Peters & Company Limited 2012 North American Oil & Gas Conference Toronto, Ontario September 12, 2012 WWW.ZARGON.CA
Highlights (As at September 7, 2012 unless otherwise stated) Listed on Toronto Stock Exchange: Symbols: ZAR; ZAR.DB Common Shares Outstanding: 29.69 million (basic) Market Capitalization: 265 million Annualized Q4 2012 Dividend:…
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…
Oil Exploitation Properties (6 Conventional & 1 Tertiary ASP Project) Williston Basin Two Project Types Drainage Structural Frys Weyburn Ralph Steelman Elswick Mackobee Coulee Haas Truro
Six Conventional Oil Exploitation Projects Many Years of Drilling Inventory Net Alberta Plains Project Locations Comments Hamilton Lake Multi-frac horizontals 30+ Will require waterflood re-implementation, large upside Bellshill Lake…
Zargon Conventional Oil Exploitation Projects Evaluations Based on Actual Zargon Field Results Production [1] Potl/ Oil 30 Day 6 Month Addition Booked CAPEX PV10% Reserves Oil Rate Oil Rate P.I.R. F&D [4] Efficiency Project Name…
Taber South Sunburst Hz Oil Development History Production Contribution by Drilling Program Date 1,000 Pre 2008 2008 2009 2010 Q1 2011 Q3 2011 2 wells converted to water injection Oil Rate ( bbl/d ) 100 1 well converted…
Taber South Historical Results under Three Pricing Scenarios Analysis Using Base Pricing Taber Project - TypeCurve Evaluation CAPEX (M) 1,100 2,500 PV10 (M) 1,452 Reserves - Oil (Mbbl) 71.2 2,000 30 day rate (bbl/d) 62 Before Tax…
Steelman (Frobisher Structure) Production Growth from Drilling Programs Gross Area Production Additions Production Contribution by Drilling Program Date 1,000 Pre 2008 2008 2009 2010 2011 Oil Rate ( bbl/d ) 100 Upcoming…
Frobisher Program Historic Well Performance & Type Curve Williston Basin - 2010 and 2011 Frobisher Drilling Results 13 Horizontal Wells ( Time Normalized ) 1,000 Field Estimated Daily Oil Production ( bbl/day ) 100 10…
Frobisher Program Historical Results under Three Pricing Scenarios Analysis Using Base Pricing Williston Basin Frobisher - TypeCurve Evaluation CAPEX (M) 1,240 3,500 PV10 (M) 2,266 Reserves Oil (Mbbl) 72.0 3,000 30 day rate…
Alberta Plains North Viking Oil Drilling Activity (2007 to 2012) Zargon has drilled 5 Viking oil wells to date at Hamilton Lake In the Hamilton Lake area, nearly Jarrow 300 Viking oil resource type wells have been drilled since…
Hamilton Lake Viking Unit Viking Oil Exploitation Project 5,000 100% 90% 4,000 80% Oil Production Rate ( bbl/day ) 70% 3,000 60% Oil Cut ( % ) 50% 2,000 40% B San 30% dO 1,000 20% utl ine 10% 0 0% 0 5,000…
Hamilton Lake Viking - Productivity Implications Horizontal Well Orientation, Fracture Optimization N Production history shows that water injection has trended NE to SW between injectors, leading to early Water channels between water…
Canadian ASP Projects Grande Prairie In Progress Mooney (Black Pearl Resources) Scheme Approved Edmonton Coleville (Penn West) Suffield (Cenovus) Strathmore (Terrex) Calgary Battrum (Hyak Energy) Little Bow (Zargon)…
ASP Chemical Flooding Recovers Bypassed Oil ASP floods utilize: Rock Rock Surfactants (detergent) to mobilize oil that waterflooding alone leaves Water Trapped Oil Alkali & Surfactant Mobilized Oil trapped in the reservoir…
ASP Chemical Flooding Injection Schedule Injection Sequence 1) ASP: A blend of Alkali, Surfactant and Polymer mobilizes trapped oil 2) Polymer Push: Polymer solution displaces mobilized oil to producing wells 3) Terminal…
Little Bow Analog: Taber Mannville B (Husky) Little Bow Upper Mannville I and P Pool (Zargon) Taber Taber Mannville B Lethbridge Pool (Husky) 6 miles
Reservoir Comparison: Taber and Little Bow Husky Zargon ASP Screening Taber Little Bow Criteria Lithology Sandstone Sandstone Sandstone API Oil Gravity 19 21 15 Mean Depth (ft) 3,226 3,555 < 6000 Average Permeability (mD) 1,000…
