Zargon Oil & Gas Ltd. (TSX:ZAR) ("Zargon") is pleased to provide fourth quarter
production statistics, an operational update and report its 2011 year end
reserves. Zargon intends to release its 2011 audited financial results on March
9, 2012, before market open.
HIGHLIGHTS:
-- Reflecting an active oil exploitation capital program, fourth quarter
2011 oil and liquids production averaged 5,619 barrels per day, a five
percent gain over the preceding quarter's rate of 5,330 barrels per day.
On a per million share basis, oil and liquids production averaged 192
barrels per day, a five percent improvement from the prior quarter's
rate of 182 barrels per day. Fourth quarter 2011 natural gas production
averaged 21.96 million cubic feet per day per day, a one percent
decrease from the prior quarter's rate of 22.10 million cubic feet per
day.
-- Fourth quarter 2011 total production averaged 9,278 barrels of oil
equivalent per day (on a 6:1 equivalency basis), a three percent
increase from the prior quarter's rate of 9,014 barrels of oil
equivalent per day.
-- During the 2011 fourth quarter, Zargon completed an active oil
exploitation drilling program by drilling 11.5 net wells that resulted
in 9.0 net oil wells and 2.5 net abandonments. The field capital program
was highlighted by Williston Basin horizontal Midale oil drainage wells
plus Hamilton Lake and Bellshill Lake oil exploitation wells in the
Alberta Plains North core area.
-- Zargon's 2011 year end proved and probable total reserves increased six
percent to 34.29 million barrels of oil equivalent. These reserves were
appraised by Zargon's independent reserves evaluator McDaniel &
Associates Consultants Ltd. ("McDaniel") and are effective as of
December 31, 2011. On a 6:1 equivalency basis, oil and liquids comprised
70 percent of Zargon's total proved and probable reserves at year end
2011 up from a 66 percent weighting at the end of 2010.
-- Zargon's 2011 year end proved and probable oil and liquids reserves
increased 13 percent to total 24.05 million barrels. The proved and
probable oil and liquids reserve estimate includes 3.75 million barrels
of probable undeveloped oil and liquids reserves assigned to the
Alkaline Surfactant Polymer ("ASP") tertiary oil recovery project at
Little Bow, Alberta as this project has progressed from engineering
studies to a project implementation phase. On a per share basis,
Zargon's 2011 year end proved and probable oil and liquids reserves were
0.82 barrels, a four percent increase over the prior year.
-- Zargon's year end 2011 "produce-out" net asset value is calculated to be
$16.50 per diluted share. This estimate reflects McDaniel's estimate of
the Zargon properties' future cash flow using a before tax 10 percent
discount rate and forecast prices and costs plus the appraisal of
Zargon's undeveloped land less an allowance for the year end bank debt
and working capital deficiencies. Over 88 percent of the discounted cash
flow values are attributable to oil and liquids production. On a proved
and probable developed producing reserve assignment basis, Zargon's
"produce-out" net asset value is calculated to be $14.05 per diluted
share.
Production
Zargon's production averaged 9,278 barrels of oil equivalent per day in the
fourth quarter and was three percent higher than the preceding quarter and was
essentially unchanged from the corresponding 2010 quarter. Oil and liquids
production averaged 5,619 barrels per day in the 2011 fourth quarter, a five
percent increase from the prior quarter and a three percent increase from the
corresponding 2010 quarter. Natural gas production averaged 21.96 million cubic
feet per day, a one percent decrease from the previous quarter and a six percent
decrease from the corresponding 2010 quarter. Fourth quarter 2011 oil and
liquids production represented 61 percent of total production based on a 6:1
equivalent basis.
For calendar 2011, Zargon's production averaged 9,131 barrels of oil equivalent
per day, comprised of 5,469 barrels of oil per day and 21.97 million cubic feet
of natural gas per day.
Field Activities
Zargon's fourth quarter field capital program totalled $23.7 million (unaudited)
and included the drilling of 9.0 net oil wells and 2.5 net dry holes. The fourth
quarter Alberta Plains North drilling program was highlighted by three vertical
infills at Bellshill Lake and one horizontal multi-frac well at Hamilton Lake.
Operated wells in the Williston Basin core area included three Midale horizontal
drainage wells at the Weyburn and Elswick, Saskatchewan properties.
