provided by the Seller or any person purporting to act on behalf of the
      Seller, except the Seller Warranties; and                                      
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                     
| | (b) | subject to any law to the contrary and except as provided
      in the Seller Warranties and this Agreement, all terms, conditions,
      warranties and statements, whether express, implied, written, oral,
      collateral, statutory or otherwise, are excluded and the Seller disclaims
      all liability in relation to these to the maximum extent permitted by
      law.

|4.9 | Purchaser and TAG Oil Warranties
|--- | --------------------------------

| | (a) | The Purchaser represents and warrants to the Seller in
      terms of sections 1 and 2 of the Purchaser Warranties in the knowledge
      that the Seller is entitled to rely on the truth of the statements
      contained in the Purchaser Warranties.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                          
| | (b) | TAG Oil represents and warrants to the Seller in terms of
      section 3 of the Purchaser Warranties in the knowledge that the Seller is
      entitled to rely on the truth of the statements contained in the Purchaser
      Warranties.             
| |     |                                                                                                                                                                                                                                                          
| | (c) | The Purchaser Warranties are continuing representations
      and warranties and do not merge on Closing but remain in full force and
      effect notwithstanding Closing.                                                                              

|4.10 | Purchasers Indemnity
|---- | ---------------------

The Purchaser hereby indemnifies and
keeps indemnified and holds harmless the Seller (and its officers, directors,
employees and agents (collectively, the Purchaser Indemnified
Parties) against any loss, damage, cost or expense (including legal or other
costs associated with the enforcement of this Agreement) suffered or incurred by
the Purchaser Indemnified Parties resulting from, relating to, or arising out of
or in connection with the breach by the Purchaser or TAG Oil of any Purchaser
Warranty, covenant or agreement contained in any Transaction Document .

|4.11 | Exclusive Remedies
|---- | ------------------

The Seller and the Purchaser
acknowledge and agree that:

| | (a) | following the Closing, the indemnification provisions of
      clause 4 and clause 5 shall be the sole and exclusive remedies of the
      Seller and the Purchaser, respectively, against each other for any breach
      by the other party of the representations and warranties in this Agreement
      and for any failure by the other party to perform and comply with
    any
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

19

---

| |     | covenants and agreements that, by their terms, were to
      have been performed or complied with by such party prior to the
      Closing;                                       
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                   
| | (b) | no party hereto shall have any liability under any
      provision of this Agreement or otherwise for any punitive, consequential
      or indirect damages or for loss of profit.

|4.12 | Monies on Deposit
|---- | -----------------

From the Closing through to the end of
the period of six months following the date of this Agreement the Seller agrees
to keep the Retained Sum (less any amounts actually paid to the Purchaser under
clause 4.4) on deposit in a special purpose interest bearing account with a
registered bank in New Zealand solely for the purposes of satisfying amounts it
is required to pay to the Purchaser under clause 4.4.

|5.  | Taxation     
|--- | -------------
|    |              
|5.1 | Tax Indemnity

The Seller indemnifies the Purchaser
and undertakes to keep the Purchaser at all times fully and effectively
indemnified from and against any taxation suffered by a Company, which:

| | (a) | Arising before Closing Date:                                                                                                                                                                          
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                       
| |     | wholly or partly (in which case the liability of the
      Seller is limited to that part) relates to any period ending on or before
      the Closing Date; or                                       
| |     |                                                                                                                                                                                                       
| | (b) | Event before Closing Date:                                                                                                                                                                            
| |     |                                                                                                                                                                                                       
| |     | is wholly or partly (in which case the liability of the
      Seller is limited to that part) attributable to any event occurring on or
      before the Closing Date and which arises as a result
of:

| | (i)  | the disposal of items treated as capital assets in the
      Financial Statements, or
| | ---- | -------------------------------------------------------------------------------------
| |      |                                                                                      
| | (ii) | which does not arise in the ordinary course of business,
      or                    

| | (c) | Breach of Tax Warranty: would not have occurred
      but for a breach of a Tax Warranty,
| | --- | -----------------------------------------------------------------------------------------

except to the extent:

| | (d) | Financial Statements:                                                                                                          
| | --- | -------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                
| |     | reserve or provision (including by way of deferred
      taxation) is made for that liability in the Financial Statements;
  or
| |     |                                                                                                                                
| | (e) | Disclosure                                                                                                                     
| |     |                                                                                                                                
| |     | that liability has been disclosed to the Purchaser in the
      Disclosure Schedule or otherwise prior to Closing; or          
| |     |                                                                                                                                
| | (f) | After Balance Date                                                                                                             

20

---

| |     | the liability for taxation has been incurred after
      Balance Date in the ordinary course of business; or                                                                                                                                                                                                
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                             
| | (g) | Relief:                                                                                                                                                                                                                                                                                                     
| |     |                                                                                                                                                                                                                                                                                                             
| |     | there is Relief available to any Company or in relation
      to a period ended on or before Closing Date is able to relieve or mitigate
      that taxation liability (including where taxation in one Company is or
      will be offset by a reduced liability for taxation in another Company);
      or
| |     |                                                                                                                                                                                                                                                                                                             
| | (h) | Change in law after the date of this
    Agreement:                                                                                                                                                                                                                                                         
| |     |                                                                                                                                                                                                                                                                                                             
| |     | the liability arises as a result of any change in law,
      including any increase in rates of taxation, announced after the date of
      this Agreement;                                                                                                                                                 
| |     |                                                                                                                                                                                                                                                                                                             
| | (i) | Change in accounting principles or taxation
      treatment:                                                                                                                                                                                                                                                
| |     |                                                                                                                                                                                                                                                                                                             
| |     | the liability arises or is increased as a result of any
      voluntary change in accounting principles or in the treatment of any item
      for taxation purposes made by a Company after Closing;                                                                                                        
| |     |                                                                                                                                                                                                                                                                                                             
| | (j) | Amended return:                                                                                                                                                                                                                                                                                             
| |     |                                                                                                                                                                                                                                                                                                             
| |     | the liability arises because any Company, without the
      written consent of the Seller, amends or requests an amendment to any
      return filed prior to Closing by the Company with the relevant Tax
      Authority.                                                                                 

The undertakings contained in this
clause 5.1 are (for the purposes of the Contracts (Privity) Act 1982) intended
to create a benefit in favour of and be enforceable by the Purchaser and each
Company.

|5.2 | Payment for loss of relief
|--- | --------------------------

For the purposes of calculating the
Sellers liability under the Tax Indemnity, to the extent that a taxation claim
will cause the Purchaser or a Company to suffer a loss of relief, the quantum of
the loss suffered by the Purchaser or the relevant Company as a result of the
taxation claim will be deemed to be (at the election of the Purchaser):

| | (a) | Amount of liability for tax
| | --- | ---------------------------

an amount equal to the liability for
taxation arising as a result of the loss of relief, which amount will be payable
when such liability for taxation becomes payable by the Purchaser or the
relevant Company (as the case may be); or

| | (b) | Net present value                                                                                                                                                        
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                          
| |     | an amount equal to the net present value of the liability
      for taxation arising from the loss of relief, calculated on the basis of
      the following assumptions:

| | (i)  | the relevant rate of taxation will be that applying at
      the date of the loss of relief, unless a new rate of taxation has been
      enacted or announced, in which case that new rate will apply;
| | ---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                                                                        
| | (ii) | the discount rate will be five per cent. per annum;
      and                                                                                                                                          

21

---

| | (iii) | each liability for taxation will be deemed to have arisen
      on the last day of each relevant period in which the liability for
      taxation is predicted by the Purchaser to arise,
| | ----- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

provided that if any Company suffers a
loss of Relief in circumstances where the Seller would be liable under clause
5.1, the Seller is not liable to pay anything to the Purchaser until the loss of
Relief becomes an actual liability for the Company to pay taxation at which time
the Seller must pay the amount the Company has to pay and (for the avoidance of
doubt) any calculation as to the quantum of the loss under this sub-clause will
also be calculated at that time.

