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| Share Name | Share Symbol | Market | Type |
|---|---|---|---|
| Transatlantic Mining Corporation | TSXV:ASP | TSX Venture | Common Stock |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 0 | - |
Hot Features
Premium
Zargon Oil & Gas Ltd. (the "Company" or "Zargon") (TSX:ZAR) (TSX:ZAR.DB) is
pleased to announce the sanctioning of the construction of the Little Bow
Alkaline Surfactant Polymer ("ASP") tertiary recovery facility, provide an
operational update, provide 2013 guidance and report its 2012 year end reserves.
Zargon intends to release its 2012 audited financial results on March 12, 2013,
after market close.
LITTLE BOW ASP PROJECT SANCTIONING:
-- Zargon is sanctioning the construction of its tertiary recovery ASP oil
exploitation project at the Little Bow oil property in Southern Alberta.
This ASP project entails the injection of large volumes of a dilute
chemical solution into a partially depleted oil reservoir to recover
incremental oil reserves. With sanctioning, phases 1 and 2 of the Little
Bow ASP project will be Canada's ninth operational ASP project. For a
full description of the Little Bow ASP project, please refer to the
company's website at www.zargon.ca.
-- After three years of preparation, Zargon is now ready to proceed with
the construction phase of the Little Bow project. In particular, the
Energy Resources Conservation Board ("ERCB") regulatory scheme approval
has been obtained, detailed engineering design has been completed, long
lead time and large equipment orders have been placed and Class 3
construction cost estimates have been prepared. The project entails the
construction of a water softening plant, chemical handling/mixing
facilities and water injection facilities. In addition, there will be
oil battery upgrades, pipeline replacements/upgrades, water injector
conversions and well reactivations.
-- Including the $6.5 million of ASP costs spent in 2012, the total capital
cost of the wholly owned phases 1 and 2 of the Little Bow ASP project is
approximately $59 million (excluding the cost of capitalized chemicals).
The scheduling of these expenditures is $38 million in 2013, $4 million
in 2014, and $11 million in 2015 relating to the phase 2 implementation.
With sanctioning, field construction will proceed during this summer,
which will permit January 2014 first injection and initial incremental
oil volumes by mid 2014.
-- Based on Southern Alberta analog pools and Little Bow reservoir model
studies with predicted recoveries as high as a 17 percent incremental
reservoir recovery, Zargon's internal base case sanctioning economics
use a 12 percent incremental reservoir recovery factor and predicts an
estimated 4.87 million barrels of proved and probable oil reserves. The
increased reserves are due in part to an updated reservoir model with
increased chemical injections, and the corresponding phase 1 and 2
chemical costs for the six year chemical injection period (2014-2020)
will be capitalized and are estimated at $66 million ($50 million PVBT
10%).
-- Based on Zargon's base case economics, incremental oil production from
phases 1 and 2 is estimated to average 1,470 barrels of oil per day in
the five year 2016 to 2020 period. The long-life stable production
profile of the ASP project is well suited for Zargon's dividend paying
business model.
-- Phase 1 and 2 field netbacks are estimated, assuming a field oil price
of $68 per barrel ($85 Cdn. per barrel Edmonton par price), to be
approximately $50 per barrel of incremental oil production. Zargon
estimates that the phase 1 and 2 before tax rate of return for this
enhanced oil recovery project will be 18 percent. The project is
calculated to have a breakeven (PVBT 10%) field oil price of $48 per
barrel. Potential upsides to these results could come from follow-on
phases, higher oil prices, improved reservoir recoveries or Alberta
Crown tertiary royalty modifications.
-- 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 to 4 peak production rates expected to occur in 2020 at
a combined incremental production rate of 2,300 barrels of oil per day.
For further information regarding the Little Bow ASP project, please
refer to the company's updated corporate presentation, which is
available on our website at www.zargon.ca.
OPERATIONAL UPDATE:
-- Fourth quarter 2012 total production averaged 7,720 barrels of oil
equivalent per day (on a 6:1 equivalency basis), a one percent increase
from the prior quarter's rate of 7,634 barrels of oil equivalent per
day.