In 2011, three multi-frac horizontal locations were drilled at the 47 section
wholly-owned Hamilton Lake property. After an average of five months of
production, January 2012 production for the three wells averaged 48 barrels of
oil per day per well with a 73 percent water cut. Unlocking the potential of
Hamilton Lake's large oil-in-place resource with stimulated horizontal wells and
a reactivated waterflood will be a high priority in 2012. In the first quarter
of 2012, two wells have been drilled and completed and will be production tested
shortly. Two additional wells are scheduled for this summer and additional
locations are expected to be drilled this fall and winter. Success at Hamilton
Lake could lead to more than 30 additional horizontal oil locations. The
McDaniel 2011 year end report has not booked any of these undeveloped Hamilton
Lake Viking multi-frac horizontal locations.
In addition to Hamilton Lake, 2012 capital will be directed to the Killam
property, where a three well horizontal development drilling program will be
completed in the first quarter. This program will be followed by the
implementation of a pilot waterflood and further delineation drilling. With
further de-risking, the Killam property is expected to be a significant oil
exploitation project that could require as many as 20 horizontal drainage wells
to optimally exploit under a waterflood scheme. The McDaniel 2011 year end
report has booked only three of these undeveloped Killam Glauconite horizontal
locations.
Additional 2012 Alberta expenditures will be directed to oil exploitation
projects at Bellshill Lake and Taber. At Bellshill Lake, further infill drilling
plus oil treating and water disposal upgrades are expected to deliver increased
oil production and reserves. Similarly at Taber, capital will be allocated to
drill infill horizontal producers and to expand and enhance waterflood
recoveries through additional injection well conversions.
In the Williston Basin, we are working three types of oil exploitation projects.
In 2011, the majority of our Williston Basin drilling were Midale drainage
locations, which are characterized by low permeability reservoirs that are
generally partially pressure supported by either weak aquifers or, in some
cases, by non-operated offsetting mature waterfloods. Production from Midale
type wells are characterized by relatively low rates, moderately high water
cuts, but shallow production declines. Ultimately, as many as 30 of these
drainage locations are expected to be drilled over the next three years at the
Weyburn, Elswick, Midale, Ralph and Steelman properties. The McDaniel 2011 year
end report has booked only two of these undeveloped Williston Basin Midale
horizontal drainage locations.
Exploiting un-drained Frobisher seismically defined targets is the second type
of Williston Basin oil exploitation project that is being pursued. These
Frobisher targets are characterized by higher permeability rock with full
aquifer pressure support. Successful wells have high initial oil production
rates, but high initial declines as the flank water encroaches on the wells. The
economics of these Frobisher programs can be very robust, as demonstrated by our
17 well 2009-2010 Steelman Frobisher program where McDaniel assigned average
proved and probable reserves in excess of 75 thousand barrels of oil per well.
Over the next three years, we expect to drill a minimum of 15 Frobisher
locations on already identified structures at the Weyburn, Steelman and Mackobee
Coulee properties. The McDaniel 2011 year end report has not booked any of these
undeveloped Williston Basin Frobisher horizontal locations.
Our final Williston Basin exploitation project entails the unlocking of thick
Mississippian low permeability carbonate targets through horizontal multi-frac
wells in conjunction with the implementation of full-field waterfloods. In
particular, Zargon has significant "tight oil waterflood potential" with
considerable oil-in-place resources in the low permeability Daly, Virden,
Workman and Truro properties. In 2012, we will advance the de-risking program
for these long term opportunities with a second Truro multi-frac location and a
two well multi-frac horizontal injector-producer pilot waterflood at Daly,
Manitoba. The McDaniel 2011 year end report has booked only one of these
undeveloped Williston Basin "tight oil" multi-frac horizontal locations.
Throughout 2012, we will systematically drill oil locations high-graded from our
large inventory of oil exploitation projects. The 2012 first quarter drilling
program will include two Hamilton Lake Viking stimulated horizontal locations,
three Killam Glauconite horizontal locations, three Frobisher type locations at
Weyburn and Steelman, Saskatchewan and one stimulated horizontal location at
Truro, North Dakota.
Finally, in recent years our business has been challenged by rapidly increasing
operating costs as we integrated the properties from five corporate and one
large property oil acquisition. Now, with a refocused business plan with eight
clearly defined oil exploitation initiatives (Hamilton Lake, Killam, Bellshill
Lake, Taber, Williston Basin Midale, Williston Basin Frobisher, Williston Basin
tight oil waterflood, and Little Bow ASP), we have an opportunity to high grade
our property footprint and concentrate on cost containment initiatives. To this
end, we will continue to sell non-strategic oil properties if attractive
valuations can be realized. Also, during this period of low natural gas prices,
we will complete a comprehensive review of our natural gas properties to
identify well shut-in, facility consolidation and other fixed cost saving
opportunities that will permit improved returns when natural gas prices improve.