|5.3 | Sellers obligation to pay
|--- | --------------------------

Any payment the Seller is required to
make in relation to any claim under the Tax Indemnity:

| | (a) | Pay three days before tax due                                                                                                                                                                                                                                                                                                                                                         
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                       
| |     | if it relates to a taxation liability on which no use of
      money interest is accruing, is to be made at least three business days
      before the last date on which payment may be made by the Purchaser or the
      relevant Company of the relevant liability to the relevant taxation
      authority without incurring any liability to pay any late payment
      penalty;
| |     |                                                                                                                                                                                                                                                                                                                                                                                       
| | (b) | Otherwise on demand                                                                                                                                                                                                                                                                                                                                                                   
| |     |                                                                                                                                                                                                                                                                                                                                                                                       
| |     | otherwise is to be paid to the Purchaser on demand being
      made by the Purchaser; and                                                                                                                                                                                                                                                                                             
| |     |                                                                                                                                                                                                                                                                                                                                                                                       
| | (c) | Refund of Purchase Price                                                                                                                                                                                                                                                                                                                                                              
| |     |                                                                                                                                                                                                                                                                                                                                                                                       
| |     | is to be made to the Purchaser in reduction and refund of
      the Purchase Price.                                                                                                                                                                                                                                                                                                   

|5.4 | Dispute of taxation claim
|--- | -------------------------

If the Purchaser or a Company receives
a taxation claim which may give rise to a claim under the Tax Indemnity against
the Seller, the Purchaser will give notice of that taxation claim to the Seller
within five business days after receiving notice of the taxation claim. If so
requested by the Seller in writing and subject to receipt by the Purchaser from
the Seller of the full amount due under clause 5.3 the Purchaser will ensure
that:

| | (a) | No prejudice of defence                                                                                                                                                                                                                                                                                                                                       
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                               
| |     | no payment (except to the extent required by law) or
      admission of liability in respect of the taxation claim is made or other
      steps are taken which may in any way prejudice any challenge to it or
      defence to that claim without the prior written consent of the Seller
      which consent is not to be unreasonably withheld or delayed;
| |     |                                                                                                                                                                                                                                                                                                                                                               
| | (b) | Purchaser will defend                                                                                                                                                                                                                                                                                                                                         
| |     |                                                                                                                                                                                                                                                                                                                                                               
| |     | Subject to clause 5.5, the Purchaser
  will:                                                                                                                                                                                                                                                                                                                  

| | (i)  | challenge the taxation claim or issue a notice of
      response or notice of proposed adjustment, as is appropriate;                                                                                                        
| | ---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                                                                                              
| | (ii) | refer the matter to a lawyer or accountant
      (Counsel) nominated by the Seller and approved by the Purchaser and
      experienced in tax matters for an opinion on the likelihood of a challenge
      being successful;

22

---

| | (iii) | request a case to be stated to a court, or prepare and
      file a challenge to the assessment in court, if the opinion of Counsel is
      that there is a reasonable prospect of the challenge being
    successful;                                                                              
| | ----- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |       |                                                                                                                                                                                                                                                                                                      
| | (iv)  | if the challenge or an appeal is decided against it,
      after notifying the Seller of the decision immediately after receipt by it
      of the written decision, subject to a recommendation by the Counsel,
      appeal the decision to any relevant appellate body (as the case may
      be);
| |       |                                                                                                                                                                                                                                                                                                      
| | (v)   | instruct Counsel to act and advise in the conduct of all
      such court proceedings and any related correspondence and negotiations;
      and                                                                                                                                                     

| | (c) | Repayment of tax refund                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |     | if the challenge or appeal (in respect of which the
      Purchaser has previously received a payment under clause 5.3) is
      ultimately successful in whole or in part and the Purchaser or a Company
      receives any tax credit or refund the Purchaser or relevant Company will
      promptly pay to the Seller (to the extent that it does not exceed that
      amount previously paid by the Seller) an amount equal to the amount of
      that tax, credit or refund together with any interest (net of tax) which
      the Purchaser or relevant Company has received from any revenue authority
      on such tax credit or refund.

|5.5 | Consultation
|--- | ------------

The Purchaser will, at all times prior
to taking any action, act in consultation with the Seller and its professional
advisers in relation to the conduct and progress of all such objections,
challenges or court proceedings and any related correspondence and negotiations,
keep the Seller and its professional advisers fully informed on this progress
and provide the Seller and its professional advisers with copies of all relevant
documents, including drafts. The Purchaser, following such consultation, is to
take into account all reasonable concerns and issues raised by the Seller in all
action that is taken by the Purchaser following consultation.

|5.6 | Expenses
|--- | --------

To the extent that costs and expenses
are properly incurred, pursuant to clauses 5.4 and 5.5, by the Purchaser or any
Company in connection with any consultation, objection, challenge or appeal on a
taxation claim, such costs and expenses, will be paid by the Seller. The Seller
undertakes to the Purchaser that the Seller will pay to the Purchaser such costs
and expenses on receipt of copies of the relevant invoices or other evidence of
incurrence of the costs and expenses by the Purchaser or the Company.

|5.7 | Period for Tax Indemnity claims
|--- | -------------------------------

The Purchaser may not make any claim
under the Tax Indemnity unless the Purchaser gives the Seller notice of the
claim prior to the end of the period of three months following the Closing Date.

|6.  | Conditions to Closing                     
|--- | ------------------------------------------
|    |                                           
|6.1 | Conditions to Obligations of the
  Parties

The obligations of the parties to
consummate the transactions contemplated by this Agreement are subject to the
fulfilment or waiver, at or before the Closing, of each of the following
conditions:

23

---

| | (a) | Mutual Consents                                                                                                                                                                                                                                                                                                                                                                                                                 
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |     | all Consents, if any, identified in Schedule 5 necessary
      to permit the parties to perform their respective obligations under this
      Agreement and to consummate the transactions contemplated hereby shall
      have been duly obtained, made, given or granted and shall be in full force
      and effect; and                                                                                                     
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | (b) | No Orders                                                                                                                                                                                                                                                                                                                                                                                                                       
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |     | since the date of this Agreement, no Public Authority
      shall have enacted, issued, promulgated, enforced or entered, and there
      shall not be pending, any law or order (whether temporary, preliminary or
      permanent) that has the effect of making the transactions contemplated by
      this Agreement illegal or otherwise restraining, enjoining or prohibiting
      the consummation of such transactions.

|6.2 | Conditions to Obligations of the Seller
|--- | ---------------------------------------

The obligations of the Seller to
consummate the transactions contemplated by this Agreement are subject to the
fulfilment or waiver, at or before the Closing, of each of the following
conditions:

| | (a) | Covenants                                                                                                                                                                                                                                                                                                                                 
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                           
| |     | the covenants and agreements contained in this Agreement
      to be complied with by the Purchaser on or before the Closing Date shall
      have been complied with in all material respects and the Seller shall have
      received a certificate from the Purchaser to such effect signed by a duly
      authorised officer thereof;
| |     |                                                                                                                                                                                                                                                                                                                                           
| | (b) | Purchaser Warranties                                                                                                                                                                                                                                                                                                                      
| |     |                                                                                                                                                                                                                                                                                                                                           
| |     | the Purchaser Warranties shall be true and correct as of
      the Closing Date and the Seller shall have received a certificate from the
      Purchaser to such effect signed by a duly authorised officer
    thereof;                                                                                                                 
| |     |                                                                                                                                                                                                                                                                                                                                           
| | (c) | Required Seller Consents                                                                                                                                                                                                                                                                                                                  
| |     |                                                                                                                                                                                                                                                                                                                                           
| |     | receipt by the Seller of the consents and approvals (if
      any) set forth on Schedule 6 which shall remain in full force and
      effect.                                                                                                                                                                                             

|6.3 | Conditions to Obligations of the
      Purchaser
|--- | ------------------------------------------------

