Zargon Oil & Gas Ltd.

Zargon Oil & Gas Ltd.

September 09, 2010 13:32 ET

Zargon Energy Trust Announces the Acquisition of Oakmont Energy Ltd.

CALGARY, ALBERTA--(Marketwire - Sept. 9, 2010) - Zargon Energy Trust ("Zargon") (TSX:ZAR.UN) (TSX:ZOG.B) is pleased to announce that it has acquired all of the outstanding common shares (the "Oakmont Shares") of Oakmont Energy Ltd. ("Oakmont"), a private oil and gas company, for total consideration of approximately 336,000 Zargon trust units and the assumption of approximately $3.45 million of net debt (including adjustments and transaction costs), for a total transaction value of approximately $9.45 million. Zargon acquired approximately 99.5% of the outstanding Oakmont Shares pursuant to a share purchase agreement with Oakmont and the holders of the Oakmont shares and the balance of the Oakmont Shares pursuant to the compulsory acquisition provisions of the Business Corporations Act (Alberta).

Oakmont is currently producing approximately 280 barrels of oil equivalent per day, which consists of 110 barrels per day of crude oil and 1.03 million cubic feet per day of natural gas. These assets are primarily located within Zargon's Alberta Plains South core area and are adjacent to Zargon's Little Bow and Grand Forks properties.


The Oakmont transaction represents a small accretive "tuck-under" acquisition that brings three smaller oil-in-place exploitation opportunities along with complementary properties in our Alberta Plains South core area. Specifically, Oakmont brings the following assets and opportunities to Zargon:

-- Current production of approximately 280 barrels of oil equivalent per
day, consisting of 110 barrels per day of crude oil and 1.03 million
cubic feet per day of natural gas.
-- Estimated proved and probable reserves of 0.77 million barrels of oil
equivalent, which is comprised of 2.5 billion cubic feet of natural gas
and 0.34 million barrels of oil and natural gas liquids (based on Zargon
internal reserve estimates as of December 31, 2009).
-- Significant oil exploitation potential in the Southern Alberta Taber
South, Grand Forks and Wayne properties.
-- 8,700 net acres of undeveloped land.
-- Tax pools of approximately $7.6 million.

The Oakmont acquisition metrics (without assigning any value to undeveloped land) that are summarized below are very accretive to Zargon on both a reserves and production basis:

-- Production - $33,800 per producing barrel of oil equivalent per day
based on current rates of approximately 280 barrels of oil equivalent
per day.
-- Reserves - $12.27 per proved and probable barrels of oil equivalent.

These metrics do not reflect any of the oil exploitation upside that Zargon has identified in the Taber South, Grand Forks and Wayne properties. The debt component of the acquisition will be funded from existing bank lines. The additional production volumes acquired will be partially offset by a minor fall 2010 disposition program. This fall disposition program continues our initiative to focus on our core oil exploitation opportunities by selling smaller unrelated properties and follows on the success of our spring property disposition program, that is expected to realize approximately $29 million from the sale of 17, mostly oil properties, producing 375 barrels of oil equivalent per day.


This document contains statements that are forward-looking, such as those relating to reserves information, resource exploitation potential and the timing and amount of proposed property dispositions. By their nature, forward-looking statements are subject to numerous risks and uncertainties that could significantly affect anticipated results in the future and, accordingly actual results may differ materially from those predicted. The forward-looking statements contained in this document are as of September 9, 2010 and are subject to change after this date. 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. Zargon disclaims, except as required by law, any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.


Barrels of oil equivalent ("boe") may be misleading, particularly if used in isolation. A boe conversion ratio of six thousand cubic feet of natural gas to one barrel of oil is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.


Based in Calgary, Alberta, Zargon's securities trade on the Toronto Stock Exchange and there are currently 23.762 million trust units (ZAR.UN) after giving effect to this acquisition and 1.693 million exchangeable shares (ZOG.B) outstanding. After giving effect to the conversion privilege of the exchangeable shares and the September 15, 2010 revised exchange ratio there would be a total of 26.778 million trust units outstanding.

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

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