ZARGON ENERGY TRUST
TSX : ZAR.UN

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

Zargon Oil & Gas Ltd.

December 15, 2010 17:01 ET

Zargon Energy Trust Announces Securityholder and Court Approvals for Its Previously Announced Conversion to a Corporation and Declares Final Distributions of the Trust

CALGARY, ALBERTA--(Marketwire - Dec. 15, 2010) - Zargon Energy Trust ("Zargon" or the "Trust") (TSX:ZAR.UN) (TSX:ZOG.B) is pleased to announce that today Zargon received securityholder and court approvals for the previously announced plan of arrangement (the "Arrangement") pursuant to which Zargon will convert, effective December 31, 2010, to a dividend paying corporation to be named "Zargon Oil & Gas Ltd.". Zargon's securityholders voted 99% in favour of the Arrangement. Upon completion of the Arrangement, the common shares of Zargon Oil & Gas Ltd. will be listed for trading on the Toronto Stock Exchange (the "TSX") under the trading symbol "ZAR", subject to satisfying certain listing conditions of the TSX.

Zargon is also announcing that the Board of Directors has declared a cash distribution of Cdn. $0.18 per trust unit payable to unitholders of record on December 31, 2010 (ex-distribution date December 29, 2010) which will be paid to unitholders on January 17, 2011. This distribution will be the final distribution of the Trust and will be paid pursuant to the Arrangement or if the Arrangement is not completed for any reason paid in the normal course. As previously announced, following the Arrangement it is expected that Zargon Oil & Gas Ltd. will adopt a monthly dividend policy with an initial dividend rate of $0.14 per common share commencing in January 2011, with the first dividend payment anticipated to be paid on February 15, 2011.

In addition, pursuant to the terms of the Arrangement, the Trust is required to declare payable to unitholders of record at the effective time a distribution per trust unit equal to any remaining taxable income of the Trust divided by the total number of trust units then outstanding payable in trust units with a value equal to such distribution. Management of Zargon does not currently anticipate that there will be any remaining taxable income in the Trust at the effective time and as a result the Board of Directors has declared a nil distribution for unitholders of record on December 31, 2010 (ex-distribution date December 29, 2010). If the Board of Directors determines that there is taxable income in the Trust as of December 31, 2010 the amount of this distribution will be adjusted; however, regardless of whether any amount is distributed pursuant to this distribution, unitholders will not receive any cash or trust units pursuant to this distribution as immediately following such distribution the number of trust units will be consolidated such that each unitholder will hold after the consolidation the same number of trust units as the unitholder held before the distribution of trust units.

On April 9, 2010, Zargon announced adoption of a Distribution Reinvestment Plan (the "DRIP"). Eligible unitholders may elect to participate in the DRIP. A complete copy of the DRIP is available on Zargon's website or by calling the Manager Income Trusts, Valiant Trust Company at (403) 233-2801. Pursuant to the Arrangement, the DRIP will be amended and restated as a Dividend Reinvestment Plan (the "Amended DRIP") and all existing participants in the DRIP will be deemed to be participants in the Amended DRIP.

Zargon Energy Trust is a Calgary based oil and natural gas company working the Western Canadian and Williston sedimentary basins with a long history of returns and earnings. Zargon's smaller size and technical focus provides a unique opportunity to deliver profitable oil exploitation results with smaller oil projects that may be overlooked by larger competitors.

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.

Forward-Looking Statements – Certain information in this news release includes forward-looking statements. 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.

Contact Information

  • Zargon Energy Trust
    C.H. Hansen
    President and Chief Executive Officer
    403-264-9992
    or
    J.B. Dranchuk
    Vice President, Finance and Chief Financial Officer
    403-264-9992
    zargon@zargon.ca
    www.zargon.ca