The obligations of the Purchaser to
consummate the transactions contemplated by this Agreement are subject to the
fulfilment or waiver, at or before the Closing, of each of the following
conditions:

| | (a) | Covenants                                                                                                                                                                                                                                                                                                                              
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                        
| |     | the covenants and agreements contained in this Agreement
      to be complied with by the Seller on or before the Closing Date shall have
      been complied with in all material respects and the Purchaser shall have
      received a certificate from the Seller to such effect signed by a duly
      authorised officer thereof;
| |     |                                                                                                                                                                                                                                                                                                                                        
| | (b) | Seller Warranties                                                                                                                                                                                                                                                                                                                      

24

---

| |     | the Seller Warranties shall be true and correct as of the
      Closing Date other than those that are made as of another date, in which
      case they shall be true and correct as of that date and the Purchaser
      shall have received a certificate from the Seller to such effect signed by
      a duly authorised officer thereof;
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                               
| | (c) | Required Purchaser Consents                                                                                                                                                                                                                                                                                                                   
| |     |                                                                                                                                                                                                                                                                                                                                               
| |     | receipt by the Purchaser of the confirmations, consents
      and approvals set forth on Schedule 7 which shall remain in full force and
      effect;                                                                                                                                                                                        
| |     |                                                                                                                                                                                                                                                                                                                                               
| | (d) | Completion of Financing                                                                                                                                                                                                                                                                                                                       
| |     |                                                                                                                                                                                                                                                                                                                                               
| |     | receipt by the Purchaser of sufficient proceeds from a
      financing approved by the TSX Venture Exchange, on or before 10 July
      2006.                                                                                                                                                                                                 

|6.4 | Fulfilment of Conditions
|--- | ------------------------

The Seller and the Purchaser must
promptly notify each other in writing if any Condition is satisfied or cannot be
satisfied.

|7.  | Termination and effect of termination
|--- | -------------------------------------
|    |                                      
|7.1 | Termination                          

This Agreement may be terminated and
the transactions contemplated hereby may be abandoned at any time prior to the
Closing:

| | (a) | at the election of the Seller, by notice to the
      Purchaser, in the event of a material breach of this Agreement by the
      Purchaser which if uncured would cause one or more of the conditions to
      Closing set forth in clause 6 hereof not to be satisfied and which remains
      uncured 10 days after notice thereof is given to the Purchaser;                                                                                                                                                                                                                                     
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | (b) | at the election of the Purchaser, by notice to the
      Seller, in the event of a material breach of this Agreement by the Seller
      which if uncured would cause one or more of the conditions to Closing set
      forth in clause 6 hereof not to be satisfied and which remains uncured 10
      days after notice thereof is given to the Seller;                                                                                                                                                                                                                                           
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | (c) | at the election of the Seller on or after 10 July 2006
      unless the Purchaser has notified it, no later than 10 July 2006, that the
      condition described in clause 6.3(d) has been satisfied;                                                                                                                                                                                                                                                                                                                                                                                               
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | (d) | at the election of either the Purchaser or the Seller if
      the Closing shall not have occurred by 31 July 2006; provided that the
      right to terminate this Agreement under this clause 7.1(d) shall not be
      available to (i) any party whose failure to fulfil any obligation under
      this Agreement shall have been the cause of, or shall have resulted in,
      the failure of the Closing to occur on or prior to such date (ii) the
      Purchaser if the Closing shall not have occurred because the condition
      described in clause 6.3(d) has not been satisfied; and
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | (e) | by mutual written consent of the Seller and the
      Purchaser.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     

If this Agreement so terminates, it
shall become null and void and have no further force or effect, and there shall
be no liability or obligation on the part of any party hereto except (i) as set
forth in clause 8, and (ii) that nothing herein shall relieve either party from
liability for any breach of this Agreement. This Agreement may not be terminated
or rescinded after

25

---

Closing except by mutual written
consent of the Seller and the Purchaser and may not be terminated or cancelled
prior to the Closing other than in pursuant to this clause 7.1.

|7.2 | Treatment of Deposit
|--- | --------------------

| | (a) | The Deposit shall be held on interest bearing deposit by
      the Seller in a New Zealand bank account until the earlier to occur
    of:
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------

| | (i)   | Closing, in which case the Deposit shall be released to
      the Seller;                                                                                                                                                                                                                                                                                
| | ----- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |       |                                                                                                                                                                                                                                                                                                                                                          
| | (ii)  | termination of this Agreement by the Seller pursuant to
      clause 7.1(a) or 7.1(c), in which case the Deposit shall be released to
      the Seller; and                                                                                                                                                                                              
| |       |                                                                                                                                                                                                                                                                                                                                                          
| | (iii) | termination of this Agreement by the Purchaser pursuant
      to clause 7.1(b), by any party under clause 7.1(d) (unless the Closing has
      not occurred due to the failure to satisfy the condition described in
      clause 6.3(d)), or by the parties pursuant to clause 7.1(e), in which case
      the Deposit shall be repaid to the Purchaser.

| | (b) | Interest and other amounts earned on the Deposit shall,
      if the Deposit is released to the Seller pursuant to clause 7.2(a)(i) or
      (ii), be for the account of the Seller and, if the Deposit is repaid
      pursuant to clause 7.2(a)(iii), be for the account of the
  Purchaser.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                               
| | (c) | Treatment of:                                                                                                                                                                                                                                                                                 

| | (i)  | the Deposit in accordance with clause 7.2; and 
| | ---- | -----------------------------------------------
| |      |                                                
| | (ii) | any Cash Call amounts pursuant to clause
  3.6,

are liquidated damages, each being
genuine pre-estimate of the loss likely to be suffered by the party to which the
liquidated damages are due.

|8.  | General Provisions
|--- | ------------------
|    |                   
|8.1 | Time of essence   

Time is of the essence in the
performance by the parties of their obligations under this Agreement.

|8.2 | Exercise of rights and waivers
|--- | ------------------------------

| | (a) | No delay, grant of time, release, compromise, forbearance
      (whether partial or otherwise) or other indulgence by one party in respect
      of any breach of any other partys obligations under this Agreement is
      to:
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (i)  | operate as a waiver of or prevent the subsequent
      enforcement of that obligation; or                                                                                                       
| | ---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                                                                 
| | (ii) | be deemed a delay, grant of time, release, compromise,
      forbearance (whether partial or otherwise) or other indulgence in respect
      of, or a waiver of, any subsequent or other
breach.

| | (b) | A party may exercise a right, power or remedy at its
      discretion, and separately or concurrently with another right, power or
      remedy it is entitled to exercise hereunder.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

26

---

| | (c) | A single or partial exercise of a right, power or remedy
      by a party does not prevent a further exercise of that or of any other
      right, power or remedy.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                    
| | (d) | No waiver by any party of its rights under this Agreement
      will be effective unless it is in writing and signed by that
  party.                              

|8.3 | Severability
|--- | ------------

If one or more of the provisions of
this Agreement is, or becomes, unenforceable, invalid or illegal for any reason,
the relevant provision will be deemed to be modified to the extent necessary to
remedy such unenforceability, invalidity or illegality, or if this is not
possible then that provision will be severed from this Agreement, without
affecting the enforceability, validity or legality of any other provision of
this Agreement.

|8.4 | Non merger
|--- | ----------

The obligations, warranties,
undertakings and indemnities undertaken or given pursuant to this Agreement, to
the extent not already performed at Closing, are not to merge on Closing, or on
the execution or delivery of any document pursuant to this Agreement, but are to
remain enforceable to the fullest extent and notwithstanding any rule of law to
the contrary.

|8.5 | Confidentiality and announcements
|--- | ---------------------------------

| | (a) | Negotiations:                                                                                                                                                                                                                                                                                                                                                                                                            
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                          
| |     | Each party must keep the existence of this Agreement, its
      terms and any confidential information about any other party to this
      Agreement that was obtained during the course of negotiations relating to
      this Agreement confidential and no party is to make any disclosure or
      announcement relating to this Agreement or its terms without the prior
      written consent of the other parties;
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                          
| | (b) | Exceptions:                                                                                                                                                                                                                                                                                                                                                                                                              
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                          
| |     | The obligations contained in clause 8.5(a) do not
      apply:                                                                                                                                                                                                                                                                                                                                                           

| | (i)   | Requirements of law or stock exchange:                                                               
| | ----- | -----------------------------------------------------------------------------------------------------
| |       |                                                                                                      
| |       | to the extent required by law or by the listing
      requirements of any relevant stock exchange; or
| |       |                                                                                                      
| | (ii)  | Public domain:                                                                                       
| |       |                                                                                                      
| |       | to the extent that such information is already in the
      public domain; or                        
| |       |                                                                                                      
| | (iii) | Professional advice:                                                                                 
| |       |                                                                                                      
| |       | to the extent reasonably required to obtain professional
      advice.                               

