Zargon Oil & Gas Ltd. October 2014 Corporate Presentation WWW.ZARGON.CA
Zargon: Core Attributes Pressure Supported (Waterflood and Water Drive): 60+ prospective oil exploitation locations Oil Exploitation in pressure supported (low decline) properties. Tertiary (ASP): Little Bow ASP tertiary…
Zargon: Asset Description Waterflood and Waterdrive (Pressure Supported) Oil Waterflood and Properties: Waterdrive Oil Properties provide 93% of total oil production (3,827 bbl/d in Q2 2014); very predictable with very low…
Forecast Oil Production Trends (Indicative) 6,000 5,000 Oil Production (bbl/day) ASP Phase 12 increment 4,000 Variable Conv. Cap. 3,000 2,000 Base Production declines at 15% per year 1,000 History Estimate 0 Q1 Q2…
Zargon Overview (As at October 7, 2014 unless otherwise stated) Capitalization Toronto Stock Exchange: Symbols: ZAR; ZAR.DB Common Shares Outstanding: 30.18 million (basic) Market Capitalization: 201 million (6.66 per share) (1)…
2014 Corporate Objectives ASP Related: Commission the Little Bow ASP project on budget, with first chemical injections occurring by the end of the 2014 first quarter. (completed) Deliver Little Bow Phase 1 ASP operational and…
Oil Exploitation Properties (Waterflood and Waterdrive Properties) 8
Waterflood and Waterdrive Oil Exploitation Projects Current Drilling Inventory Net Property Project Locations Comments Hamilton Lake Multifrac horizontals 20+ Will require waterflood reimplementation, large upside Bellshill Lake…
Long-Life, Low-Decline Oil Production Base Average Annual Decline Rate (%) Zargon Corporate Decline Analysis Total Oil Production Rate 0 10 20 30 40 50 6,000 Gross W.I. Oil Production Rate ( bbl/day ) 5,000 Zargon 4,000…
Canadian Alkaline Surfactant Polymer (ASP) Projects Alberta Sask. 10 Canadian ASP Projects in Grande Prairie Mooney (Black Pearl) operation 2011 3 additional projects have regulatory approval Edmonton Major operators:…
Little Bow ASP Enhanced Oil Recovery (EOR) With Proven Technology EOR in a mature, southern Alberta Waterflood Little Bow ASP: Phase 1&2 Development Phased Development Alberta 15-18W4 Phases 1 & 2 Project Capital: 62 Million…
Little Bow ASP Project Milestones RECENT HIGHLIGHTS ASP facility, oil battery and field construction complete and online in March 2014 (50 million capital construction and startup cost). Through September 2014, have injected…
ASP Enhanced Oil Recovery Process Process: Dilute concentrations of chemicals (Alkali, Surfactant and Polymer) in water are injected into an existing oil pool to scrub out oil that waterflooding alone could not recover. Objective…
ASP Chemical Flooding Injection Sequence 1 ASP Injection 2 Polymer Push 3 Terminal Waterflood A Blend of Alkali, Polymer displaces Completes the Surfactant & Polymer mobilized oil to Displacement mobilizes trapped oil producing…
Little Bow ASP Analog ASP Project: Husky Taber Mannville B Taber Mannville B ASP Project Little Bow Mannville I Most mature Canadian ASP Project; Husky Operated and P Pools (Zargon) Same geological setting, oil quality, reservoir…
Little Bow ASP Development Optimization Study (Phases 1 & 2) ASP Oil Recovery (mbbl) Reservoir simulation model ASP Oil Recovery Zargon 2013 Optimized: 6,500 1,276 cases run Zargon 2013 Economics: 5,200 used to optimize ASP…
Little Bow ASP Phase 1-4 Development Plan (Incorporates Q2 2014 Acquisition of Phase 3 & 4 Interests) 1519W4 1518W4 W.I. ZAR DOIIP* W.I. (%) (mmbbl) Phases 1 & 2 LB I Pool 100 31 ASP Phase 1&2 LB P Pool 100 8 Phases 3 & 4…
Alberta Modified EOR Crown Royalty Program PROGRAM HIGHLIGHTS AND IMPACT ON ZARGON Announced July 2014 Alberta conventional oil EOR royalties in line with Alberta oil sands and Saskatchewan conventional oil EOR programs. 5…
Little Bow ASP Phase 1 Positive Response Indicators First Well with ASP Response Phase 1 Region 1 02/10-32-014-18W4/0 Oil Oil Cut Fluid Other nonproduction 30 1,200 indicators have been 25 1,000 observed: OIl (bpd) & Oil Cut…
Little Bow Phase 1 ASP Actual and Forecast Data Little Bow ASP: Phase 1 Oil Production 1000 900 800 700 Zargon Forecast 2015 Avg. = 700 bpd McDaniel TP+P 600 2015 Avg. = 248 bpd Ultimate: 5.2 mmbbl BOPD Ultimate: 4.5…