-- Fourth quarter 2012 oil and liquids production volumes averaged 5,065
barrels per day, essentially unchanged from 5,079 barrels per day in the
prior quarter and less than one percent below production guidance levels
of 5,100 barrels per day. On a production per million share basis
(basic), oil and liquids production averaged 170 barrels per day in the
fourth quarter essentially unchanged from the prior quarter's rate of
171 barrels per day.
-- Fourth quarter 2012 natural gas production volumes averaged 15.93
million cubic feet per day, a four percent increase from the prior
quarter rate of 15.33 million cubic feet per day and three percent above
production guidance levels of 15.50 million cubic feet per day. The
production gains came from the reactivation of natural gas wells that
had been shut-in during the summer due to very low field natural gas
prices.
-- Fourth quarter 2012 oil and liquids production represented 66 percent of
total production based on a 6:1 equivalent basis, up from 61 and 58
percent weightings in fourth quarter 2011 and 2010, respectively.
-- For calendar 2012, Zargon's production averaged 8,117 barrels of oil
equivalent per day, comprised of 5,255 barrels of oil and liquids per
day and 17.17 million cubic feet of natural gas per day.
-- During the full year 2012, Zargon spent $58.2 million (unaudited) on
field activities and a further $6.5 million (unaudited) on the Little
Bow ASP project. These expenditures were partially offset by a net $34.5
million (unaudited) of property dispositions and resulted in net 2012
total capital expenditures of $30.2 million (unaudited).
-- During the 2012 fourth quarter, Zargon spent $22.5 million (unaudited)
on field capital programs (exclusive of $3.2 million of ASP related
expenditures). Zargon completed an active 15.0 net well oil exploitation
drilling program (13.0 net horizontal wells) that resulted in 14.0 net
oil wells and 1.0 water disposal well. The drilling program included 4.8
Williston Basin horizontal Frobisher and Midale oil wells, 3.0 oil wells
in the Taber Sunburst property, along with 4.0 Hamilton Lake and 2.0
Bellshill Lake oil exploitation wells in the Alberta Plains North core
area. The capital program also included significant battery, pipeline
and infrastructure upgrade expenditures at Hamilton Lake, Bellshill
Lake, Little Bow, Elswick and Steelman.
-- Results from the Bellshill Lake and Taber fourth quarter drilling
programs met or exceeded expectations. In the Williston Basin, three of
the five locations met or exceeded expectations. At Hamilton Lake, three
monobore horizontal multi-frac locations were drilled in an attempt to
reduce costs and improve recoveries from our wholly owned 47 section
Viking oil resource opportunity. Significant improvements in costs were
made, but initial production data from these wells did not perform up to
our 60 thousand barrels of oil reserves per well type curve that had
been based on the results of the first five horizontal locations drilled
on the property. Prior to drilling further wells on this property, we
will rework our technical analysis to determine the optimal approach to
develop the Hamilton Lake oil resource.
-- During this 2013 year's "heavy spend" period for the construction of the
Little Bow ASP project, Zargon will proceed with a modest conventional
oil exploitation capital program. In the first quarter of 2013, we will
drill five Midale drainage locations in the Williston Basin. In the
summer, five Taber Sunburst and two Bellshill Viking horizontal wells
are planned. Williston Basin drilling activities will resume this fall
with an additional five locations. Additional wells will be added to the
conventional oil exploitation budget throughout the year, as we complete
the Little Bow construction project milestones.
2013 CAPITAL AND PRODUCTION GUIDANCE:
-- Zargon's 2013 capital budget has been set at $40 million for (non-ASP)
conventional projects with the drilling of 20 net oil exploitation
wells, plus an additional $38 million for the Little Bow ASP project.
This $78 million capital program is forecast to be funded by cash flows,
bank debt and the sale of $20 million of minor non-strategic oil
properties that are not related to Zargon's six core conventional oil
projects.