Little Bow Alkaline Surfactant Polymer ("ASP") Project
Earlier this year, Zargon announced that it would proceed with detailed
engineering, regulatory applications and the procurement of long-lead time
equipment for the Little Bow Upper Mannville I pool ASP project. This tertiary
oil recovery project entails the injection of chemicals in a water solution into
a partially depleted reservoir to recover incremental oil reserves. The project
schedule anticipates first chemical injections in July 2013, with a significant
oil production response forecast to occur by January 2014. In their year end
review, McDaniel assigned 4.15 million barrels of oil equivalent of probable
undeveloped reserves to Zargon's working interest in Phases 1 and 2 of the
project. Future costs to develop the first two phases of the project are
estimated at $103.5 million and are comprised of $47.8 million for the field and
related capital (2012-2015) and $55.7 million for the cost of the chemical
injections (2013-2019). Incorporating all future capital (including chemical
costs), the Little Bow ASP Phase 1 and 2 finding and development cost is
estimated to be $24.98 per barrel of oil equivalent. Targeted field netbacks for
the Little Bow ASP Phase 1 and 2 project are in the $50 to $60 per barrel of oil
range.
In 2012, Zargon is projecting to spend $21 million of Phase 1 Little Bow ASP
capital with 75 percent of the expenditures occurring in the second half of the
year. An additional $11 million of capital expenditures is forecast to be spent
in 2013, with the remainder of the capital costs relating to the project's Phase
2 implementation scheduled for 2014 and 2015.
2011 Capital Expenditures and 2012 Capital Budgets
Reflecting a very active fall and early winter oil exploitation drilling
program, Zargon spent $71.7 million (unaudited) on field activities in 2011.
These expenditures were offset by a net $23.4 million (unaudited) of property
dispositions and resulted in net 2011 field capital expenditures of $48.3
million (unaudited).
Excluding the Little Bow ASP project, Zargon's 2012 field capital budget has
been reduced by $10 million from previous guidance of $65 million to $55 million
as we redirect a portion of our capital spending to long term ASP tertiary oil
opportunities that will provide stable mid-decade production volumes. Similar to
2011, this field capital program will be partially funded by non-strategic
property dispositions, as we improve our property focus and footprint. Our
current budget calls for $10 million of net property dispositions and results in
a net $45 million of non-ASP capital expenditures.
Consistent with our 2010-2011 strategy, the 2012 field programs are directed
entirely to oil exploitation activities. In Alberta, the 2012 field capital
program will focus on Hamilton Lake Viking oil exploitation, Bellshill Lake
increased fluid withdrawals, Killam Glauconite oil pool development, Taber South
waterflood expansion and the Little Bow ASP project development. In the
Williston Basin, the capital program will focus on Midale horizontal drainage
locations, Frobisher undrained targets and early de-risking expenditures for
waterflooding tight oil carbonates with multi-frac horizontal wells.
Including the Little Bow ASP project, Zargon's 2012 capital budget has been
reset at $66 million and is comprised of $21 million of ASP related expenditures
and the net $45 million of field capital expenditures. As at the end of the 2011
fourth quarter, Zargon's debt net of working capital is $109.5 million
(unaudited), a level that represents 61 percent of Zargon's $180 million
syndicated loan facility.
Production Guidance
On July 19, 2011, Zargon provided 2011 fourth quarter production guidance at
5,400 barrels of oil and liquids per day. Fourth quarter actual volumes were
5,619 barrels of oil and liquids per day and exceeded guidance levels. On
September 12, 2011, Zargon updated fourth quarter 2011 natural gas production
guidance at 21.60 million cubic feet per day. Fourth quarter actual volumes were
21.96 million cubic feet per day and exceeded guidance levels.
Incorporating the $45 million of net field (non-ASP) 2012 capital expenditures,
Zargon's 2012 oil and liquids production guidance is now reduced from 5,650
barrels per day to 5,400 barrels per day, a production level that is expected to
remain relatively consistent throughout the year. Reflecting essentially no
natural gas related capital expenditures in 2012, corporate natural gas
production declines of 15 percent per year and approximately one million cubic
feet per day of economic related shut-ins, the 2012 natural gas production
guidance level remains set at 18.60 million cubic feet per day.