The parties shall consult with each
other and use reasonable endeavours to agree on the form and timing of any
public announcements or disclosure referred to in this clause.

27

---

| | (c) | Companys information after Closing:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |     | The Seller will not at any time after the Closing Date
      use or disclose, for its own benefit or that of any other person, any
      confidential information it possesses concerning the Company, the Assets,
      the Permits, the Joint Venture Agreements or any person having dealings
      with the Company except, in each case, to the extent required by law or
      for the purposes of receiving professional advice in the context of
      threatened or actual legal proceedings or claims or in accordance with
      good record- keeping practice.

|8.6 | Entire agreement
|--- | ----------------

This Agreement, the other Transaction
Documents and the agreements and instruments referred to herein and therein:

| | (a) | Entire understanding:                                                                                                                                                                                                                                                                                            
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                  
| |     | constitute the entire understanding and agreement of the
      parties relating to the transactions contemplated hereby and thereby and
      it is agreed that there are no representations, warranties, covenants or
      undertakings by any party except as expressly provided herein and therein;
      and
| |     |                                                                                                                                                                                                                                                                                                                  
| | (b) | Supersede prior agreements:                                                                                                                                                                                                                                                                                      
| |     |                                                                                                                                                                                                                                                                                                                  
| |     | supersede and extinguish all prior agreements and
      understandings between the parties relating to the acquisition of the
      Shares including, without limitation, the Confidentiality
  Agreement.                                                                                                       

|8.7 | Successors
|--- | ----------

This Agreement is to be binding on and
enure for the benefit of the parties and their respective successors.

|8.8 | No assignment
|--- | -------------

A party may not assign or transfer all
or part of its respective rights or obligations under this Agreement without the
prior written consent of the other parties.

|8.9 | Notices
|--- | -------

| | (a) | Form of notice:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |     | each notice or other communication under this Agreement
      is to be in writing, is to be made by facsimile, personal delivery or by
      post to the addressee at the facsimile number or address, and is to be
      marked for the attention of the person or office holder (if any), from
      time to time designated for the purpose by the addressee to the other
      parties. The initial facsimile number, address and relevant person or
      office holder of each party is set out under its name at the end of this
      Agreement;
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | (b) | Notice effective:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |     | no notice or other communication is to be effective until
      received. A notice or other communication is, however, deemed to be
      received by the addressee:                                                                                                                                                                                                                                                                                                                                                                                    

28

---

| | (i)   | Facsimile:                                                                                                                                                                                                                                     
| | ----- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |       |                                                                                                                                                                                                                                                
| |       | in the case of a facsimile, on the business day on which
      it is sent or, if sent after 5 pm (in the place of receipt) on a business
      day or, if sent on a non-business day, on the next business day after the
      date of sending;
| |       |                                                                                                                                                                                                                                                
| | (ii)  | Personal delivery:                                                                                                                                                                                                                             
| |       |                                                                                                                                                                                                                                                
| |       | in the case of personal delivery, when delivered;
    and                                                                                                                                                                                      
| |       |                                                                                                                                                                                                                                                
| | (iii) | Post:                                                                                                                                                                                                                                          
| |       |                                                                                                                                                                                                                                                
| |       | in the case of a letter, on the third business day after
      posting by fastpost or by airmail.                                                                                                                                              

|8.10 | Amendments
|---- | ----------

No amendment to this Agreement is to be
effective unless it is in writing and signed by all the parties.

|8.11 | Counterparts
|---- | ------------

| | (a) | Number of counterparts:                                                                                                                                                                                                                                           
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                   
| |     | this Agreement may be executed in any number of
      counterparts each of which is to be deemed an original, but all of which
      together are to constitute a single instrument. A party may enter into
      this Agreement by executing any counterpart; and
| |     |                                                                                                                                                                                                                                                                   
| | (b) | Facsimile exchange:                                                                                                                                                                                                                                               
| |     |                                                                                                                                                                                                                                                                   
| |     | this Agreement may be executed on the basis of an
      exchange of facsimile copies and execution of this Agreement by such means
      is to be a valid and sufficient execution.                                                                               

|8.12 | Expenses
|---- | --------

Whether or not any of the transactions
contemplated by this Agreement are completed, unless otherwise specified in this
Agreement, each of the parties is to bear its own costs and other expenses
including expenses of counsel, financial advisors and accountants of and
incidental to the preparation, execution and Closing of this Agreement.

|8.13 | Specific Performance
|---- | --------------------

Each of the parties hereto acknowledges
and agrees that the parties hereto would be damaged irreparably in the event
that the Closing is not consummated in accordance with the terms and conditions
of this Agreement. Accordingly, each party hereto agrees that each other party
shall be entitled to an injunction or injunctions to prevent breaches of the
provisions of this Agreement and to enforce specifically this Agreement and the
terms and provisions hereof in addition to any other remedy to which it may be
entitled pursuant hereto.

|8.14 | Contracts (Privity) Act 1982
|---- | ----------------------------

The parties acknowledge and agree in
terms of the Contracts (Privity) Act 1982 that clause 4 is intended to be for
the benefit of each Seller Indemnified Party and each Purchaser Indemnified
Party and to be enforceable by such persons as well as by the parties
hereto.

29

---

|8.15 | Governing law
|---- | -------------

This Agreement shall be governed by and
construed by the laws of New Zealand.

Execution

Executedas an agreement.

South Pacific Lease OperationsLimitedby

|                                                                 |                      |  | 
|---------------------------------------------------------------- | -------------------- |  | 
|Director                                                         | Director            
|                                                                 |                     
|                                                                 |                      |  | 
|Print Name                                                       | Print Name          
|                                                                 |                     
|Address:                                                         | P O Box 305-017     
|                                                                 | Triton Plaza        
|                                                                 | North Shore City    
|                                                                 | New Zealand         
|                                                                 |                     
|Facsimile No.:                                                   | 64-9-415-8353       
|                                                                 |                     
|Email Address:                                                   | pault@spenergy.co.nz
|                                                                 |                     
|Contact person/position:                                         | Paul Twynham, CEO   
|                                                                 |                     
|TAG Oil (NZ) Limitedby                                           |                     
|                                                                 |                     
|                                                                 |                      |  | 
|Director                                                         | Director            
|                                                                 |                     
|                                                                 |                      |  | 
|Drew Cadenhead                                                   | Garth Johnson       
|                                                                 |                     
|Address:117 Powderham Street, PO Box 183, New
      Plymouth, NZ
|                                                                
|Facsimile No.: 64-6-769-6075                                    
|                                                                
|Email Address: drew.cadenhead@tagoil.com                        
|                                                                
|Contact person/position: Drew Cadenhead, CEO
      & Director   

30

---

|TAG Oil Limitedby                                                             |              
|----------------------------------------------------------------------------- | -------------
|                                                                              |              
|                                                                              |              
|Director                                                                      | Director     
|                                                                              |              
|                                                                              |              
|Drew Cadenhead                                                                | Garth Johnson
|                                                                              |              
|Address: 534 17thAvenue SW, Suite
      400, Calgary, Alberta, Canada T2S 0B1
|                                                                             
|Facsimile No.: 604-682-1174                                                   |              
|                                                                              |              
|Email Address: drew.cadenhead@tagoil.com                                      |              
|                                                                              |              
|Contact person/position: Drew Cadenhead, CEO
      & Director                

31

---

|Schedule 1:
      Disclosure Schedule
|-------------------------------------

Certain matters set forth herein are included for informational
purposes only, notwithstanding the fact that, because they do not rise above
applicable materiality thresholds or otherwise, they would not be required to be
set forth herein by the terms of the Agreement. Disclosure of such matters shall
not be taken as an admission by the Seller or the Companies that such disclosure
is required to be made under the terms of the Agreement and in no event shall
the disclosure of such matters be deemed or interpreted to broaden or otherwise
amplify the representations, warranties and covenants contained in the
Agreement.

