Exploration & Production

Zargon 'Encouraged' by Early Little Bow ASP Results

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Zargon Oil & Gas Ltd. has reported an update on its Little Bow Alkaline Surfactant Polymer (ASP) Project

Zargon continues to be encouraged by the early injection data for the Little Bow ASP enhanced oil recovery project. Commencing in March 2014, Zargon initiated the injection of large volumes of a dilute chemical solution into a partially depleted Little Bow Mannville I Pool in order to recover substantial incremental oil reserves. To date, ASP injections have totaled approximately 2 million barrels, and represent just less than 10 percent of the total chemical bank (ASP and Polymer only) to be injected.

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Encouragingly, pattern injection rates are balanced and are meeting or exceeding reservoir models. We have also observed numerous indicators that are precursors to ASP production, namely: increased produced gas-oil ratios, reduced producer total inflow volumes, changes in the produced water chemistry, minor produced polymer concentrations and increasing injection pressures. Finally, at one producer (02/10-32-14-18 W4), we have observed 12 barrels per day of first incremental ASP production volumes as evidenced by tripling of oil production volumes with a corresponding increase in produced oil cuts. Although we view these production indicators very positively, phase 1 incremental ASP production volumes are small. Currently, phase 1 production capability is averaging approximately 260 barrels per day, which is marginally ahead of the 250 barrels per day baseline rate for the pre-ASP waterflood project. Over the next few months, a material ramp up in production is anticipated and we will provide timely updates to outline material progress.

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Consistent with our prior communications, Zargon’s internal estimates continue to forecast incremental phase 1 production volumes to commence in the 2014 fourth quarter and increase to a 2014 year end rate of 150 barrels of oil per day. Incremental ASP production is expected to average 700 barrels of oil per day in 2015 and then increase to 1,550 barrels of oil per day in 2016, once phase 2 production begins.

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