CALGARY, Alberta, Jan. 25, 2019 (GLOBE NEWSWIRE) — Zargon Oil & Gas Ltd. (the “Company” or “Zargon”) (TSX:ZAR) announces fourth quarter 2018 production volumes and announces 2018 year end reserves. Zargon intends to release its 2018 audited financial results on March 14, 2019, after market close.
2018 FOURTH QUARTER PRODUCTION VOLUMES:
Fourth quarter 2018 production averaged 1,786 barrels of oil equivalent per day, a 26 percent decline from the fourth quarter 2017 rate of 2,416 barrels of oil equivalent per day. The reduced volumes were primarily due to the suspension of discretionary oil exploitation capital programs, the deferral of routine maintenance operations due to cash constraints, minor property sales and the shut-in of uneconomic natural gas properties.
Fourth quarter 2018 oil and liquids production averaged 1,575 barrels per day, and compares to rates of 1,680 barrels of oil and liquids per day in the preceding quarter and 1,924 barrels of oil and liquids per day in the fourth quarter of 2017. Fourth quarter 2018 natural gas production averaged 1.27 million cubic feet per day, and compares to rates of 1.64 million cubic feet per day in the preceding quarter and 2.95 million cubic feet per day in the fourth quarter of 2017.
For calendar 2018, Zargon’s production averaged 2,069 barrels of oil equivalent per day, and was comprised of 1,751 barrels of oil and liquids per day and 1.91 million cubic feet per day of natural gas. We are forecasting first half 2019 production to average approximately 1,800 barrels of oil equivalent per day, which is comprised of 1,585 barrels of oil and liquids per day and 1.30 million cubic feet of natural gas per day. This forecast is based on $2.0 million of first half 2019 capital expenditures. Additional details regarding guidance, capital budgets, oil exploitation opportunities, hedging and corporate outlook are provided in our updated presentation and previous press releases that are located on our website at www.zargon.ca.
2018 YEAR END RESERVES:
DETAILED RESERVE INFORMATION:
Reserves included herein are stated on a gross company working interest basis unless otherwise noted. All reserves information has been prepared in accordance with National Instrument 51-101 Standards of Disclosure (“NI 51-101”). In addition to the detailed information disclosed in this press release, more detailed information will be included in Zargon’s 2018 Annual Information Form to be filed on SEDAR (www.sedar.com) and posted on our website (www.zargon.ca) in March 2019.
Based on the independent reserves evaluation conducted by McDaniel effective December 31, 2018, and prepared in accordance with NI 51-101, Zargon had proved and probable reserves of 9.14 million barrels of oil equivalent.
COMPANY TOTAL Reserves (1) | Barrels of Oil | ||
At December 31, 2018 | Oil and Liquids (mmbbl) |
Natural Gas (bcf) |
Equivalent (2) (mmboe) |
Proved producing | 5.26 | 3.59 | 5.86 |
Proved non-producing | 0.39 | 0.48 | 0.47 |
Proved undeveloped | 0.35 | – | 0.35 |
Total proved | 6.00 | 4.07 | 6.68 |
Probable additional producing | 1.37 | 0.89 | 1.52 |
Probable non-producing and undeveloped | 0.87 | 0.45 | 0.94 |
Total probable additional | 2.24 | 1.34 | 2.46 |
Total proved and probable producing | 6.63 | 4.48 | 7.38 |
Total proved and probable | 8.24 | 5.41 | 9.14 |
Proved producing reserve life index, years (3) | 9.1 | 7.7 | 9.0 |
Proved reserve life index, years (3) | 10.4 | 8.8 | 10.2 |
Proved and probable producing reserve life index, years (3) | 11.5 | 9.7 | 11.3 |
Proved and probable reserve life index, years (3) | 14.3 | 11.7 | 14.0 |
CANADA Reserves (1) | Barrels of Oil | ||
At December 31, 2018 | Oil and Liquids (mmbbl) |
Natural Gas (bcf) |
Equivalent (2) (mmboe) |
Proved producing | 3.43 | 3.59 | 4.03 |
Proved non-producing | 0.39 | 0.48 | 0.47 |
Proved undeveloped | 0.09 | – | 0.09 |
Total proved | 3.91 | 4.07 | 4.59 |
Probable additional producing | 0.94 | 0.89 | 1.09 |
Probable non-producing and undeveloped | 0.56 | 0.45 | 0.63 |
Total probable additional | 1.50 | 1.34 | 1.72 |
Total proved and probable producing | 4.37 | 4.48 | 5.12 |
Total proved and probable | 5.41 | 5.41 | 6.31 |
Proved producing reserve life index, years (3) | 7.9 | 7.7 | 7.9 |
Proved reserve life index, years (3) | 9.0 | 8.8 | 9.0 |
Proved and probable producing reserve life index, years (3) | 10.1 | 9.7 | 10.0 |
Proved and probable reserve life index, years (3) | 12.5 | 11.7 | 12.4 |
UNITED STATES Reserves (1) | Barrels of Oil | ||
At December 31, 2018 | Oil and Liquids (mmbbl) |
Natural Gas (bcf) |
Equivalent (2) (mmboe) |