The sections below correspond to the numbering in Schedule 4
(Sellers Warranties). The disclosure of any matter in any section of
this Disclosure Schedule shall be deemed to be disclosed for all purposes of the
Agreement.

Section 2.4

The gas supply agreement between Rata Energy Limited, Cheal
Petroleum Limited, International Resource Management Corporation, Cardiff
Holdings No.1 Limited, Cardiff Holdings No.2 Limited, Austral Pacific Energy
(NZ) Limited, and Genesis Power Limited dated 2 July 2004 (the Gas Supply
Agreement) contains restrictions on changes of control in Cheal Petroleum
Limited without consent of the other parties. No such consent has been sought or
obtained from the other parties to the Gas Supply Agreement.

Section 3.1

The Seller holds the following ordinary shares in each of the
Companies:

Cheal Petroleum Limited: 1,000

PEP38757 Limited: 1,000

PEP38758 Limited: 1,000

Section 8.1

(1) Since the Balance Date, Cheal Petroleum Limited has paid
the amounts set forth in Annexure 8.1(1) to the Disclosure Schedule in
connection with cash calls made under the Joint Venture Agreements described in
section 10.2:

(2) Since the Balance Date, Cheal Petroleum Limited has
received the cash calls set forth in Annexure 8.1(2) to the Disclosure Schedule
made under the Joint Venture Agreements described in section 10.2, which have
not been paid:

(3) Since the Balance Date the Companies have made
Distributions and repayment of advances to the Seller.

(4) Cheal Petroleum Limited currently pays a management fee to
Calgary Petroleum Limited of $20,000 per month. This arrangement will be
terminated at Closing.

Section 8.2

(1) With currently available working capital it is possible
that Cheal Petroleum Limited will not be able to meet anticipated cash calls
under the Joint Venture Agreements without a sale of one of its assets or
issuing additional debt or equity. The anticipated cash calls, as at the date of
this Agreement, are set forth on Annexure 8.2 to the Disclosure Schedule.

32

---

Section 9.1

(1) The Joint Venture Agreements contain default and other
provisions entitling other parties to exercise rights with respect to a partys
interest in the relevant joint venture.

Section 10.1

(1) See section 2.4 and section 13.2.

(2) The Joint Venture Agreements and the Gas Supply Agreement
contain provisions which prevent disclosure of confidential information to
persons without the consent of all counterparties to those contracts. Consent
has not been received from all counterparties to these contracts for the
disclosure of information to prospective purchasers of the Shares and Assets.

(3) The Gas Supply Agreement contains a provision whereby any
direct or indirect change of control of a supplier, without the prior written
consent of each other counterparty (such approval not to be unreasonably
withheld), may give rise to a right of termination for the purchaser. This
consent has not been sought or obtained by Cheal Petroleum Limited.

Section 10.2

(1) The Companies have been funded from time to time by
advances from South Pacific Energy Limited, Calgary Petroleum Limited (the
parent company of the Seller) and by the Seller. These advances total
approximately $3,900,000 on the date of this Agreement and will be repaid or
released at or prior to Closing.

(2) The following agreements contain provisions of the type
described in section 10.2 of Schedule 4 (Sellers Warranties)
(collectively, the Joint Venture Agreements):

- the joint venture agreement dated 16 December 2002, initially between PEP
    38716 Limited and Cheal Petroleum Limited, as amended on 2 July 2004, and
    including the coordination agreement in respect of PEP 38738 between Rata
    Energy Limited, Cheal Petroleum Limited, International Resource Management
    Corporation, Cardiff Holdings No. 1 Limited, Cardiff Holdings No. 2 Limited
    and Austral Pacific Energy (NZ) Limited dated 2 July 2004 (the Coordination
    Agreement) (together, the Shallow JVA)
- the joint venture agreement between Rata Energy Limited, Cheal Petroleum
    Limited, International Resource Management Corporation, Cardiff Holdings No.
    1 Limited, Cardiff Holdings No. 2 Limited and Austral Pacific Energy (NZ)
    Limited dated 2 July 2004, and the Coordination Agreement (together, the Deep
    JVA).

(3) See section 2.4, above.

(4) The constitutions of the Companies each contain
indemnification and insurance provisions in favour of directors and employees of
the relevant Company to the same extent permitted by the Companies Act. The
Company has entered into deeds of indemnity with its current directors.

(5) The Gas Supply Agreement.

Section 12.2

(1) PEP 38738 has expired. Pursuant to the Crown Minerals
regulations the permit rights of the Joint Venture participants remain in place
over PEP 38738 while the MED deliberates on the extension of the duration of the
permit area not including the Cheal and Cardiff discoveries and the details for
granting of a petroleum mining permit over the Cheal and Cardiff discoveries. No
mining permit has yet been issued.

33

---

Section 13.2

(1) From time to time, Cheal Petroleum Limited has disputed
actions taken by other parties to the Joint Venture Agreements including
disputing whether a sole risk notice delivered by the operator under a Joint
Venture Agreement had been validly given.

(2) In connection with its proposed sale of the Companies, the
Seller has disclosed Information (as defined in the Joint Venture Agreements)
without receiving the consent to such disclosure from all parties to such Joint
Venture Agreements.

Section 16.1

(1) Cheal Petroleum Limited is party to the Joint Venture
Agreements.

(2) PEP38757 Limited is party to a Deed of Assignment between
PEP38757 Limited (as assignor) and TAG Oil (NZ) Limited (as assignee) dated 9
November 2004 (the 757 ORR). The 757 ORR relates to the transfer
of 100% of Calgary Petroleum Limiteds interests in petroleum exploration permit
PEP 38757 to TAG Oil (NZ) Limited, under which PEP38757 Limited was granted a 5%
overriding royalty.

(3) PEP38758 Limited is party to a Deed of Assignment between
PEP38758 Limited (as assignor) and TAG Oil (NZ) Limited (as assignee) dated 9
November 2004 (the 758 ORR). The 758 ORR relates to the transfer
of 100% of Calgary Petroleum Limiteds interests in petroleum exploration permit
PEP 38757 to TAG Oil (NZ) Limited, under which PEP38758 Limited was granted a 5%
overriding royalty.

Section 18

(1) The taxation returns for financial year ended 31 March 2005
were not filed by the due date at 31 March 2006. Late filing fees will be
levied.

(2) No representation or warranty is made with respect to
taxation matters of the joint ventures or other parties to the Joint Venture
Agreements.