-- As at the end of the 2012 fourth quarter, Zargon's debt net of working
capital is $113.2 million (unaudited), a level that represents 51
percent of the $222.5 million of credit through convertible debentures
and syndicated loan facilities.
-- With the revised (non-ASP) 2013 capital budget of $40 million, Zargon's
2013 oil and liquids production guidance level has been revised to 5,000
barrels per day. This guidance is based on a 21 percent annual corporate
oil and liquids production decline, the fourth quarter 2012 oil and
liquids production rate of 5,065 barrels of oil per day and (non-ASP)
capital program production addition efficiencies of $40,000 per barrel
of oil and liquids per day. These guidance levels will be adjusted for
acquisitions or dispositions as they occur. In the 2013 first quarter,
oil and liquids production is forecast to average 5,150 barrels of oil
per day.
-- Zargon's 2013 natural gas production guidance is expected to average
15.0 million cubic feet per day, a production level that reflects a 12
percent "blowdown" corporate decline from 2012 exit rate production
levels of 16.0 million cubic feet per day. In the 2013 first quarter,
natural gas production is forecast to average 15.6 million cubic feet
per day.
-- For 2013, Zargon has entered into 2,875 barrels of oil per day of oil
fixed price sales contracts at an average price of $97.94 US per barrel,
which represents 57.5 percent of the 2013 production guidance levels.
2012 YEAR END RESERVES:
-- Zargon's 2012 year end proved and probable total reserves decreased nine
percent to 31.19 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, 2012. On a 6:1 equivalency basis, oil and liquids comprised
74 percent of Zargon's total proved and probable reserves at year end
2012, up from a 70 percent weighting at the end of 2011.
-- Zargon's 2012 year end proved and probable oil and liquids reserves
decreased four percent to total 23.05 million barrels. On a per share
basis (basic), Zargon's 2012 year end proved and probable oil and
liquids reserves were 0.77 barrels, a six percent decrease over the
prior year. The proved and probable oil and liquids reserves estimate
includes 4.39 million barrels of probable undeveloped oil equivalent
reserves assigned using a 10 percent incremental reservoir recovery
factor to the ASP tertiary oil recovery project at Little Bow, Alberta.
-- Zargon's 2012 year end proved and probable natural gas reserves
decreased 21 percent to total 48.82 billion cubic feet, due to a
combination of production and 7.02 billion cubic feet of negative
reserve adjustments relating to economic factors. Zargon's business is
completely focused on oil exploitation, and Zargon has not drilled a gas
well since the fall of 2010. Over 90 percent of Zargon's proved and
probable discounted cash flows (PVBT 10%) are attributable to oil and
liquids production.
-- Zargon's oil properties are characterized by pressure supported
reservoirs (waterflood or natural aquifers) that provide long-life, low-
decline oil production. Consequently, Zargon's proved developed
producing oil and liquids reserve life index is 6.9 years and Zargon's
proved and probable producing oil and liquids reserve life index is 9.3
years. These low decline oil reserves are well suited for Zargon's
dividend paying business model.
-- Zargon's year end 2012 "produce-out" net asset value is calculated to be
$12.79 per basic share. This estimate reflects McDaniel's estimate of
the Zargon properties' proved and probable future cash flow using a
before tax 10 percent discount rate and forecast prices and costs plus
an independent appraisal of Zargon's undeveloped land less an allowance
for the year end bank debt, the full future face value of the $57.5
million convertible debenture and working capital deficiencies. On a
proved and probable developed producing reserve assignment basis,
Zargon's "produce-out" net asset value is calculated to be $10.64 per
basic share. The corresponding proved developed producing net asset
value estimate is $7.75 per basic share.
DETAILED RESERVE INFORMATION:
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 2012 Annual Information Form
to be filed on SEDAR (www.sedar.com) and posted on our website (www.zargon.ca)
in March 2013.
