The Globe and Mail

Go to the Globe and Mail homepage

Jump to main navigationJump to main content

Press release from Marketwire

Zargon Oil & Gas Ltd. Announces Asset Sales

Monday, June 04, 2012

Zargon Oil & Gas Ltd. Announces Asset Sales19:03 EDT Monday, June 04, 2012CALGARY, ALBERTA--(Marketwire - June 4, 2012) - Zargon Oil & Gas Ltd. (TSX:ZAR) (TSX:ZAR.DB) ("Zargon") has executed two definitive agreements totalling $36 million with private companies for the sale of all of its southwest Manitoba assets and for selected properties in the Elswick area of southeast Saskatchewan, subject to normal course closing adjustments. Details of the Company's divested assets are as follows: Reserves attributed to the assets on a proved basis are 0.96 million bbl (1) and on a proved plus probable basis are 1.30 million bbl (1); Oil production attributed to the assets is approximately 275 bbl/d (1); Transaction metrics are $36.38 per barrel on a proved reserve basis, $27.61 per barrel on a proved plus probable reserve basis and $131,000 on a flowing barrel per day basis. (1) As evaluated by McDaniel & Associates Consultants Ltd. effective Dec. 31, 2011. The transactions will have effective dates of May 15, 2012 and June 1, 2012, are scheduled to close prior to the end of June 2012, and will be subject to standard industry closing conditions. The proceeds from the transactions will be applied to reduce indebtedness under Zargon's outstanding credit facilities. Zargon anticipates net debt to be approximately $95 million following the closing of the two transactions. The net debt includes Zargon's recently issued $57.5 million five year convertible debentures (ZAR.DB) and approximately $37.5 million of bank debt and working capital deficiencies. Zargon's syndicated borrowing base is currently set at $180 million, and the effect of the proposed dispositions will be integrated into the annual borrowing base review process which is scheduled to be concluded by June 30.Upon the closing of these dispositions, Zargon will provide updated guidance regarding its capital programs and production guidance. Based in Calgary, Alberta, Zargon's securities trade on the Toronto Stock Exchange and there are currently 29.514 million common shares outstanding. FORWARD-LOOKING STATEMENTSThis press release offers our assessment of Zargon's future plans and operations as at June 4, 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;the sale of assets and the resulting debt levels;banking syndicate borrowing base expectations.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 INFORMATIONZargon 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.FOR FURTHER INFORMATION PLEASE CONTACT: C.H. HansenZargon Oil & Gas Ltd.President and Chief Executive Officer403-264-9992 or Toll Free: 1-855-464-9992ORVice President, Finance and Chief Financial OfficerJ.B. Dranchuk403-264-9992 or Toll Free: 1-855-464-9992zargon@zargon.cawww.zargon.ca