Little Bow ASP Phases 1 & 2 Project Economics (Zargon est.) With new EOR royalties, July 2014 eff. date and McDaniel prices Phases 1 & 2 Economics Little Bow ASP: Phases 1&2 Production Go Forward Full Cycle Base W.F. Phase 1 Phase 2…
Little Bow ASP Phases 3 & 4 Project Economics (Zargon est.) With new EOR royalties, July 2014 eff. date and McDaniel prices ASP Development Forecast - Phases 1-4 Phases 1 4 Go Forward Economics Base W.F. Phase 1 Phase 2 Phase 3…
2014 Property Disposition Program Objective: Conclude property dispositions that highgrade and concentrate the Companys properties on our core oil exploitation business: Completed property sales: 1.5 million of Q1 proceeds for…
2014 Updated and 2015 Capital Programs 2014 2015 ASP Phase 1 Construction Capital 8 million nil ASP Phase 1 Exploitation Capital 2 million 2 million ASP Phase 2 Development Capital nil 6 million ASP Phase 1 Chemical Costs 11…
Net Asset Value Breakdown by Property: McDaniel Proved and Probable 2013 Yr. End Reserves Waterflood Waterdrive Q2/14 Oil Q2/14 Gas Prod. McD. Oil Res. McD. Gas H1/14 CF PV10 Asset Value Properties Prod. (bbl/d) (mmcf/d) (mmbbl)…
Key Takeaways at Current Share Price (October 7, 2014) Zargon is committed to the current 0.06 per share monthly dividend (10.8 percent yield) During the 2013 ASP heavy spend period, Zargon bridged the spending gap between cash…
Appendices WWW.ZARGON.CA
Williston Basin Waterflood and Waterdrive Property Summary Historical Current Assets 2008 2009 2010 2011 2012 2013 2014 2900 2800 2700 The Williston Basin properties have been 2600 developed with horizontal producers and 2500 2400…
Williston Basin Activity Summary and Orientation Map Ongoing Activities Exploit long life low decline pools with Saskatchewan Manitoba horizontal wells and waterflood enhancements. 2014 Activities Drill 8 exploitation horizontal…
Taber South Waterflood Property Summary Taber S Production Contribution by Drilling Program Date (29 hz wells) 1,000 Pre 2008 2008 2009 2010 Q1 2011 Q3 2011 Q4 2012 Q4 2013 Q2 2014 The Taber South waterflood property has 900 been…
Taber South Future Sunburst Hz Oil Development 2014 Activities Drilled 2 hz Sunburst wells in Q2 Plan to drill 2 hz Sunburst wells in Q4 (1 MM/well) Injector conversion in south pool (04/61 hz) in Q4 (300 M) Oil tank…
Little Bow Waterflood Property Summary Existing assets prior to ASP increment Little Bow Core Area Production 800 700 600 Oil Rate (bbl/d) 500 Zargon Operated Oilwells 400 No Drilling Activity Well…
Bellshill Lake (Waterdrive) & Killam Glauconite (Waterflood) Property Summary The Bellshill Lake waterdrive property has been developed with vertical producers and high volume lift. The Killam Glauconite property is a less mature…
Bellshill Lake Waterdrive Property 2014 Drilling Program: Four vertical wells and a dual leg horizontal well Potential for pool enlargement based on new H2H Pool drilling and seismic 2 wells approved for Q2/2015 Further…
Hamilton Lake Viking Oil Unit Waterflood Project Netback Elements Rate OPEX Netback Netback CAPEX Net Proceeds (bbl/d) (/boe) (/boe) (M) (M) (M) 2008 73 12.54 36.60 7,185 104 7,081 2009 56 15.54 11.03 1,697 177 1,520 2010 64…
Net Asset Value Calculations at 2013 Year End NAV Calculation (Dec 31, 2013) Proved + Prob. McDaniel Est. (PVBT 10%) 469 million Undeveloped Land 17 million Deduct Est. Net Working Capital & Bank/Debenture Debt 116 million Net…
Hedging Strategy and Current Hedges Zargon uses hedges to help fund dividends and capital programs during periods of lower commodity prices. Our oil hedging policies allow for the forward sale of: up to a 70 percent maximum of…
Estimated (unaudited) Tax Pools (June 30, 2014) Category June 30, 2014 Canadian Exploration Expense 55 million Non Capital Losses 113 million Canadian Development Expense 51 million Canadian Oil & Gas Property Expense 2 million…
Production Guidance Scorecard (October 7, 2014 Update) Oil and Liquids Guidance: Q3 2013 4,650 barrels per day (4,816 bbl/d reported) (+) Q4 2013 4,550 barrels per day (4,625 bbl/d reported) (+) Q1 2014 4,300 barrels per day (4,320…
Zargon Oil & Gas Ltd. October 2014 Corporate Presentation WWW.ZARGON.CA
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