ASP Transatlantic Mining Corporation

Zargon Oil & Gas Ltd. (TSX:ZAR)(TSX:ZAR.DB) ("Zargon") has closed its previously
announced $36 million sale of 275 barrels of oil per day pertaining to all of
its southwest Manitoba assets and selected properties in the Elswick area of
southeast Saskatchewan. The proceeds from the transactions have been used to
reduce bank indebtedness. 


With the closing of these property sales, Zargon has entered into renewed
committed syndicated credit facilities with a borrowing base of $165 million.
The credit facilities are fully revolving for an additional 364 day period with
the provision for an annual extension at the option of the lenders and upon
request from Zargon. 


Zargon is well positioned to manage the current period of lower commodity
prices. Subsequent to the two property sales, Zargon's net debt is approximately
$95 million and is comprised of $57.5 million of five year convertible
debentures (ZAR.DB) and approximately $37.5 million of bank debt and working
capital deficiencies. With these transactions concluded, Zargon has access to
over $120 million of unutilized credit facilities. In addition, Zargon has
entered into oil hedges totalling 2,500 barrels per day in the second half of
2012, 1,450 barrels per day in the first half of 2013 and 600 barrels per day in
the second half of 2013 at respective West Texas Intermediate oil prices of
$97.96, $101.95 and $103.30 US per barrel.


Little Bow Alkaline Surfactant Polymer ("ASP") Project 

Earlier this year, Zargon announced that it was proceeding 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. In its year
end review, McDaniel and Associates Consultants Ltd. assigned 4.15 million
barrels probable undeveloped oil equivalent reserves to Zargon's working
interest in phases 1 and 2 of the project. 


To date in 2012, Zargon has finalized the front-end engineering and design
("FEED") studies, finalized the alkaline and polymer selections and has obtained
project approval from the Energy Resources Conservation Board ("ERCB"). Detailed
design is being completed and the awarding of long-lead-time procurement items
has commenced. Later this summer, Zargon will proceed with producer
reactivations and water injector conversions, along with pipeline modifications
and replacements that in part support continued waterflood operations, but are
ultimately required for and are included in the ASP project costs. In aggregate,
these approved 2012 activities are forecast to cost $15 million. 


Later this fall, Zargon will make a sanctioning decision regarding proceeding
with the construction component of the ASP project. Long-dated forward market
oil prices and the status of the Alberta government tertiary royalty review will
be important considerations in this decision. Assuming the sanctioning of the
construction component of the project, the current project schedule anticipates
first chemical injections in the third quarter of 2013, with a significant oil
production response forecast by the first quarter of 2014. 


Assuming that the construction phase of the project is sanctioned this fall, the
total capital cost of phases 1 and 2 of the ASP project is approximately $52
million (as spent dollars), with $18 million (including $3 million of
construction and other related costs) to be spent in 2012. An additional $22
million of capital expenditures is forecast to be spent in 2013, with the
remaining $12 million of the capital costs relating to the project's phase 2
implementation scheduled for 2014 and 2015. The estimated total phase 1 and 2
chemical cost for the 2013-2019 chemical injection period is $47 million (as
spent dollars). Phase 1 and 2 peak incremental oil production is estimated at
1,500 barrels of oil per day in 2017. Based on these rates and on an estimated
field oil price of $70 per barrel, a 12 percent incremental tertiary royalty
rate, and operating costs of $12 per barrel of incremental oil, the project is
forecast to provide a field net back of approximately $50 per barrel of
incremental oil production volumes. Follow-on capital expenditures for phases 3
and 4 of the Little Bow ASP project are expected to be completed by 2017 with
forecasted total combined phase 1-4 project peak production rates expected to
occur in 2020. (For further information regarding the Little Bow ASP project,
please refer to our website at www.zargon.ca.)


2012 Capital Programs 

Zargon seeks to deliver superior long term financial returns working in a
partial cash flow distributing model through focused oil exploitation programs
designed to increase oil recovery factors in existing reservoirs. By
concentrating on a long-life, low-decline oil property portfolio, Zargon is
building a stable asset base that can maintain a steady stream of dividends
during periods of stable commodity prices. With the sale of our Manitoba assets,
Zargon is now focused on seven long-life, low-decline oil exploitation
initiatives, that typically entail the implementation and modification of
secondary (waterflood) and tertiary (chemical) enhanced recovery projects.  