Proved producing | 1.83 | – | 1.83 |
Proved non-producing | – | – | – |
Proved undeveloped | 0.26 | – | 0.26 |
Total proved | 2.09 | – | 2.09 |
Probable additional producing | 0.43 | – | 0.43 |
Probable non-producing and undeveloped | 0.31 | – | 0.31 |
Total probable additional | 0.74 | – | 0.74 |
Total proved and probable producing | 2.26 | – | 2.26 |
Total proved and probable | 2.83 | – | 2.83 |
Proved producing reserve life index, years (3) | 12.9 | – | 12.9 |
Proved reserve life index, years (3) | 14.7 | – | 14.7 |
Proved and probable producing reserve life index, years (3) | 15.9 | – | 15.9 |
Proved and probable reserve life index, years (3) | 19.9 | – | 19.9 |
Zargon’s reserves are characterized by long-life, low-decline oil production with a high producing developed component that generally provides a corresponding high confidence level. In calendar 2018, net reserves of 0.30 and 0.97 million barrels of oil equivalents of negative reserve revisions were booked for the proved developed producing and proved and probable developed producing cases, respectively. The reduction of developed producing proved and probable reserves was primarily attributable to the production performance related decrease in reserves for the Little Bow ASP project, property sales and the shut-in of uneconomic natural gas properties, partially offset by positive revisions in North Dakota.
In calendar 2018, net reserves of 0.49 and 2.54 million barrels of oil equivalents of negative reserve revisions were booked for the total proved and total proved and probable cases, respectively. These reductions were primarily attributed to economic factors related to the removal of previously booked Little Bow ASP project expansions and the shut-in of uneconomic natural gas properties.
NET ASSET VALUE:
Zargon’s oil, liquids and natural gas reserves were evaluated using McDaniel’s price forecasts effective January 1, 2019, prior to provisions for income taxes, interest, debt service charges, transaction costs and general and administrative expenses. The estimated values of future net revenue disclosed do not represent the fair market value of the reserves.
TOTAL COMPANY Before Tax Present Value of Future Net Revenue | |||||
(Forecast Prices and Costs) | |||||
Discount Factor | |||||
($ millions) | 0% | 5% | 10% | 15% | |
Proved producing | 74.7 | 60.7 | 49.6 | 41.7 | |
Proved non-producing | 8.3 | 6.4 | 5.1 | 4.2 | |
Proved undeveloped | 5.1 | 3.3 | 2.0 | 1.0 | |
Total proved | 88.1 | 70.4 | 56.7 | 46.9 | |
Probable additional producing | 42.8 | 24.1 | 15.3 | 10.7 | |
Probable additional non-producing and undeveloped | 22.1 | 15.3 | 10.9 | 8.0 | |
Total probable additional | 64.9 | 39.4 | 26.2 | 18.7 | |
Total proved and probable producing | 117.5 | 84.8 | 64.9 | 52.4 | |
Total proved and probable | 153.0 | 109.8 | 82.9 | 65.6 |
CANADA Before Tax Present Value of Future Net Revenue | |||||
(Forecast Prices and Costs) | |||||
Discount Factor | |||||
($ millions) | 0% | 5% | 10% | 15% | |
Proved producing | 49.0 | 39.6 | 32.7 | 27.8 | |
Proved non-producing | 8.3 | 6.4 | 5.1 | 4.2 | |
Proved undeveloped | 2.1 | 1.6 | 1.2 | 0.8 | |
Total proved | 59.4 | 47.6 | 39.0 | 32.8 | |
Probable additional producing | 30.7 | 18.4 | 12.1 | 8.6 | |
Probable additional non-producing and undeveloped | 14.2 | 10.3 | 7.7 | 5.9 | |
Total probable additional | 44.9 | 28.7 | 19.8 | 14.5 | |
Total proved and probable producing | 79.7 | 58.0 | 44.8 | 36.4 | |
Total proved and probable | 104.3 | 76.3 | 58.8 | 47.3 |
UNITED STATES Before Tax Present Value of Future Net Revenue | |||||
(Forecast Prices and Costs) | |||||
Discount Factor | |||||
($ millions) | 0% | 5% | 10% | 15% | |
Proved producing | 25.7 | 21.1 | 16.9 | 13.9 | |
Proved non-producing | – | – | – | – | |
Proved undeveloped | 3.0 | 1.7 | 0.8 | 0.2 | |
Total proved | 28.7 | 22.8 | 17.7 | 14.1 | |
Probable additional producing | 12.1 | 5.7 | 3.2 | 2.1 | |
Probable additional non-producing and undeveloped | 7.9 | 5.0 | 3.2 | 2.1 | |
Total probable additional | 20.0 | 10.7 | 6.4 | 4.2 | |
Total proved and probable producing | 37.8 | 26.8 | 20.1 | 16.0 | |
Total proved and probable | 48.7 | 33.5 | 24.1 | 18.3 |
The following net asset value 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 McDaniel’s forecast future prices and costs. The value is a snapshot in time as at December 31, 2018, 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. These net asset value calculations do not include ongoing operating costs or site reclamation and abandonment costs for wells that are not assigned reserves.
