Peters Toronto Oil & Gas Conference September 13, 2011 Presentation www.zargon.ca
Operational & Financial Highlights (Quarter ended June 30, 2011) Q2 2011 Production - 8,686 boe/d Oil 5,034 bbl/d (58% of production) Gas 21.91 mmcf/d Oil reduced by 760 bbl/d of shut-ins (surface lease flooding) Undeveloped land -…
Corporate Strategy Oil Exploitation: Increase oil reservoir recovery factors by horizontal drainage wells, production optimizations, waterfloods and now, tertiary methods. Focused on smaller and technically complex, but very…
Business Plan Oil Exploitation (increasing reservoir oil recovery factors) Increase oil production, reserves and ultimate recoveries from existing oil pools through waterfloods, development drilling and other production optimization…
Successful Oil Acquisition & Disposition Strategy In 2008-2010, we completed five corporate acquisitions and one significant property acquisition that brought oil exploitation opportunities: Rival Energy Ltd. (public TSX) 47.8 million…
Oil Exploitation Properties
Oil Exploitation Project Inventory Williston Basin Potential Net Locations Waterflood Steelman, SK Frobisher Horizontals 4 Primary Steelman, SK Midale Horizontals 2 Modify Steelman West, SK Midale Verticals or Horizontals 4…
Comparison of Steelman Area Type Curve Zargon 2010 and Q1/2011 Drilling Results 100.0 Cumulative Oil Produced ( Mbbl ) 10.0 1.0 0.1 10 100 1,000 10,000 Cumulative Producing Time ( days ) Chart showing Zargon 2010…
Steelman Type Curve Statistics Williston Basin - 2010 and Q1/2011 Drilling Steelman Type Curve Analysis (based on Steelman Field Statistics): 04/11 Review 09/11 Update First month rate 98 bbl/d 91 bbl/d 12th month rate 31 bbl/d 31…
Oil Exploitation Project Inventory (Alberta Plains South and North) Potential Alberta Plains South Net Locations Waterflood Taber South, AB Sunburst and Glauconite Horizontals 10 Implement (two projects) Taber South East, AB…
Hamilton Lake Horizontal Multi-Frac Opportunity Alberta Plains North 16-16-36-11W4 Production Period Oil Rate Oil Cut Apr-May 15 bbl/d 5.1% June 46 bbl/d 7.0% July 48 bbl/d 9.5% Viki ng B S an d Tr end Vik in gC San d…
Hamilton Lake Oil Sand Unit Unit Production History 5,000 100% 90% Viking A 4,000 80% Oil Production Rate ( bbl/day ) 70% Viking B 3,000 60% Oil Cut ( % ) Viking C 50% 2,000 40% 30% 1,000 20% Unit Statistics…
Hamilton Lake Viking B Unit Multi-frac Horizontal Well Depletion Concept N Water Injector Abandoned Oil well Watered out area New Horizontal wells Reservoir modeling shows that the combination of strong northeast fracture…
Killam Glauconite Oil Development Alberta Plains North 28 Degree API sweet crude Significant waterflood upside 5+ metre Glauc zone Zargon 100% Working Interest Second Month Well Results Sections Well Rate Oil Cut 13-15 50 bbl/d…
Killam Glauconite Production Type Curve Alberta Plains North Killam Glauconite Pool 100.0 Primary Production Type Curve Cumulative Oil Prodcued ( Mbbl ) 10.0 1.0 0.1 10 100 1,000 10,000 Cumulative Producing Time (…
Killam Glauconite Type Curve Statistics Alberta Plains North Killam Type Curve Analysis (Based on Pool Production Statistics): First month rate 67 bbl/d 12th month rate 35 bbl/d First year average rate 52 bbl/d Production addition…
Taber Type Curve Statistics Alberta Plains South 1000 100 Cumulative Oil Produced ( Mbbl ) 10 1 0.1 0.01 1 10 100 1,000 10,000 Producing Time ( Days ) Chart showing Zargon drilling activity with the…
Taber Type Curve Statistics Alberta Plains South Taber Type Curve Analysis (Based on Zargon Production Statistics): Initial Updated ** First month rate 67 bbl/d 78 bbl/d 12th month rate 45 bbl/d 52 bbl/d First year average rate 56…
Little Bow Alkaline Surfactant Polymer (ASP) Project Phases 1 and 2 10,000 100% Alberta Oil Production Rate ( bbl/day ) ASP Phase 2 P Pool Little Bow I Pool Oil Cut ( % ) ASP Phase 1 Waterflood Little Bow 1,000 10% ASP…
ASP Chemical Flood Recovers Bypassed Oil Alkali Alters properties of reservoir rock to increase surfactant efficiency Reacts with oil to form natural surfactants Surfactant Reduces interfacial tension between oil and water,…
ASP Analog: Taber South Mannville B Pool Taber Mannville 'B' Pool 100,000 1,000% Oil Prod'n & Water Inj'n ( bbl/day ) Injection 10,000 100% Oil Cut ( % ) Oil Rate 1,000 10% Oil Cut 100 1% 0% 5% 10% 15% 20% 25%…
Zargon ASP Followup Targets 15-019W4 15-018W4 W.I. ZAR OOIP* W.I. (%) (mmbbl) Phase 1 & 2 Little Bow I Pool 100 31 Little Bow P Pool 100 8 Followup ASP Phase 1 & 2 U&W Unit 68 19 14-019W4 14-018W4 MM Unit 100 5 C8C / X8X 81…
Little Bow ASP: Capital and Chemical Cost Capital And Chemical Costs 12 120 Chemical Capital Cumulative Costs 10 100 Cumulative ( Millions) Millions per Quarter 8 80 6 60 4 40 2 20 0 0 2011 2012 2013 2014…