Consistent with prior guidance, Zargon's 2012 non-ASP field capital budget is
set at $55 million, of which $21 million was spent in the first quarter with the
drilling of 9.6 net oil wells. The 2012 capital program is focused on oil
exploitation drilling and oil production optimization projects relating to
battery modifications, water injection conversions, well workovers and facility
consolidations. For the remainder of the year we anticipate drilling 16 net oil
exploitation wells. In Alberta, the summer-fall capital program includes three
Taber South Sunburst horizontal drainage locations and three horizontal
re-entries plus a water disposal well at Bellshill Lake. At Killam, we will
proceed with implementing the first Glauconite pilot waterflood that could lead
to full scale waterflood implementation in subsequent years.  


At Hamilton Lake three shorter mono-bore horizontal locations will be drilled
this fall in a northwest-southeast orientation to attempt to improve well costs
and the predictability of the production results. In the last 18 months, we have
drilled five multi-frac horizontal oil wells that in aggregate are producing
approximately 200 barrels of oil per day. These wells have been drilled on our
47 section wholly owned Viking Unit which has previously produced 16 million
barrels of oil. Our technical work, suggests that significant additional
reserves could be recoverable through a combination of potentially dozens of
fracture stimulated horizontal wells and a re-initiated waterflood.  


In the Williston Basin, we are planning on drilling six locations in the fourth
quarter, which will be allocated between our high rate, higher initial decline
Frobisher locations and our lower rate but lower decline Midale drainage
locations. 


With the now concluded sale of $36 million of assets, we have exceeded this
year's property disposition target and we will not be actively pursuing
additional property sales. In specific cases relating to our exploitation
projects, we may consider smaller "tuck-in" acquisitions that complement our now
reduced seven focused oil exploitation projects.


Production Guidance 

In our February 15, 2012 press release, Zargon provided updated 2012 average oil
production guidance of 5,400 barrels of oil and liquids per day. First quarter
actual volumes were 5,496 barrels of oil and liquids per day and exceeded
guidance levels. Prior to the now concluded property sale, second quarter
production volumes had been running at levels roughly consistent with guidance
levels. Reflecting the 275 barrels of property sales, we are now forecasting
that the second half 2012 production to average 5,200 barrels of oil per day,
with the fourth quarter volumes exceeding the third quarter levels, as new wells
from the fall oil exploitation drilling programs are placed on production. 


In the same February press release, 2012 average natural gas production rate
guidance was set at 18.6 million cubic feet per day. First quarter actual
volumes were 20.0 million cubic feet per day which exceeded guidance levels, but
we have subsequently aggressively shut-in uneconomic natural gas production
during this period of very low natural gas prices, with the view that the
current price regime provides an opportunity to shed operated property fixed
costs, which in turn will permit improved profitability when natural gas prices
ultimately improve. With these shut-ins, our current natural gas production
rates have declined to approximately 16.5 million cubic feet per day, a
restricted level that may not be exceeded during the third and possibly the
fourth quarter of 2012.  


Based in Calgary, Alberta, Zargon's securities trade on the Toronto Stock
Exchange and there are currently 29.569 million common shares outstanding.


FORWARD-LOOKING STATEMENTS

This press release offers our assessment of Zargon's future plans and operations
as at June 18, 2012, and contains forward-looking statements. All statements
other than statements of historical fact may be forward-looking statements. Such
statements are generally identified by the use of 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 pertaining to the following:




--  our business plans and strategy; 
--  our ability to manage our business in a lower commodity price
    environment; 
--  the resulting debt levels after the concluded property sales; 
--  future banking syndicate borrowing base levels; 
--  reserve estimates; 
--  our expectation of future capital expenditures (including the ASP
    project); 
--  our expectation for the sanctioning of the ASP project construction
    phase, and the timing of the construction and project start-up; 
--  our expectations of the ASP costs; 
--  our expectations for production volumes; 
--  our expectation for netbacks; 
--  our expectations for drilling activities. 



By their nature, forward-looking statements are subject to numerous risks and
uncertainties, some of which are beyond our control, including 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 is available on our website and at
www.sedar.com. 


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.


FURTHER INFORMATION 

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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