CALGARY, ALBERTA–(Marketwired – Dec. 2, 2013) – Zargon Oil & Gas Ltd. (TSX:ZAR)(TSX:ZAR.DB) (“Zargon”) has closed an additional $12.0 million of dispositions in two separate transactions since our November 13, 2013 press release. Production from these properties totaled approximately 240 barrels of oil per day and 0.50 million cubic feet of natural gas per day. The oil properties are located in the Grand Forks area of southern Alberta, and the natural gas properties are located in the Peace River Arch area of northern Alberta. Both properties are mature assets and are not included in the five high-graded conventional (non-Alkaline Surfactant Polymer (“ASP”)) oil exploitation projects that will form the basis of our conventional exploitation drilling programs during the next few years.
With these property dispositions, Zargon has closed approximately $35 million (cash) of property dispositions in 2013, a level that considerably exceeds the $20 million of property dispositions originally budgeted for 2013. Subsequent to the closing of these additional property sales, Zargon has reaffirmed that committed syndicated credit facilities remain unchanged with a borrowing base of $165 million. Including Zargon’s $57.5 million convertible debenture (face value), available credit totals $222.5 million. At September 30, 2013, Zargon’s debt, net of working capital (excluding unrealized derivative assets/liabilities) but including the convertible debenture was $117.6 million.
For the foreseeable future, Zargon will continue to actively pursue property dispositions that improve our profitability and operational focus by selling (or trading away) non-strategic properties. Over time, we anticipate that these dispositions will enable Zargon to realize a lower cost structure through a disciplined focus on a growing tertiary ASP oil recovery business and the stable production volumes coming from the measured exploitation of five conventional long-life low-decline core oil properties.
Updated 2013 Outlook and 2014 Capital Budgets
In our November 13, 2013 press release, Zargon provided an updated 2013 outlook and a first look 2014 capital budget. With these dispositions concluded, Zargon’s 2013 non-ASP field capital budget remains at $40 million but is partially offset by $35 million (cash) of dispositions. The 2013 ASP capital expenditures continue to be estimated at $38 million. The remaining $4 million of phase 1 ASP capital costs are forecast to be spent in the first quarter of 2014 and will provide for the forecast March 2014 ASP initial injection date.
Zargon’s 2014 capital budget remains at $35 million for conventional projects, $4 million for ASP capital projects and $10 million for ASP chemical expenditures. The $49 million capital program is forecasted to be funded by cash flows, long term bank debt and the sale of approximately $5 million of non-strategic oil and natural gas properties. Based on this 2014 capital program, we expect oil production to steadily grow from first quarter levels throughout 2014 as stable conventional oil production volumes are augmented by growing Little Bow ASP oil production volumes.
In the November 13, 2013 third quarter results press release, guidance for fourth quarter 2013 production was provided at 4,550 barrels of oil and liquids per day and 15.00 million cubic feet of natural gas per day. Despite the announced additional property sales, these guidance levels are reaffirmed.
First quarter 2014 production rates are now forecast to average 4,300 barrels of oil per day and 14.30 million cubic feet of natural gas per day, although these estimates willdepend on the