34

---

|Schedule 2:
      Purchaser Warranties
|--------------------------------------

|1.  | The Purchaser                                                                                                                                                                                                                                                                                                                                                                                                                          
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                        
|1.1 | Due incorporation                                                                                                                                                                                                                                                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | The Purchaser is duly incorporated and validly exists
      under the law of its place of incorporation.                                                                                                                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                        
|1.2 | Solvency                                                                                                                                                                                                                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | The Purchaser is solvent and no receiver or receiver and
      manager has been appointed over any part of its Assets and no such
      appointment has been threatened.                                                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                        
|1.3 | No liquidation                                                                                                                                                                                                                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | The Purchaser is not in liquidation or statutory
      management and no proceedings have been brought or threatened and no
      resolution has been passed or other step taken for the purposes of
      appointing a liquidator of the Purchaser or to declare the Purchaser at
      risk pursuant to the Corporations (Investigation & Management) Act
      1989 or placing it under statutory management pursuant to that
  Act.

|2. | Due
      authorisation
|-- | -----------------------

|2.1 | Corporate authorisation                                                                                                                                                                                                                                                                                                                                          
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                  
|    | The execution and delivery of the Transaction Documents
      has been properly authorised by all necessary corporate action of the
      Purchaser.                                                                                                                                                                                                             
|    |                                                                                                                                                                                                                                                                                                                                                                  
|2.2 | Corporate power                                                                                                                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                  
|    | The Purchaser has full corporate power and lawful
      authority to execute and deliver the Transaction Documents and to
      consummate and perform or cause to be performed its obligations under the
      Transaction Documents.                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                  
|2.3 | Legal and binding document                                                                                                                                                                                                                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                                                                                                  
|    | Each Transaction Document constitutes a legal, valid and
      binding obligation of the Purchaser enforceable in accordance with its
      terms by appropriate legal remedy.                                                                                                                                                                                   
|    |                                                                                                                                                                                                                                                                                                                                                                  
|2.4 | No adverse effect                                                                                                                                                                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                                                  
|    | This Agreement and Closing do not conflict with or result
      in a breach of or default under any provision of the constitution of the
      Purchaser or any material term or provision of any agreement or deed or
      any writ, order or injunction, judgment, law, rule or regulation to which
      it is a party or is subject or by which it is
bound.

35

---

|3. | TAG
      Oil Warranties
|-- | ------------------------

|3.1 | Due incorporation                                                                                                                                                                                                                                                                                                                                                                                                                        
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    | TAG Oil is duly incorporated and validly exists under the
      law of its place of incorporation.                                                                                                                                                                                                                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                          
|3.2 | Solvency                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    | TAG Oil is solvent and no receiver or receiver and
      manager has been appointed over any part of its Assets and no such
      appointment has been threatened.                                                                                                                                                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                          
|3.3 | No liquidation                                                                                                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    | TAG Oil is not in liquidation, no proceedings have been
      brought or threatened and no resolution has been passed or other step
      taken for the purposes of appointing a liquidator of TAG Oil.                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                          
|3.4 | Corporate authorisation                                                                                                                                                                                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    | The execution and delivery of the Transaction Documents
      has been properly authorised by all necessary corporate action of TAG
      Oil.                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                          
|3.5 | Corporate power                                                                                                                                                                                                                                                                                                                                                                                                                          
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    | TAG Oil has full corporate power and lawful authority to
      execute and deliver the Transaction Documents and to consummate and
      perform or cause to be performed its obligations under the Transaction
      Documents.                                                                                                                                                                                                         
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                          
|3.6 | Legal and binding document                                                                                                                                                                                                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    | Each Transaction Document constitutes a legal, valid and
      binding obligation of TAG Oil enforceable in accordance with its terms by
      appropriate legal remedy.                                                                                                                                                                                                                                                                 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                          
|3.7 | No adverse effect                                                                                                                                                                                                                                                                                                                                                                                                                        
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    | This Agreement and Closing do not conflict with or result
      in a breach of or default under any provision of the constitution of TAG
      Oil or any material term or provision of any agreement or deed or any
      writ, order or injunction, judgment, law, rule or regulation to which it
      is a party or is subject or by which it is bound.                                                                              
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                          
|3.8 | Power                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    | TAG Oil has all corporate power and lawful authority to
      issue the TAG Oil Shares to the Seller.                                                                                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                          
|3.9 | Fully Paid and Transferable                                                                                                                                                                                                                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    | The TAG Oil Shares to be issued under the Agreement will
      be fully paid and no money is owing in respect of them. The TAG Oil Shares
      to be issued under this Agreement will be able to be sold or transferred
      by the Seller, in whole or in part, without restriction, or otherwise over
      any exchange or facility on which TAG Oil securities are currently traded
      or quoted, four months following Closing.

36

---

|3.10 | No Security Interest                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|     | The TAG Oil Shares to be issued under the Agreement will
      be free of security interests.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|3.11 | Capitalisation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|     | There are 46,631,081 shares of common stock of TAG Oil
      issued and outstanding (Existing TAG Shares). There are 400,000
      warrants over shares of TAG Oil common stock (Warrants) and
      1,025,000 options over shares of TAG Oil common stock (Options).
      Each Option and Warrant held entitles the holder to one share of TAG Oil
      common stock upon payment of the applicable exercise price. Assuming all
      Warrants and Options are exercised 48,598,576 shares of common stock of
      TAG Oil would be issued and outstanding (excluding the TAG Oil Shares to
      be issued hereunder).
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|     | The Existing TAG Shares comprise all the issued shares in
      the capital of TAG Oil and the TAG Oil Shares to be issued hereunder will,
      upon issue, rank equally in all respects with the Existing TAG Shares.
      Except for the Existing TAG Shares, the Warrants and the Options there are
      no agreements, arrangements or understandings in force that call for the
      present or future issue or transfer of, or grant to any person the right
      at any time to require the issue or transfer of, any equity capital in TAG
      Oil.                                                          

37

---

|Schedule 3:
      Purchase Price Allocation1
|--------------------------------------------

|1. | Cheal Petroleum Limited:  
|-- | --------------------------
|   |                           
|   | a.                        
|   |                           
|   | b.                        
|   |                           
|2. | PEP38757 Limited: $100,000
|   |                           
|3. | PEP38758 Limited: $100,000



____________________________________1 Excludes
value of Overriding Royalty and assumes TAG Oil Shares valued at CDN$1.10 per
share.

38

---

|Schedule 4:
      Seller Warranties
|-----------------------------------

|1.  | The Seller                                                                                                                                                                                                                                                                                                                                                                                                                  
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                             
|1.1 | Due incorporation                                                                                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                             
|    | The Seller is duly incorporated and validly exists under
      the law of its place of incorporation.                                                                                                                                                                                                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                                                                                                                                                             
|1.2 | Solvency                                                                                                                                                                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                             
|    | The Seller is solvent and no receiver or receiver and
      manager has been appointed over any part of its Assets and no such
      appointment has been threatened.                                                                                                                                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                                                                                                                                                             
|1.3 | No liquidation                                                                                                                                                                                                                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                                                                                                                                                                             
|    | The Seller is not in liquidation or statutory management
      and no proceedings have been brought or threatened and no resolution has
      been passed or other step taken for the purposes of appointing a
      liquidator of the Seller or to declare the Seller at risk pursuant to the
      Corporations (Investigation & Management) Act 1989 or placing it under
      statutory management pursuant to that Act.

|2. | Due
      authorisation
|-- | -----------------------

|2.1 | Corporate authorisation                                                                                                                                                                                                                                                                                                                                                                                      
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                              
|    | The execution and delivery of the Transaction Documents
      has been properly authorised by all necessary corporate action of the
      Seller.                                                                                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                                                                                                                                                                              
|2.2 | Corporate power                                                                                                                                                                                                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                                                                                                                                                              
|    | The Seller has full corporate power and lawful authority
      to execute and deliver the Transaction Documents and to consummate and
      perform or cause to be performed its obligations under the Transaction
      Documents.                                                                                                                                                                          
|    |                                                                                                                                                                                                                                                                                                                                                                                                              
|2.3 | Legal and binding document                                                                                                                                                                                                                                                                                                                                                                                   
|    |                                                                                                                                                                                                                                                                                                                                                                                                              
|    | Each Transaction Document constitutes a legal, valid and
      binding obligation of the Seller enforceable in accordance with its terms
      by appropriate legal remedy.                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                              
|2.4 | No adverse effect                                                                                                                                                                                                                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                                                                                                                                                                              
|    | This Agreement and Closing do not conflict with or result
      in a breach of or default under any provision of the constitution of the
      Seller or of any Company or any material term or provision of any
      agreement or deed or any writ, order or injunction, judgment, law, rule or
      regulation to which the Seller or any Company is a party or is subject or
      by which it is bound.