Based on the independent reserves evaluation conducted by McDaniel effective
December 31, 2012, and prepared in accordance with NI 51-101, Zargon had proved
and probable reserves of 31.19 million barrels of oil equivalent. Reserve
reductions from exploration and development activities (including revisions) and
corporate and net property acquisitions/dispositions were negative 0.13 million
barrels of oil equivalent.
Company Reserves(1)
Oil and Equivalents
Liquids Natural Gas (2)
At December 31, 2012 (mmbbl) (bcf) (mmboe)
----------------------------------------------------------------------------
Proved producing 12.74 26.61 17.18
Proved non-producing 0.44 3.23 0.98
Proved undeveloped 0.23 0.08 0.24
----------------------------------------------------------------------------
Total proved 13.41 29.92 18.40
Probable additional producing 4.56 9.14 6.08
Probable non-producing and
undeveloped 5.08 9.76 6.71
----------------------------------------------------------------------------
Total probable additional 9.64 18.90 12.79
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Total proved and probable producing 17.30 35.75 23.26
----------------------------------------------------------------------------
Total proved and probable 23.05 48.82 31.19
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Proved producing reserve life index,
years (3) 6.9 4.6 6.1
Proved reserve life index, years (3) 7.2 5.1 6.5
Proved and probable producing reserve
life index, years (3) 9.3 6.1 8.2
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Proved and probable reserve life
index, years (3) 12.4 8.4 11.0
----------------------------------------------------------------------------
----------------------------------------------------------------------------
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 2012
production.
A summary reconciliation of the 2012 year end reserve assignments with the
reserves reported in the 2011 year end report based on McDaniel's forecast
prices and costs is presented below:
Reserve Reconciliation (All Categories)
----------------------------------------------------------------------------
Oil and Liquids (mmbbl)
----------------------------------------------------------------------------
Proved
Proved Probable & Prob.
----------------------------------------------------------------------------
December 31, 2011 14.60 9.45 24.05
Discoveries and extensions 0.97 0.45 1.42
Revisions 0.57 0.03 0.60
Acquisitions and dispositions (0.81) (0.29) (1.10)
Production (1.92) - (1.92)
----------------------------------------------------------------------------
December 31, 2012 13.41 9.64 23.05
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Reserve Reconciliation (All Categories)
----------------------------------------------------------------------------
Natural Gas (bcf) Equivalents (mmboe)
----------------------------------------------------------------------------
Proved Proved
& &
Proved Probable Prob. Proved Probable Prob.
----------------------------------------------------------------------------
December 31, 2011 39.37 22.06 61.43 21.16 13.13 34.29
Discoveries and extensions 0.43 0.18 0.61 1.05 0.48 1.53
Revisions (3.66) (3.36) (7.02) (0.04) (0.53) (0.57)
Acquisitions and dispositions 0.06 0.02 0.08 (0.80) (0.29) (1.09)
Production (6.28) - (6.28) (2.97) - (2.97)
----------------------------------------------------------------------------
December 31, 2012 29.92 18.90 48.82 18.40 12.79 31.19
----------------------------------------------------------------------------
----------------------------------------------------------------------------
On a proved and probable basis, Zargon's oil and liquids reserves from
development activities increased by 2.02 million barrels, and after net
dispositions of 1.10 million barrels the net increase was 0.92 million barrels
before production of 1.92 million barrels. Overall, field capital exploration
and development programs provided 1.53 million barrels of oil equivalent of new
additions. Net property acquisitions/dispositions for 2012 removed 1.09 million
barrels of oil equivalent, and provided $34.5 million of net proceeds to Zargon.
During the year, positive technical revisions pertaining to Alberta Plains Taber
and Little Bow and the Williston Basin Elswick and Ralph oil exploitation
properties were partially offset by negative oil reserve adjustments at Alberta
Plains North St. Anne property and other minor properties. With the sharply
lower natural gas prices in 2012, negative proved and probable natural gas
revisions totaling 7.02 billion cubic feet were booked at Jarrow, Pembina and
other selected Alberta properties. As a result, overall technical reserve
revisions were a negative 0.57 million barrels of oil equivalent.