2011 Year End Reserves:
Reserves included herein are stated on a gross company working interest basis
unless otherwise noted. All reserves information has been prepared in accordance
with National Instrument 51-101 Standards of Disclosure ("NI 51-101"). In
addition to the detailed information disclosed in this press release, more
detailed information will be included in Zargon's 2011 Annual Information Form
to be filed on SEDAR (www.sedar.com) in March 2012.
Based on an independent reserves evaluation conducted by McDaniel effective
December 31, 2011, and prepared in accordance with NI 51-101, Zargon had proved
and probable reserves of 34.29 million barrels of oil equivalent. Reserve
additions from exploration and development activities (including revisions) and
corporate and net property acquisitions were 5.24 million barrels of oil
equivalent.
Company Reserves(1)
Oil and Liquids Natural Gas Equivalents (2)
At December 31, 2011 (mmbbl) (bcf) (mmboe)
----------------------------------------------------------------------------
Proved producing 13.69 33.71 19.31
Proved non-producing 0.42 5.29 1.31
Proved undeveloped 0.49 0.37 0.54
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Total proved 14.60 39.37 21.16
Probable additional producing 4.71 11.53 6.63
Probable non-producing and
undeveloped 4.74 10.53 6.50
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Total probable additional 9.45 22.06 13.13
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Total proved and probable
producing 18.40 45.24 25.94
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Total proved and probable 24.05 61.43 34.29
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Proved producing reserve life
index, years (3) 6.7 4.2 5.7
Proved reserve life index,
years (3) 7.1 4.9 6.2
Proved and probable producing
reserve life index, years (3) 9.0 5.6 7.7
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Proved and probable reserve
life index, years (3) 11.7 7.7 10.1
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1. Company working interest reserves are gross reserves before deduction of
royalties, boe (6:1).
2. Boes may be misleading, particularly if used in isolation. A boe
conversion ratio of 6 mcf:1 bbl is based on an energy equivalency
conversion method primarily applicable at the burner tip and does not
represent a value equivalency at the wellhead.
3. Reserve life is calculated using annualized fourth quarter 2011
production.
A summary reconciliation of the 2011 year end reserve assignments with the
reserves reported in the 2010 year end report based on McDaniel's forecast
prices and costs is presented below:
Reserve
Reconciliation (All
Categories)
----------------------------------------------------------------------------
Oil and Liquids (mmbbl) Natural Gas (bcf)
----------------------------------------------------------------------------
Proved Proved
Proved Probable & Prob. Proved Probable & Prob.
----------------------------------------------------------------------------
December 31, 2010 15.15 6.15 21.30 44.26 22.27 66.53
Discoveries and
extensions 0.94 4.26 5.20 0.66 2.74 3.40
Revisions 0.84 (0.81) 0.03 0.29 (4.04) (3.75)
Acquisitions and
dispositions (0.33) (0.15) (0.48) 2.18 1.09 3.27
Production (2.00) - (2.00) (8.02) - (8.02)
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December 31, 2011 14.60 9.45 24.05 39.37 22.06 61.43
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Reserve
Reconciliation (All
Categories)
----------------------------------------------------------------------------
Equivalents (mmboe)
----------------------------------------------------------------------------
Proved
Proved Probable & Prob.
----------------------------------------------------------------------------
December 31, 2010 22.53 9.86 32.39
Discoveries and
extensions 1.05 4.72 5.77
Revisions 0.89 (1.48) (0.59)
Acquisitions and
dispositions 0.03 0.03 0.06
Production (3.34) - (3.34)
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December 31, 2011 21.16 13.13 34.29
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On a proved and probable basis, Zargon's reserves have increased by six percent
in 2011. Including revisions, Zargon replaced 157 percent of 2011 production
through the addition of 5.24 million barrels of oil equivalent. Before
revisions, 5.83 million barrels of oil equivalent were added, representing 175
percent of production. Oil reserves accounted for 91 percent (after revisions)
of the proved and probable reserve additions. Field capital exploration and
development programs provided 5.77 million barrels of oil equivalent of new
additions. Net property acquisitions/dispositions for 2011 added 0.06 million
barrels of oil equivalent, despite the fact that the 2011 net
acquisition/disposition program provided $23.4 million of net proceeds to
Zargon. Overall, technical reserve revisions were a negative 0.59 million
barrels of oil equivalent. During the year, positive technical revisions
pertaining to Alberta Plains Taber and Bellshill Lake oil exploitation
properties were offset by negative reserve adjustments at the Williston Basin
Haas and Weyburn properties. With the sharply lower natural gas prices, negative
proved and probable natural gas revisions totalling 3.75 billion cubic feet due
to economic factors were booked at Jarrow and selected Alberta Plains South
properties.