39

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|3. | The
      Shares
|-- | ----------------

|3.1 | Title                                                                                                                                                                                                              
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                    
|    | The Seller has legal and beneficial title to the Shares,
      free of security interests.                                                                                                                         
|    |                                                                                                                                                                                                                    
|3.2 | Power                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                    
|    | The Seller has the right and power to sell the Shares on
      the terms set out in this Agreement without the consent of any other
      person and free of any pre-emptive rights or rights of first
    refusal.
|    |                                                                                                                                                                                                                    
|3.3 | Fully paid                                                                                                                                                                                                         
|    |                                                                                                                                                                                                                    
|    | The Shares have been issued and are fully paid and no
      money is owing in respect of them.                                                                                                                     
|    |                                                                                                                                                                                                                    
|3.4 | No other shares or rights                                                                                                                                                                                          
|    |                                                                                                                                                                                                                    
|    | (a)                                                                                                                                                                                                                
|    |                                                                                                                                                                                                                    
|    | (b)                                                                                                                                                                                                                

|4. | Group Company constitutions
|-- | ---------------------------

|4.1 | Constitution                                                                                                                                                                                               
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                            
|    | True and correct copies of the current constitutions of
      each Company have been delivered to the Purchaser. The affairs of each
      Company have been conducted in accordance with its constitution.
|    |                                                                                                                                                                                                            
|4.2 | Registration                                                                                                                                                                                               
|    |                                                                                                                                                                                                            
|    | Each Company is registered under the Companies
  Act.                                                                                                                                                      
|    |                                                                                                                                                                                                            
|4.3 | Corporate existence                                                                                                                                                                                        
|    |                                                                                                                                                                                                            
|    | Each Company has the power to own its Assets and to carry
      on its Business as it is now being conducted.                                                                                              

|5. | Material circumstances
|-- | ----------------------

|5.1 | Solvency                                                                                                                                                                              
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                       
|    | Each Company is solvent and no receiver or receiver and
      manager has been appointed over any part of the Assets of any Company and
      no such appointment has been threatened.

40

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|5.2 | No liquidation                                                                                                                                                                                                                                                                                                                                                                                                            
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                           
|    | No Company is in liquidation or statutory management and
      no proceedings have been brought or threatened and no resolution has been
      passed or other step taken for the purposes of appointing a liquidator of
      any Company or to declare any Company at risk pursuant to the Corporations
      (Investigation & Management) Act 1989 or placing it under statutory
      management pursuant to that Act.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                           
|5.3 | Power of attorney                                                                                                                                                                                                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                                                                                                                                                                                                                                           
|    | No Company has granted any power of attorney which is
      still in force or conferred on any person, other than its directors and
      employees, or any subsisting authority to bind a Company in any
  way.                                                                                                                                                                                                          

|6. | Due
      Diligence Material
|-- | ----------------------------

The material made available to the Purchaser and its advisors
in their due diligence review of the Assets, the Business and the Companies
(including the responses provided to the written due diligence questions
submitted by the Purchaser) was and is accurate and not misleading (whether by
omission or otherwise) in any material respect.

|7. | Financial matters
|-- | -----------------

|7.1 | Accuracy of the Financial Statements                                                                                                                                               
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                    
|    | The Financial Statements:                                                                                                                                                          
|    |                                                                                                                                                                                    
|    | (a)                                                                                                                                                                                
|    |                                                                                                                                                                                    
|    | (b)                                                                                                                                                                                
|    |                                                                                                                                                                                    
|7.2 | Financing                                                                                                                                                                          
|    |                                                                                                                                                                                    
|    | No Company has or is engaged in financing of a type which
      is not required to be shown or reflected in the Financial Statements or in
      any off-balance sheet arrangement.

|8. | Conduct of Business since Balance Date
|-- | --------------------------------------

|8.1 | Conduct of Business                      
|--- | -----------------------------------------
|    |                                          
|    | Since the Balance Date, each Company has:
|    |                                          
|    | (a)                                      
|    |                                          
|    | (b)                                      

41

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| |     | each case, payment of professional fees and expenses by
      third party service providers and payment of management fees to Calgary
      Petroleum Limited;
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                               
| | (c) | not entered into, varied or terminated any agreement or
      other commitment which:                                                                         
| |     |                                                                                                                                                               
| |     | (i)                                                                                                                                                           
| |     |                                                                                                                                                               
| |     | (ii)                                                                                                                                                          
| |     |                                                                                                                                                               
| | (d) | not entered into any major transaction (as that term is
      defined in section 129 of the Companies Act);                                                   
| |     |                                                                                                                                                               
| | (e) | not:                                                                                                                                                          
| |     |                                                                                                                                                               
| |     | (i)                                                                                                                                                           
| |     |                                                                                                                                                               
| |     | (ii)                                                                                                                                                          
| |     |                                                                                                                                                               
| |     | (iii)                                                                                                                                                         
| |     |                                                                                                                                                               
| |     | (iv)                                                                                                                                                          
| |     |                                                                                                                                                               
| |     | (v)                                                                                                                                                           
| |     |                                                                                                                                                               
| |     | (vi)                                                                                                                                                          
| |     |                                                                                                                                                               
| |     | (vii)                                                                                                                                                         
| |     |                                                                                                                                                               
| |     | (viii)                                                                                                                                                        
| |     |                                                                                                                                                               
| | (f) | not taken or omitted to take any action which may
      adversely affect any right attaching to the Shares;                                                   
| |     |                                                                                                                                                               
| | (g) | not:                                                                                                                                                          
| |     |                                                                                                                                                               
| |     | (i)                                                                                                                                                           
| |     |                                                                                                                                                               
| |     | (ii)                                                                                                                                                          

|8.2 | Material Adverse Effect
|--- | -----------------------

Since the Balance Date there has not
been any event or circumstance which might reasonably be expected to have a
material adverse effect.

42

---

|9.  | Assets               
|--- | ---------------------
|    |                      
|9.1 | No security interests

Each Company has legal and beneficial
title to all of its Assets, free from security interests. No Company has
created, or agreed to create, any encumbrance in respect of any of its Assets.
No person, other than a Company, is entitled to possession of, or any interest
in, any Asset.

|9.2 | Fixed Assets
|--- | ------------

No Company holds or owns any fixed
assets other than its rights to assets under the Joint Venture Agreements.

|10.  | Material commitments
|---- | --------------------
|     |                     
|10.1 | Agreements          

No Company is in default under any of
its agreements with third parties (including the Joint Venture Agreements) and
is not aware of any material default under such agreements by those third
parties.

|10.2 | Material commitments
|---- | --------------------

No Company is party to any agreement
which:

| | (a) | relates to the provision of financial accommodation to
      the Company;                                                                                                                                
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                          
| | (b) | is outside the ordinary course of business;                                                                                                                                                              
| |     |                                                                                                                                                                                                          
| | (c) | is incapable of performance in accordance with its terms
      within twelve months after the date on which it was entered into or
      undertaken;                                                     
| |     |                                                                                                                                                                                                          
| | (d) | involves the supply of goods or services, the aggregate
      sales value of which will represent in excess of 10 per cent. of the
      turnover expected for the current financial year of the Company;
| |     |                                                                                                                                                                                                          
| | (e) | requires authorisation under Part II of the Commerce Act
      1986 for its legality or validity;                                                                                                        
| |     |                                                                                                                                                                                                          
| | (f) | involves the Company giving a guarantee, indemnity or
      letter of comfort in respect of, or to be otherwise contingently liable
      for, the obligations of, any other person;                     
| |     |                                                                                                                                                                                                          
| | (g) | is with any Related Company of the Company or of the
      Seller (other than another Company);                                                                                                          
| |     |                                                                                                                                                                                                          
| | (h) | restricts or prevents the Company from carrying on any
      activity or business in any area;                                                                                                           
| |     |                                                                                                                                                                                                          
| | (i) | confers on any person any rights as a consequence of a
      change in the shareholding in, or composition of the board of directors
      of, the Company;                                              

