Net Asset Value
Zargon's oil, liquids and natural gas reserves were evaluated using the McDaniel product price forecasts
effective January 1, 2011, prior to provisions for income taxes, interest, debt service charges, transaction costs
and general and administrative expenses.
The estimated future net revenue contained in the following table does not necessarily represent the fair market
value of the reserves. There is no assurance that the forecast price and cost assumptions contained in the
McDaniel reserves evaluation will be attained and variations could be material. The recovery and reserve
estimates described herein are estimates only. Actual reserves may be greater or less than those calculated.
Before Tax Present Value of Future Net Revenue (Forecast Price Case)
|
Discount Rate |
| ($ millions) |
0% |
5% |
10% |
15% |
| Proved producing |
629.3 |
480.4 |
391.0 |
332.6 |
| Proved non-producing |
26.0 |
21.3 |
17.8 |
15.2 |
| Proved undeveloped |
23.7 |
18.4 |
14.5 |
11.6 |
| Probable additional producing |
277.5 |
152.9 |
100.0 |
72.6 |
| Probable additional non-producing and undeveloped |
83.1 |
61.2 |
47.4 |
38.1 |
Net Asset Value
| As at December 31 ($ millions) |
2010 |
2009 |
2008 |
| Proved and probable reserves (PVBT 10%)(1)(2) |
570.7 |
592.4 |
567.0 |
| Undeveloped land |
44.5 |
58.8 |
70.4 |
| Working capital (excluding unrealized risk management assets/liabilities and future income taxes) |
(9.1) |
(11.4) |
(10.1) |
| Bank debt |
(115.3) |
(76.6) |
(77.6) |
| Proceeds from the exercise of all share rights |
31.7 |
41.0 |
42.3 |
| Net asset value (including share rights dilution) |
522.5 |
604.2 |
592.0 |
| Net asset value per share |
| Total ($/share) |
18.15 |
21.65 |
25.99 |
| With full dilution ($/share)(3) |
18.34 |
21.77 |
25.96 |
|
The preceding table shows what is customarily referred to as a "produce-out" net asset value calculation under which the current
value of Zargon's reserves would be produced at the McDaniel forecast future prices and costs. The value is a snapshot in time as of
December 31, 2010, and is based on various assumptions including commodity prices and foreign exchange rates that vary over
time. In this analysis, the present value of the proved and probable reserves is calculated at a before tax 10 percent discount rate. In
the net asset value calculation, Zargon's 521 thousand net acres of undeveloped land is valued at $44.51 million based on the
independent firm of Seaton-Jordon & Associates Ltd.'s valuation of undeveloped lands as at December 31, 2010.
- McDaniel's estimate of future before tax cash flow discounted at PV 10 percent.
- PVBT represents present value before taxes.
- Full dilution of shares represents the year end common shares outstanding plus the presumed exercise of all share rights. At December 31, 2010, Zargon had 27.046 million common shares and 1.446 million share incentive rights issued and outstanding. Assuming the exercise of all share incentive rights, there would be 28.492 million common shares outstanding at this date.
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