Reserve Reconciliation
(Developed Producing)
----------------------------------------------------------------------------
Oil and Liquids (mmbbl) Natural Gas (bcf)
----------------------------------------------------------------------------
Proved Proved
Proved Probable & Prob. Proved Probable & Prob.
----------------------------------------------------------------------------
December 31, 2010 14.04 4.78 18.82 37.35 12.78 50.13
Discoveries and
extensions 0.93 0.16 1.09 0.48 0.17 0.65
Revisions 0.96 (0.13) 0.83 2.02 (2.14) (0.12)
Acquisitions and
dispositions (0.24) (0.10) (0.34) 1.88 0.72 2.60
Production (2.00) - (2.00) (8.02) - (8.02)
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December 31, 2011 13.69 4.71 18.40 33.71 11.53 45.24
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Reserve Reconciliation
(Developed Producing)
----------------------------------------------------------------------------
Equivalents (mmboe)
----------------------------------------------------------------------------
Proved
Proved Probable & Prob.
----------------------------------------------------------------------------
December 31, 2010 20.27 6.91 27.18
Discoveries and
extensions 1.01 0.19 1.20
Revisions 1.30 (0.49) 0.81
Acquisitions and
dispositions 0.07 0.02 0.09
Production (3.34) - (3.34)
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December 31, 2011 19.31 6.63 25.94
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Zargon's reserves are characterized by a high developed producing component.
Proved developed producing reserves represent 91 percent of total proved
reserves while proved and probable proved developed reserves account for 76
percent of total proved and probable reserves. Reflecting long life production
characteristics, Zargon's proved and probable developed producing oil liquids
reserve life index is 9.0 years.
FINDING, DEVELOPMENT AND ACQUISITION COSTS:
We have presented finding and development costs below both including and
excluding acquisitions and dispositions. While NI 51-101 requires that the
effects of acquisitions and dispositions be excluded, we have included these
items because we believe that acquisitions and dispositions can have a
significant impact on our ongoing reserve replacement costs and that excluding
these amounts could result in an inaccurate portrayal of our cost structure.
For 2011, Zargon's proved and probable finding, development and acquisition
(FD&A) costs, taking into account reserve revisions and changes in estimated
future development capital during the period, were $27.58 per barrel of oil
equivalent. In excess of 90 percent of the total proved and probable reserve
additions were oil and liquids related. These oil exploitation capital
expenditures were generally allocated to projects with targeted first year field
netbacks ranging from $40 to $60 per barrel of oil equivalent. For the purposes
of this calculation, the $48.3 million of 2011 net capital additions was
combined with an increase in estimated future development capital for proved and
probable reserves of $96.2 million ($128.8 million at December 31, 2011 compared
to $32.6 million at December 31, 2010; future capital for the Little Bow ASP
projects represents more than 80 percent of the 2011 year end future capital
costs). Excluding acquisitions (and dispositions), Zargon's 2011 proved and
probable finding and development (F&D) costs were $32.41 per barrel of oil
equivalent. If the change in future development costs are excluded, the 2011
proved and probable FD&A costs, taking into account reserve revisions, were
$9.22 per barrel of oil equivalent ($13.83 per barrel of oil equivalent on a F&D
basis).
Proved and Probable Finding, Development and Acquisition Costs (1)
2011 2010 2009
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Total net capital expenditures ($
millions) - unaudited (2) 48.29 71.38 103.83
Total net capital expenditures plus
change in forecast future
development costs ($ millions) (2) 144.52 79.62 100.65
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Proved and probable reserves (mmboe)
Open 32.39 32.24 29.72
Discoveries and extensions 5.77 3.07 1.78
Acquisitions and dispositions 0.06 1.53 4.22
Revisions (0.59) (0.84) 0.12
Production (3.34) (3.61) (3.60)
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Close 34.29 32.39 32.24
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Proved and probable FD&A costs
($/boe) (3) 27.58 21.18 16.45
Proved and probable three-year FD&A
costs ($/boe) (3) 21.48 18.83 19.57
Proved and probable F&D costs ($/boe)
(3) 32.41 30.79 22.77
Proved and probable three-year F&D
costs ($/boe) (3) 30.06 24.80 23.29
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1. The aggregate of the exploration and development costs incurred in the
most recent financial year and the change during that year in
estimated future development costs generally will not reflect total
finding and development costs related to reserves additions for that
year.