Net Asset Value | Proved Developed Producing Reserves |
Proved and Probable Reserves |
||
As at December 31, 2018 ($ millions) | ||||
Proved and probable reserves (PVBT 10%) (1) |
50 |
83 |
||
Undeveloped land – unaudited | 2 | 2 | ||
Working capital (excluding unrealized derivative assets/liabilities) – unaudited | 2 | 2 | ||
Bank debt – unaudited | (5 | ) | (5 | ) |
Convertible debenture – proforma as at January 17, 2019 | – | – | ||
Net asset value | 49 | 82 | ||
Net asset value per share ($/basic share) (2) | 0.11 | 0.18 |
McDaniel & Associates Consultants Ltd. Price Forecast (effective January 1, 2019)
WTI Crude Oil $US/bbl |
Edmonton Light Crude Oil $C/bbl |
Alberta Bow River Hardisty Crude Oil $C/bbl |
Western Canadian Select Crude Oil $C/bbl |
Alberta Heavy Crude Oil $C/bbl |
Sask Cromer Medium Crude Oil $C/bbl |
U.S. Henry Hub Gas Price $US/MMBtu |
Alberta AECO Spot Price $C/MMBtu |
US/CAN Exchange Rate $US/$CAN |
|
2019 | 56.50 | 63.30 | 48.70 | 47.50 | 39.90 | 60.80 | 3.00 | 1.85 | 0.750 |
2020 | 63.80 | 74.30 | 58.70 | 58.00 | 50.20 | 70.20 | 3.00 | 2.20 | 0.775 |
2021 | 67.60 | 78.50 | 65.20 | 64.40 | 56.10 | 73.00 | 3.15 | 2.55 | 0.800 |
2022 | 71.60 | 83.40 | 69.20 | 68.40 | 59.60 | 77.60 | 3.45 | 3.05 | 0.800 |
2023 | 73.10 | 85.10 | 70.60 | 69.80 | 60.80 | 79.10 | 3.60 | 3.20 | 0.800 |
2024 | 74.50 | 86.80 | 72.00 | 71.20 | 62.10 | 80.70 | 3.70 | 3.30 | 0.800 |
2025 | 76.00 | 88.50 | 73.50 | 72.60 | 63.30 | 82.30 | 3.75 | 3.35 | 0.800 |
2026 | 77.50 | 90.30 | 74.90 | 74.00 | 64.60 | 84.00 | 3.85 | 3.40 | 0.800 |
2027 | 79.10 | 92.10 | 76.40 | 75.50 | 65.90 | 85.70 | 3.90 | 3.45 | 0.800 |
2028 | 80.70 | 94.00 | 78.00 | 77.10 | 67.20 | 87.40 | 4.00 | 3.55 | 0.800 |
2029 | 82.30 | 95.80 | 79.50 | 78.60 | 68.50 | 89.10 | 4.05 | 3.60 | 0.800 |
2030 | 83.90 | 97.70 | 81.10 | 80.10 | 69.90 | 90.90 | 4.15 | 3.70 | 0.800 |
2031 | 85.60 | 99.70 | 82.80 | 81.80 | 71.30 | 92.70 | 4.25 | 3.75 | 0.800 |
2032 | 87.30 | 101.70 | 84.40 | 83.40 | 72.70 | 94.60 | 4.30 | 3.80 | 0.800 |
2033 | 89.10 | 103.80 | 86.20 | 85.10 | 74.20 | 96.50 | 4.40 | 3.90 | 0.800 |
Thereafter | +2%/yr | +2%/yr | +2%/yr | +2%/yr | +2%/yr | +2%/yr | +2%/yr | +2%/yr | 0.800 |