ZARGON ENERGY TRUST
TSX : ZAR.UN

ZARGON ENERGY TRUST
Zargon Oil & Gas Ltd.
TSX : ZAR

Zargon Oil & Gas Ltd.

October 19, 2010 17:40 ET

Zargon Energy Trust Announces Corporate Conversion

CALGARY, ALBERTA--(Marketwire - Oct. 19, 2010) - Zargon Energy Trust (TSX:ZAR.UN) (TSX:ZOG.B) ("Zargon") announces that the board of directors of Zargon Oil & Gas Ltd. has unanimously approved the conversion of Zargon Energy Trust to a corporation to be named Zargon Oil & Gas Ltd. The conversion is expected to be completed on December 31, 2010.

After the conversion, Zargon Oil & Gas Ltd. will continue to execute a focused oil exploitation and income model as previously announced on August 11, 2010. Commencing in January 2011, we anticipate the initial dividend rate will be $0.14 per share per month.

Pursuant to the conversion, unitholders will exchange their trust units on a one-for-one basis for common shares and exchangeable shareholders will exchange their exchangeable shares for common shares based on the exchange ratio in effect at the time of conversion. The conversion is expected to be a tax-deferred exchange for Canadian income tax purposes. The foregoing statement is not intended to be, and should not be construed as, tax advice. Investors should consult with their tax advisors regarding the tax consequences of the conversion and any dividends paid by Zargon Oil & Gas Ltd. following the conversion.

The conversion is proposed to be implemented through a plan of arrangement that will require the approval of two-thirds of the unitholders and exchangeable shareholders at a special meeting to be held on December 15, 2010. The record date for the meeting is November 9, 2010. In addition to unitholder approval, the conversion is subject to receipt of all required regulatory, stock exchange and Court of Queen's Bench of Alberta approvals.

Forward-Looking Statements – This news release includes forward-looking statements about our future plans and operations that we believe allow readers to better understand our business and prospects. These forward-looking statements pertain to the proposed conversion (including the proposed structure, the timing relating to the approval and implementation thereof, the anticipated tax effect of the conversion on unitholders and exchangeable shareholders), our proposed dividend policy (including the amount of dividend proposed to be paid and our ability to sustain that dividend) and our business plan following the conversion.

By their nature, forward-looking statements are subject to numerous risks and uncertainties, some of which are beyond our control. Risks are described in more detail in our Annual Information Form, filed on SEDAR. Statements relating to the conversion and our dividend policy following the conversion are subject to additional risks, including failure to receive all necessary securityholder, regulatory, stock exchange and Court approvals to complete the conversion, changes in laws and regulatory regimes (including tax laws) and our ability to sustain our production and reserves.

With respect to forward-looking statements contained in this news release, we have made assumptions regarding, among other things, our ability to complete the conversion in the manner and timeframe expected, future legislation, future oil and natural gas prices, future capital expenditure levels, future production levels, future exchange rates, future participation rates in our dividend reinvestment plan and use of cash preserved through the dividend reinvestment plan, the cost of developing and producing our assets, our ability to obtain equipment in a timely manner to carry out development activities, our ability to market our oil and natural gas successfully to current and new customers, our expectation for the consumption of crude oil and natural gas, our expectation for industry drilling levels, our ability to obtain financing on acceptable terms, and our ability to add production and reserves through development and acquisition activities.

Readers are cautioned that the assumptions used in the preparation of such information, although considered reasonable at the time of preparation, may prove to be imprecise and, as such, undue reliance should not be placed on forward-looking statements. Our actual results, performance, or achievement could differ materially from those expressed in, or implied by, these forward-looking statements. We can give no assurance that any of the events anticipated will transpire or occur, or if any of them do, what benefits we will derive from them. The forward looking information contained in this news release is expressly qualified by this cautionary statement. We do not undertake to update any forward looking information in this press release whether as to new information, future events or otherwise except as required by securities rules and regulations.

ABOUT ZARGON

Based in Calgary, Alberta, Zargon's securities trade on the Toronto Stock Exchange and there are currently 23.809 million trust units (ZAR.UN) and 1.692 million exchangeable shares (ZOG.B) outstanding. After giving effect to the conversion privilege of the exchangeable shares and the October 15, 2010 revised exchange ratio there would be a total of 26.853 million trust units outstanding.

In order to learn more about Zargon, we encourage you to visit Zargon's website at www.zargon.ca where you will find a current unitholder presentation, financial reports and historical news releases.

Contact Information

  • Zargon Energy Trust
    C.H. Hansen
    President and Chief Executive Officer
    (403) 264-9992
    or
    T.L. Howard
    Corporate Secretary
    403-264-9992
    zargon@zargon.ca
    www.zargon.ca