2. Amounts exclude additions for administrative assets.
3. Amounts are calculated including the change in future development
costs.
Note: 2010 and 2009 numbers do not reflect any changes to accounting rules
which may have occurred.
Capital Program Performance (All categories)
Three-Year
Average
(2009 -
2011 2010 2009 2011)
----------------------------------------------------------------------------
Total Capital Program (including
future development costs)
Proved FD&A costs ($/boe) (1) 21.11 24.60 19.24 21.30
Proved and probable FD&A costs
($/boe) (1) 27.58 21.18 16.45 21.48
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----------------------------------------------------------------------------
1. FD&A costs taking into account reserve revisions during the year on a
barrel of oil equivalent basis (6:1).
Note: 2010 and 2009 numbers do not reflect any changes to accounting rules
which may have occurred.
Capital Program Performance (Developed Producing
Reserves Only)
Three-Year
Average
(2009 -
2011 2010 2009 2011)
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Total Capital Program (including future
development costs)
Proved Producing FD&A costs ($/boe) (1) 20.37 28.90 20.11 22.34
Proved and Probable Producing FD&A costs
($/boe) (1) 23.11 27.52 18.19 21.53
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1. FD&A costs taking into account reserve revisions during the year on a
barrel of oil equivalent basis (6:1).
Note: 2010 and 2009 numbers do not reflect any changes to accounting rules
which may have occurred.
NET ASSET VALUE:
Zargon's oil, liquids and natural gas reserves were evaluated using McDaniel's
price forecasts effective January 1, 2012, prior to provisions for income taxes,
interest, debt service charges, transaction costs and general and administrative
expenses. The estimated values of future net revenue disclosed do not represent
the fair market value of the reserves.
Before Tax Present Value of Future Net Revenue
(Forecast Prices and Costs)
Discount Factor
----------------------------------------------------------------------------
($ millions) 0% 5% 10% 15%
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Proved producing 603.0 469.2 386.7 332.0
Proved non-producing 23.1 17.9 14.3 11.8
Proved undeveloped 18.3 13.9 10.8 8.5
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Total proved 644.4 501.0 411.8 352.3
Probable additional producing 266.8 147.8 97.7 71.5
Probable additional non-
producing and undeveloped 154.7 87.6 49.5 26.4
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Total probable additional 421.5 235.4 147.2 97.9
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Total proved and probable
producing 869.8 617.0 484.4 403.5
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Total proved and probable 1,065.9 736.4 559.0 450.2
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The following net asset value table shows what is customarily referred to as a
"produce-out" net asset value calculation under which the current value of
Zargon's reserves would be produced at McDaniel's forecast future prices and
costs. The value is a snapshot in time as at December 31, 2011, and is based on
various assumptions including commodity prices and foreign exchange rates that
vary over time. In this analysis, the present value of the proved and probable
reserves is calculated at a before tax 10 percent discount rate. In the net
asset value calculation, Zargon's 422 thousand net acres of land is valued at
$32.7 million based on the independent firm of Seaton-Jordan & Associates Ltd.
valuation as at December 31, 2011.
Net Asset Value
As at December 31 ($ millions) 2011 2010 2009
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Proved and probable reserves (PVBT 10%) (1) (2) 559.0 570.7 592.4
Undeveloped land 32.7 44.5 58.8
Working capital (excluding unrealized risk
management assets/ liabilities and future
income taxes) - unaudited (15.9) (9.1) (11.4)
Bank debt - unaudited (92.7) (115.3) (76.6)
Proceeds from the exercise of all common share
rights 19.6 31.7 41.0
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Net asset value (including common share rights
dilution) 502.7 522.5 604.2
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Net asset value per share
Total ($/share) 16.45 18.15 21.65
With full dilution ($/share) (3) 16.50 18.34 21.77
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1. McDaniel's estimate of future before tax cash flow discounted at PV 10
percent.
2. PVBT 10 percent represents present value before taxes discounted at 10
percent.
