Major Properties

Going forward, Zargon has a substantial inventory of Alberta Plains opportunities that provide a base level of field activity that can be accelerated when improved commodity prices warrant. These opportunities include oil exploitation, natural gas exploration and natural gas development in the following key properties:

Jarrow

The Jarrow property continues to be the Trust’s most significant producing natural gas property. At this property, Zargon produced 14.63 million cubic feet of natural gas per day and 68 barrels of oil and liquids per day in 2008, primarily from the Mannville and Viking formations. This property is characterized by high working interests, ownership and operatorship of significant pipeline and gas processing facilities and a large inventory of prospects on a 129 thousand net acre undeveloped land inventory. At December 31, 2008, the Jarrow undeveloped land inventory increased 19 percent over the prior year. This increase is primarily attributable to Crown acquisitions during a year of reduced industry competition for land.

During 2008, Zargon drilled 12.8 net (14 gross) wells at Jarrow, resulting in 9.8 net natural gas wells, 2.0 net oil wells and 1.0 net dry hole. The Trust also shot 181 kilometres of two-dimensional ("2D") seismic as part of its ongoing exploration and development programs.

In 2009, similar to the 2008 program, Zargon will focus mainly on seismically based Mannville exploration in Jarrow, with the drilling of eight net wells that are mostly located in the western and southern portions of the property.

Bellshill Lake

The Bellshill Lake oil property is located immediately south of Jarrow and was acquired as part of the acquisition of Rival Energy Ltd., which closed on January 23, 2008. This property provides significant oil development drilling, exploitation drilling and production optimization opportunities from existing wells. In 2008, the Bellshill property produced approximately 543 barrels per day of 27 degree API oil and 0.20 million cubic feet of natural gas per day to the Zargon acquired interest.

During 2008, Zargon drilled 10.0 net (10 gross) wells at the Bellshill Lake property on step-out or infill exploitation projects, resulting in nine net oil wells and one net dry hole. These wells, which were mostly drilled in the 2008 fourth quarter, will provide incremental production volumes in 2009.

For 2009, Zargon is budgeting a two net well drilling program along with multiple optimization and workover activities scheduled for existing wells. The property has significant infill potential and additional exploitation wells can be initiated if higher oil prices are realized during the year.

Taber

The Taber oil property (20 degree API) is a large oil-in-place property that brings significant future exploitation potential in terms of horizontal development wells and waterflood modifications and implementations. In 2008, this property produced 553 barrels of oil and liquids per day and 0.50 million cubic feet of natural gas per day, a 10 percent gain from the prior year’s rates. In 2008, Zargon drilled one net horizontal oil well and is planning on drilling an additional one net horizontal well in 2009.

Hamilton Lake

The Hamilton Lake property produced 2.97 million cubic feet of natural gas per day and 75 barrels of oil and liquids per day in 2008 (a seven percent decline from 2007 levels) from the Mannville and Viking formations. The property’s key asset is a 48 thousand net acre unit that has significant development potential in the lower permeability but extensive first Viking sand formation.

In 2008, Zargon did not undertake any drilling at Hamilton Lake as the available development projects did not provide an acceptable rate of return at the current commodity prices. At this time, Zargon is not planning any 2009 development drilling at Hamilton Lake until higher natural gas prices and/or reduced costs permit improved economic returns.

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