Taber Mannville B Analog - ASP Flood Reserves ASP Polymer Terminal 100% Waterflood Oil Cut (%) Oil Cut 10% ASP Flood Decline Base Waterflood 12% incremental recovery Decline 1% 20% 25% 30% 35% 40% 45% 50% 55%…
Little Bow Mannville I and P Pools: Phases 1 & 2 Little Bow ASP Production Forecast Phase 1 and 2 2000 1800 Little Bow P Pool 1600 1400 1200 BOP D Little Bow I Pool 1000 800 600 400 U&W Unit 200 0 2011 2013 2015…
Little Bow ASP - Capital and Net Cash Flow 2014-2020 Average Netback (C/bbl) Field Price 72.00 Royalty 12% -8.64 Operating Cost -12.00 Net Back 51.36 Pricing 2013 Edmonton Light: 86/bbl increasing with inflation 2013 Field…
Little Bow ASP Follow-up Development Little Bow ASP Production Forecast Little Bow ASP Phases 1-4 Phases 1 - 4 (net Zargon) 2500 Alberta Zargon Land Zargon Wells 2000 Little Bow Phase 3 Phase 4 Phase 1&2 1500 Phase 3&4…
Little Bow ASP Upside Potential Little Bow ASP Undiscounted Cash Flow (Net Zargon WI - Before Tax) 450 400 Little Bow ASP Upside Phases 3&4 Development 350 +15% Reserves 300 +10% Field Price Millions of Dollars 250 EOR…
Little Bow ASP Project Fact Sheet (Phases 1 & 2) Capital Outlays: 2012 Phase 1 15 million (engineering design, long lead and key equipment procurement, pipelines and workovers) 2013 Phase 1 25 million (facility construction, oil…
Little Bow ASP Project: Q&A Why ASP for Little Bow ASP is an exciting, commercially proven technology, for a small subset of Alberta oil reservoirs (high permeability, good reservoir conformance, minimal gas caps or water legs, water…
2012 Production Guidance (August 2012 Update) Oil and liquids: - Q3 2011 5,200 barrels per day (achieved with 5,330 bbl/d) - Q4 2011 5,400 barrels per day (achieved with 5,619 bbl/d) - Q1 2012 5,400 barrels per day (achieved with…
Net Asset Value Calculation (2011 Year End) Zargon Year-End NAV NAV Calculation (Dec 31, 2011) Proved + Prob. McDaniel Est. (PVBT 10%) 559 million Undeveloped Land 33 million Deduct Net Working Capital & Bank Debt - 109 million Net…
Creative Funding in a Challenging Commodity Price Environment September 12, 2012 WWW.ZARGON.CA
Zargon First Half 2012 Challenges Promising Long Term Projects Require Significant Funding Zargon has six high-graded conventional and one Little Bow ASP oil exploitation project that will require approximately 250 million of capital…
Zargon First Half 2012 Responses Cost and Efficiencies Office staff was reduced by 20% in Q1. High cost natural gas properties were shut-in and fixed costs were reduced through facility consolidations. Capital programs have been…
Oil Production and Dividend Sustainability Calculations Oil Production Sustainability (before ASP growth): Oil production (per share) is forecast to be maintained through 2015 from our existing non-ASP project inventory, based on the…
Current ASP Project Funding Status Bank Lines Bank lines set at 165 million in June 2012 review. Zargon has over 125 million of borrowing capacity. Little Bow ASP Project is Moving Forward 15 million of capital is to be spent in…
Other ASP Funding Alternatives Available Joint Venture Partner A Little Bow ASP project joint venture partner might be considered if an attractive arrangement could be negotiated. Taking a partner now, would truncate the Phase 3 and…
Hedging Strategy Current Hedges Zargon uses hedges to help fund dividends and capital programs during periods of lower commodity prices. Our policies allow for the forward sale of: up to a 50 percent maximum of estimated production…
Key Takeaways at Current Share Price (September 7, 2012) Zargon oil exploitation business provides considerable potential. Zargon has simplified its business to focus on the exploitation of seven profitable oil projects. Hamilton…
Peters & Company Limited 2012 North American Oil & Gas Conference Toronto, Ontario September 12, 2012 WWW.ZARGON.CA
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