43

---

| | (j) | is of an unusual, long term or onerous nature or cannot
      readily be performed by the Company without undue or unusual expenditure
      of money or effort; or
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                    
| | (k) | is for any reason considered
material.                                                                                                                             

|11.  | Properties   
|---- | -------------
|     |              
|11.1 | Complete list

There is no land or building owned or
occupied by any Company.

|12.  | Compliance with laws
|---- | --------------------
|     |                     
|12.1 | Compliance          

No Company is in breach of any statute,
order, by-law or regulation binding on or applicable to it where such breach
might reasonably be expected to have a material adverse effect and, to the
extent of its interest in the relevant Permit, is complying with the terms of
and conditions of that Permit.

|12.2 | All Consents held
|---- | -----------------

The Companies have all Consents
required for carrying on the Business. In respect of each Consent:

| | (a) | all fees due have been paid;                                                                                                                  
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                               
| | (b) | all conditions have been fully complied with;                                                                                                 
| |     |                                                                                                                                               
| | (c) | to the Sellers knowledge, there is no factor which might
      prejudice its continuance or renewal; and                                     
| |     |                                                                                                                                               
| | (d) | the Consent will not be prejudiced in any way by, or
      revoked as a consequence of, the entry into or performance of this
      Agreement.

|13.  | Legal proceedings
|---- | -----------------
|     |                  
|13.1 | No litigation    

No Company is involved in any
investigation, prosecution, litigation, arbitration, proceedings or any other
form of mediation or dispute resolution or other legal proceedings (except as
plaintiff in normal debt collection proceedings) the result of which might
reasonably be expected to have a material adverse effect.

|13.2 | No claims
|---- | ---------

To the Sellers knowledge, there are no
claims or disputes against or involving a Company or the Permits or the Joint
Venture Agreements, which are likely to give rise to any legal proceedings that
might reasonably be expected to have a material adverse effect.

44

---

|13.3 | No proceedings
|---- | --------------

There are no enquiries pending before
or, to the Sellers knowledge, threatened by, any Public Authority, and in
particular no Company is involved in any dispute with the Commissioner of Inland
Revenue.

|14.  | Statutory records
|---- | -----------------
|     |                  
|14.1 | All records kept 

Each Company holds all accounting and
other records which it is required by law to retain either indefinitely or for a
particular period or periods and such records are properly and fully maintained.

|14.2 | Documents of title
|---- | ------------------

All documents of title, or documents
that otherwise evidence title, to the Assets are in the Companies' possession or
under their control.

|15. | Employees
|--- | ---------

No Company has employed any person
since its incorporation.

|16.  | Investments     
|---- | ----------------
|     |                 
|16.1 | No joint venture

No Company is a party to any joint
venture, partnership, syndicate, consortium, or other body or association,
whether incorporated or not (other than a recognised trade association).

|16.2 | No shares held
|---- | --------------

No Company owns shares in the capital
of any company.

|17.  | Environmental                                     
|---- | --------------------------------------------------
|     |                                                   
|17.1 | Compliance with Environmental Law and
    Consents

Each Company:

| | (a) | is not in breach of any Environmental Law; and                                                                                                                                                                                                                                                                                                                                                                                                                               
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | (b) | holds and complies in all material respects with, and has
      always held and complied in all material respects with, all environmental
      consents required from time to time in relation to that Company or its
      Assets or the conduct of its business and, to the Sellers knowledge,
      there is no matter that may result in the cancellation, suspension,
      limitation, review, variation or non-renewal of any of those environmental
      consents.

45

---

|18.  | Taxation           
|---- | -------------------
|     |                    
|18.1 | All deductions made

Each Company has:

| | (a) | made all appropriate deductions from payments made by it
      and all consequent payments due as a result to the IRD or any other Tax
      Authority; and
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                            
| | (b) | remitted the amount of these deductions to the IRD or any
      other Tax Authority.                                                                       

|18.2 | All taxation paid
|---- | -----------------

Each Company has made and will make
payment in full when due to the IRD or any other Tax Authority for all taxes in
respect of periods commencing on or before Closing, including any terminal tax
and each instalment of provisional tax of the Company in respect of that period,
together with any civil penalty payable thereon.

|18.3 | No taxation arising from sale of the
      Shares
|---- | -------------------------------------------------

No taxation will become payable by a
Company because of the sale of the Shares under this Agreement.

|18.4 | No taxation Relief refused
|---- | --------------------------

No transaction or event has occurred or
arrangement been entered into in consequence of which a Company:

| | (a) | has or may be deprived of Relief otherwise available to
      it; or                                                                                                                                                                                                                                       
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                            
| | (b) | is or may be held liable for any taxation relating to any
      period up to Closing, including taxation primarily chargeable against some
      other company or person (whether by reason of any such other company being
      or having been a member of the same group of companies or
    otherwise),

for which provision has not been made
in the Financial statements or, if occurring or entered into after the Balance
Date, has been incurred otherwise than in the ordinary course of business.

|18.5 | All returns made
|---- | ----------------

Each Company has made all returns and
supplied all information to the IRD, the Customs Department and other relevant
Tax Authorities as is required by law. All returns and information supplied were
correct and made on a proper basis and are not the subject of any dispute. Each
Company has kept and preserved those records as are required to be kept and
preserved for the purpose of taxation and any Tax Act.

|18.6 | Binding rulings
|---- | ---------------

If a Company has obtained a binding
ruling under the Tax Administration Act 1994, that binding ruling has been
disclosed:

| | (a) | to the IRD as required by that Act;
and
| | --- | ---------------------------------------

46

---

| | (b) | to the Purchaser.
| | --- | -----------------

|18.7 | Residence
|---- | ---------

Each Company is tax resident in New
Zealand and not in any other country or jurisdiction and has and has had no
branch, agency, place of business or permanent establishment outside New Zealand
which may result in that Company being subject to tax in that other country.

|18.8 | Credit account balances
|---- | -----------------------

The imputation credit accounts,
dividend withholding payment accounts and any other similar memorandum accounts
(if any) maintained by the Companies for tax purposes will not have debit
balances on the Closing Date, calculated after taking into account any tax
refunds that the Companies might be entitled to that relate to any periods up to
the Closing Date.

|18.9 | Registration
|---- | ------------

Each Company:

| | (a) | is a registered person for the purposes of the Goods and
      Services Tax Act 1985;                  
| | --- | -------------------------------------------------------------------------------------------------------
| |     |                                                                                                        
| | (b) | has complied in all respects with that Act; and                                                        
| |     |                                                                                                        
| | (c) | is not in default of any obligation to make any payment
      or return or notification under that Act.

|18.10 | Accounting year
|----- | ---------------

Each Company has an accounting year for
New Zealand income tax purposes ending on 31 March of each year.

47

---

|Schedule 5:
      Mutual Consents
|---------------------------------

All consents required under the Crown Minerals Act 1991,
including any consent of the Minister of Energy required under section 41 of the
Crown Minerals Act 1991 (and including also consent to the Overriding Royalty).

48

---

|Schedule 6:
      Required Seller Consents and Approvals
|--------------------------------------------------------

None.

49

---

|Schedule 7:
      Required Purchaser Consents
|---------------------------------------------

The Purchaser receiving confirmation from TAG Oil, that TAG Oil
has obtained all necessary corporate and other consents and approvals required
under, and otherwise complying with the requirements of, relevant Canadian
companies and securities laws, the rules of the TSX Venture Exchange and any
other relevant stock exchange, and its constitution to issue to TAG Oil Shares
pursuant to this Agreement.

50

---