Reserve Reconciliation (Developed Producing)
----------------------------------------------------------------------------
Oil and Liquids (mmbbl)
----------------------------------------------------------------------------
Proved
Proved Probable & Prob.
----------------------------------------------------------------------------
December 31, 2011 13.69 4.71 18.40
Discoveries and extensions 0.92 0.37 1.29
Revisions 0.86 (0.26) 0.60
Acquisitions and dispositions (0.81) (0.25) (1.06)
Production (1.92) - (1.92)
----------------------------------------------------------------------------
December 31, 2012 12.74 4.57 17.31
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Reserve Reconciliation (Developed Producing)
----------------------------------------------------------------------------
Natural Gas (bcf) Equivalents (mmboe)
----------------------------------------------------------------------------
Proved Proved
& &
Proved Probable Prob. Proved Probable Prob.
----------------------------------------------------------------------------
December 31, 2011 33.71 11.53 45.24 19.31 6.63 25.94
Discoveries and extensions 0.43 0.19 0.62 0.99 0.40 1.39
Revisions (1.31) (2.60) (3.91) 0.65 (0.70) (0.05)
Acquisitions and dispositions 0.06 0.02 0.08 (0.80) (0.25) (1.05)
Production (6.28) - (6.28) (2.97) - (2.97)
----------------------------------------------------------------------------
December 31, 2012 26.61 9.14 35.75 17.18 6.08 23.26
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Zargon's reserves are characterized by a high developed producing component.
Proved developed producing reserves represent 93 percent of total proved
reserves while proved and probable developed reserves account for 75 percent of
total proved and probable reserves. For the Little Bow ASP project, McDaniel has
assigned 4.39 million barrels of oil equivalent reserves in the probable
undeveloped category, which represents 83 percent of the undeveloped reserves
and 14 percent of Zargon's total proved and probable reserves assignment.
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 2012, 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 not meaningful due to net
dispositions and natural gas reserve write downs. For the purposes of this
calculation, the $30.2 million of 2012 net capital additions was combined with a
decrease in estimated future development capital for proved and probable
reserves of $5.3 million ($123.5 million at December 31, 2012 compared to $128.8
million at December 31, 2011). More than 80 percent of Zargon's 2012 year end
future capital costs are attributed to the Little Bow ASP project.
Excluding acquisitions (and dispositions), Zargon's 2012 proved and probable
finding and development ("F&D") costs were $61.82 per barrel of oil equivalent.
Considering that essentially all of Zargon's 2012 capital program was directed
to oil projects, it is insightful to calculate Zargon's proved and probable F&D
costs on an "oil only" basis ($58.2 million of conventional capital expenditures
plus $6.5 million of ASP capital expenditures, less a $5.3 million change in
future capital estimates with 2.02 million barrels of oil and liquid additions).
Using this approach, proved and probable F&D "oil only" costs were $29.38 per
barrel.
Similarly, Zargon's proved and probable FD&A costs on an "oil only" basis were
$27.01 per barrel ($58.2 million of conventional capital expenditures plus $6.5
million of ASP capital expenditures, less $34.5 million of net dispositions and
less a $5.3 million change in future capital estimates with 0.92 million barrels
of oil and liquid additions). These "oil only' costs compare with Zargon's
unaudited 2012 corporate average field oil netback (before interest, general and
administrative and other costs) of more than $40 per barrel of oil (unaudited).
