Oil Exploitation
Zargon's core business is the exploitation (increasing recovery factors) of existing oil reservoirs through enhanced recovery methods, development drilling or production optimizations. We focus on smaller and technically complex, but very profitable oil exploitation projects that tend to be overlooked by our larger competitors. In particular, we are excited about the Little Bow Alkaline Surfactant Polymer ("ASP") tertiary recovery project. Click here to view our ASP presentation.
Oil Production Weighting
Since Q4 2007, Zargon has been focused on oil weighted acquisitions and exploitation projects and has successfully increased its oil production weighting from 42 percent to 59 percent as reported in Q3 2011 (6:1 equivalency). This trend is expected to continue in 2011 and 2012.
Zargon's 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.
• By retaining at least 50% of our cash flow for capital programs, we can efficiently develop long term oil exploitation projects at the Little Bow, Hamilton Lake, Killam, Taber and Williston Basin properties that have been partially de-risked and clearly justify significant additional capital.
• Consistent with this dividend policy, Zargon reduced the October 2011 monthly dividend to $0.10 per common share. At this new level and at current prices we have the resources to maintain our dividend and fund our ongoing oil exploitation programs including the ASP project if sanctioned.
ZARGON Q3 2011 RESULTS
| Oil Production | 5,330 barrels per day |
| Gas Production | 22.1 million cubic feet per day |
| Total Production (6:1) |
9,014 barrels of oil equivalent per day |
| Net Debt | $94.5 million (September 30, 2011) |
Zargon has engaged the services of Sayer Energy Advisors to assist in the divestiture of its high working interests in a total of 31.75 sections (20,320 gross acres, 19,917 net acres) of land. To view a copy of the disposition package, please click here.
On November 9, 2011, Zargon updated their Investor Presentation. To view a copy of the presentation, please click here.
(PDF 31 KB)
KEY TAKEAWAYS
(November 8, 2011 Share Price of $14.79)
Zargon has considerably improved its business by focusing on its core oil exploitation strengths.
• Zargon’s reorganization has taken longer than anticipated and most recently was set back by Williston Basin surface access challenges.
• The organizational heavy lifting is however, now essentially complete.
Hamilton Lake, Killam, Taber, Williston Basin and other Zargon oil exploitation assets provide good visibility of profitable oil exploitation projects.
• These projects are economic to pursue at much lower oil prices.
The Little Bow ASP project could be very significant to Zargon.
• Success at Little Bow could lead to significant follow-on projects at Little Bow and other Zargon properties.
Zargon shares represent good value.
• Investors pay only for proved and probable producing reserves and receive a rich opportunity set that includes 165 net oil exploitation locations plus the high impact Little Bow Alkaline Surfactant Polymer tertiary flood project.
Zargon provides a long dated call option on future oil prices and pays a 8% dividend in the interim.
• Downside is now protected by a strong balance sheet and in-the-money forward oil hedges.
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