3. Full dilution of shares represents the year end common shares
outstanding plus the presumed exercise of all common share rights. At
December 31, 2011, Zargon had 29.36 million common shares outstanding
and 1.10 million common share incentive rights issued and outstanding.
Assuming the exercise of all common share incentive rights, there
would be 30.46 million common shares outstanding at this date.
Note: 2010 and 2009 numbers do not reflect any changes to accounting rules
which may have occurred.
Forward-Looking Statements - This press release contains forward-looking
statements relating to our plans and operations as at February 15, 2012.
Forward-looking statements typically use words such as "anticipate", "continue",
"estimate", "expect", "forecast", "may", "will", "project", "should", "plan",
"intend", "believe" and similar expressions (including the negatives thereof).
In particular, this press release contains forward-looking statements relating,
but not limited to: our business strategy, plans and management focus; the
timing of release of our 2011 financial results, our 2012 capital expenditure
program, anticipated 2012 production guidance and product mix, drilling,
completion, development and exploitation plans and the results therefrom, future
drilling locations, plans to sell non-strategic assets and to review and
implement cost saving opportunities, plans with respect to our Little Bow ASP
project, anticipated netbacks, capital expenditures and other costs associated
with the ASP project and the anticipated results from this project, and sources
of funding for our capital expenditure program. In addition, all statements
relating to reserves in this press release are deemed to be forward-looking as
they involve an implied assessment, based on certain assumptions and estimates,
that the reserves described can be properly produced in the future.
By their nature, forward-looking statements are subject to numerous risks and
uncertainties, some of which are beyond our control, such as those relating to
results of operations and financial condition, general economic conditions,
industry conditions, changes in regulatory and taxation regimes, volatility of
commodity prices, escalation of operating and capital costs, currency
fluctuations, the availability of services, imprecision of reserve estimates,
geological, technical, drilling and processing problems, environmental risks,
weather, the lack of availability of qualified personnel or management, stock
market volatility, the ability to access sufficient capital from internal and
external sources and competition from other industry participants for, among
other things, capital, services, acquisitions of reserves, undeveloped lands and
skilled personnel. Risks are described in more detail in our Annual Information
Form, which will be available on our website. Forward-looking statements are
provided to allow investors to have a greater understanding of our business.
You are cautioned that the assumptions, including, among other things, future
oil and natural gas prices; future capital expenditure levels; future production
levels; future exchange rates; the cost of developing and expanding our assets;
our ability to obtain equipment in a timely manner to carry out development
activities; our ability to market our oil and natural gas successfully to
current and new customers; the impact of increasing competition; our ability to
obtain financing on acceptable terms; and our ability to add production and
reserves through our development and acquisition activities used in the
preparation of such information, although considered reasonable at the time of
preparation, may prove to be imprecise and, as such, undue reliance should not
be placed on forward-looking statements. Our actual results, performance, or
achievement could differ materially from those expressed in, or implied by,
these forward-looking statements. We can give no assurance that any of the
events anticipated will transpire or occur or, if any of them do, what benefits
we will derive from them. The forward-looking information contained in this
document is expressly qualified by this cautionary statement. Our policy for
updating forward-looking statements is that Zargon disclaims, except as required
by law, any intention or obligation to update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
Other Advisories - Boe's may be misleading, particularly if used in isolation. A
boe conversion ratio of 6 Mcf: 1 bbl is based on an energy equivalency
conversion method primarily applicable at the burner tip and does not represent
a value equivalency at the wellhead. In addition, given that the value ratio
based on the current price of crude oil as compared to natural gas is
significantly different from the energy equivalency of 6:1, utilizing a
conversion ratio on a 6:1 basis may be misleading as an indication of value. The
estimates of reserves and future net revenue for individual properties may not
reflect the same confidence level as estimates of reserves and future net
revenue for all properties, due to the effects of aggregation.
Zargon Oil & Gas Ltd. is a Calgary based oil and natural gas company working in
the Western Canadian and Williston sedimentary basins that has delivered a long
history of returns, dividends (distributions) and value creation. Zargon's
business is focused on oil exploitation projects where we employ a careful
reservoir engineering inspired technical approach to profitably increase oil
recovery factors from existing oil reservoirs.
In order to learn more about Zargon, we encourage you to visit Zargon's website
at www.zargon.ca where you will find a current shareholder presentation,
financial reports and historical news releases.
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