Proved and Probable Finding, Development and Acquisition Costs (1)
2012 2011 2010(4)
----------------------------------------------------------------------------
Total net capital expenditures ($ millions) -
unaudited (2) 30.19 48.29 71.38
Total net capital expenditures plus change in
forecast future development costs ($ millions)
(2) 24.85 144.52 79.62
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Proved and probable reserves (mmboe)
Open 34.29 32.39 32.24
Discoveries and extensions 1.53 5.77 3.07
Acquisitions and dispositions (1.09) 0.06 1.53
Revisions (0.57) (0.59) (0.84)
Production (2.97) (3.34) (3.61)
----------------------------------------------------------------------------
Close 31.19 34.29 32.39
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Proved and probable FD&A costs ($/boe) (3) - 27.58 21.18
Proved and probable three-year FD&A costs ($/boe)
(3) 28.07 21.48 18.83
Proved and probable F&D costs ($/boe) (3) 61.82 32.41 30.79
Proved and probable three-year F&D costs ($/boe)
(3) 35.35 30.06 24.80
----------------------------------------------------------------------------
----------------------------------------------------------------------------
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.
4. 2010 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, 2013, 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%
----------------------------------------------------------------------------
Proved producing 491.3 388.8 323.0 278.1
Proved non-producing 14.7 12.2 10.3 8.7
Proved undeveloped 7.9 5.9 4.5 3.5
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Total proved 513.9 406.9 337.8 290.3
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Probable additional producing 225.9 130.0 86.2 62.6
Probable additional non-producing and
undeveloped 157.8 90.1 49.5 23.6
----------------------------------------------------------------------------
Total probable additional 383.7 220.1 135.7 86.2
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Total proved and probable producing 717.2 518.8 409.2 340.7
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Total proved and probable 897.6 627.0 473.5 376.5
----------------------------------------------------------------------------
----------------------------------------------------------------------------
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, 2012, 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 337 thousand net acres of land is valued at
$21.7 million based on the independent firm of Seaton-Jordan & Associates Ltd.
valuation as at December 31, 2012.
Net Asset Value
As at December 31 ($ millions) 2012
----------------------------------------------------------------------------
Proved and probable reserves (PVBT 10%) (1) 473.5
Undeveloped land 21.7
Working capital (excluding unrealized derivative assets/
liabilities) - unaudited (19.9)
Bank debt - unaudited (35.7)
Convertible debenture - unaudited (57.5)
----------------------------------------------------------------------------
Net asset value 382.1
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Net asset value per share ($/basic share) (2) 12.79
----------------------------------------------------------------------------
----------------------------------------------------------------------------
1. McDaniel's estimate of future before tax cash flow discounted at PV 10
percent.
2. Calculated using basic total shares outstanding at December 31, 2012 of
29.868 million shares.
The following table provides net asset value estimates at December 31, 2012 for
all four reserve categories.
McDaniel PVBT 10% Net Asset Value Net Asset Value
Reserves Category ($ million)(1) ($ million)(2) ($/basic share)(3)
----------------------------------------------------------------------------
Proved, developed,
producing reserves 323.0 231.6 7.75
Total proved reserves 337.8 246.3 8.25
Proved and probable,
developed producing
reserves 409.2 317.8 10.64
Proved and probable
reserves 473.5 382.1 12.79
----------------------------------------------------------------------------
1. McDaniel's estimate of future before tax cash flow discounted at PV 10
percent.
2. McDaniel's estimated value, adjusted for the following unaudited items
at December 31, 2012:
- Undeveloped land value as assessed by Seaton Jordan of $21.7 million;
and
- Net debt of $113.2 million, which includes full value of the
convertible debenture of $57.5 million.
3. Calculating using basic total shares outstanding at December 31, 2012 of
29.868 million shares.
Forward-Looking Statements - This press release contains forward-looking
statements relating to our plans and operations as at February 20, 2013.
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 2012 financial results, our 2013 and beyond capital
expenditure program, the source of funding of our 2013 and beyond capital
program, anticipated 2013 and beyond 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 sedar and 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.
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 and dividends (distributions). Zargon's business is focused
on oil exploitation projects that profitably increase oil production and
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.
FOR FURTHER INFORMATION PLEASE CONTACT:
C.H. Hansen
President and Chief Executive Officer
403-264-9992
J.B. Dranchuk
Vice President, Finance and Chief Financial Officer
403-264-9992
Zargon Oil & Gas Ltd.
zargon@zargon.ca
www.zargon.ca
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