Zargon ASP Future Phases ASP Development Forecast Base Phase 1 Phase 2 Phase 3 Phase 4 2500 2000 1500 BOPD 1000 500 0 2011 2013 2015 2017 2019 2021 2023 2025 2027 2029
Reserve Highlights (2010 year end) McDaniel Proved and Probable Estimate (84% is developed producing) Oil 21.3 mmbbl Gas 66.5 bcf Equivalent 32.4 mmboe Reserve Life Indices Proved producing 6.0 years Proved and probable (2P)…
Zargons Dividend Policy Zargon is committed to deliver a steady, but supportable dividend. Dividend payout levels are ultimately targeted to be 35% of cash flow and should not exceed 50% of cash flow. Zargons initial monthly dividend…
Zargons Cash Flow and Dividend Model Base Assumptions: - Based on forward strip commodity prices, currency rates, commodity price differentials and current hedges. - Assumes increasing cost trends can be arrested and no change in…
Key Valuation Parameters (September 9, 2011) Enterprise Value (EV) as of September 9, 2011 533 million 29.17 million shares (ZOG) at 15.37 per share or 448 million Approximate net debt of 85 million at September 9, 2011 EV of…
Net Asset Value Calculation (2010 Year End) Proved and Probable Reserves (Jan. 1, 2011 reserves and price forecast): McDaniel proved + prob. est. (pvbt 10%) 571 million Undeveloped land 44 million Net working capital & bank debt (125…
Key Takeaways at Current Share Price (September 9, 2011) Zargon has considerably improved its business by focusing on its core oil exploitation strengths. Zargons reorganization has taken longer than anticipated and most recently was…
Appendices www.zargon.ca
Elswick / Weyburn Midale Drainage Locations Williston Basin Elswick Zargons Elswick and Weyburn lands provide more than 25 Midale drainage locations defined by 3D seismic, and in many cases, pressure supported by offsetting…
Ralph and Weyburn North Waterflood Properties Williston Basin Ralph Weyburn The Ralph and Weyburn North waterflood projects provide a long term opportunity to enhance waterflood performance and drill Midale drainage wells.…
Daly Manitoba Horizontal Multi-Frac Waterflood Development Project E E E J E J J J E E S E S E S E E M S E S E Daly Type Log E J E E J JM E S E EE S EV S EM S E V E J E J J J E J J E E S E S J J E E J J J J E E E J J E E J…
Bellshill Lake Project Area Alberta Plains North 1,000 Oil Rate ( bbl/day ) 800 600 400 200 0 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Zargon operated: 54 oil wells (14 wells…
Little Bow ASP: Project Schedule 2011 2012 2013 J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D Lab Work Simulation Facilities Scoping FEED Study Detailed Engineering Procurement Construction Well…
ASP ROR Phases 1 and 2 Little Bow ASP Phases I & 2 ROR vs. Price and Reserves 30 4.5 mmbbl 4.0 mmbbl 3.5 mmbbl 25 20 ROR (%) 15 10 5 0 70 75 80 85 90 95 100 105 110 Edmonton Light (C/bbl)
2011 Forward Guidance (September 12 Update) Oil and liquids: - Q3 2011 5,200 barrels per day. - Q4 2011 5,400 barrels per day. - Exit 2011 5,600 barrels per day. - Reflects July property dispositions of 260 barrels per day. Natural…
History of Returns Over our 18-year history we have raised only 201 million and have invested 793 million of capital. With this equity investment, we have built a focused oil exploitation business that has distributed more than 276…
Stability History (from a 6:1 boe perspective) H1 2011 2010 2009 2008 2007 2006 2005 2004 2P reserves (boe/share) n/a 1.20 1.24 1.40 1.36 1.41 1.41 1.39 Avg. Production (boe/d per million 323 373 412 446 436 437 445 447 shares)…
Stability History (from an oil perspective) H1 2011 2010 2009 2008 2007 2006 2005 2004 2P oil reserves (bbl/share) n/a 0.79 0.77 0.84 0.79 0.82 0.81 0.77 Avg. oil production 193 213 211 207 187 198 197 184 (bbl/d per million shares)…
Distributions and Tax Pool History 400 350 300 250 200 150 100 50 0 2004 2005 2006 2007 2008 2009 2010 Tax Pools (million) 79 90 113 148 188 293 346 Distributions (million) 11 37 36 37 39 46 47 Zargon built a significant…
Prepared if Lower Oil Prices Materialize Recent activities to strengthen balance sheet In Q2 2011 raised 37 million from equity issuance. In 2011 raised a net 23 million from the sale of oil properties and land. Conservative banking…
Hedging Strategy Zargon uses hedges as a risk management tool to assist in the funding of dividends and capital programs in the event of significant commodity price declines. Our policies allow for the sale of: up to a 50 percent…
Peters Toronto Oil & Gas Conference September 13, 2011 Presentation www.zargon.ca
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