2010 Key Initiatives

Williston Basin

• Exploit primary recovery oil projects at the Steelman, Manor, Fertile, Elswick, Cromer, Virden, Daly and Mackobee Coulee properties. In particular, we will continue to use unstimulated horizontal wells to develop the Steelman Frobisher ridges, the Manor Tilston/Alida structural highs, the Elswick Midale ridges and the Virden Lodgepole pool extensions.
• The Torquay (Bakken) formation at the Fertile and Cromer properties will be exploited with fracture stimulated horizontal wells.
• A large 3D survey will be undertaken at Mackobee Coulee to set up next year’s horizontal drilling program.
• Design and initiate secondary (waterflood) recovery oil projects in the Midale and Frobisher formations at Steelman and Elswick, Saskatchewan.
• Modify and enhance secondary (waterflood) recovery schemes in the Midale, Frobisher and Tilston formations at Steelman, Pinto, Elswick, Ralph, Frys and Carnduff.
• Conclude multi-disciplined reservoir studies to rebalance injections and maximize recoveries from the large Haas and Truro, North Dakota pools.

In 2009, Zargon spent $19.48 million of field-related capital in the Williston Basin core area, which represented 54 percent of the $35.83 million of property cash flow generated by this area. With these expenditures, Zargon drilled 9.6 net oil wells with 100 percent success, of which 8.6 net wells were horizontal locations. With this capital program, Zargon maintained production at 2,897 barrels of oil equivalent per day and replaced proved and probable reserves of 12.89 million barrels of oil equivalent.

The Williston Basin core area posted another good year of capital efficiencies in 2009 as evidenced by a proved and probable finding, development and acquisition cost of $18.84 per barrel of oil equivalent and a core area recycle ratio of 1.9 times. In particular, Zargon posted significant new oil production and reserves with the drilling of 7.6 net horizontal wells at the Steelman Frobisher ridge property.

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