ZARGON ENERGY TRUST
TSX : ZAR.UN

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

Zargon Oil & Gas Ltd.

January 04, 2011 02:01 ET

Zargon Oil & Gas Ltd. Announces Completion of Its Conversion to a Corporation and Final Exchangeable Share Ratio

CALGARY, ALBERTA--(Marketwire - Jan. 4, 2011) - Zargon Oil & Gas Ltd. ("New Zargon" or "Zargon") (TSX:ZAR.UN) (TSX:ZOG.B) is pleased to announce that it has completed the plan of arrangement ("Arrangement") pursuant to which Zargon Energy Trust (the "Trust") has converted from an income trust into a dividend-paying corporation.

New Zargon common shares are expected to commence trading on the Toronto Stock Exchange ("TSX") later this week under the trading symbol "ZAR", subject to the acceptance of New Zargon's filings with the TSX. The trust units ("ZAR.UN") and exchangeable shares ("ZOG.B") will be de-listed by the TSX that same day.

The Arrangement was recommended in light of the fact that the transition period for the application of the changes in the tax treatment of income trusts (originally announced by the Canadian Federal government on October 31, 2006) ends on December 31, 2010. The board of directors and senior management of New Zargon will remain unchanged.

Under the Arrangement, unitholders received, for each trust unit held, one common share of New Zargon. Exchangeable shareholders received 1.84716 common shares of New Zargon as determined in accordance with the term of the Arrangement. As a result, New Zargon now has approximately 27.0 million common shares issued and outstanding. The Arrangement was structured to allow unitholders and exchangeable shareholders resident in Canada to receive common shares of New Zargon on a tax deferred basis for Canadian income tax purposes. In addition, the Trust has declared, in a press release dated December 15, 2010, a final 'distribution' under the Arrangement, payable on January 17, 2011 to unitholders of record on December 31, 2010.

New Zargon has adopted a monthly dividend policy with an initial dividend rate of $0.14 per common share commencing in January 2011 with the first dividend anticipated to be paid on February 15, 2011. Notwithstanding the foregoing, the amount of future cash dividends, if any, will be subject to the discretion of the board of directors of New Zargon and may vary depending on a variety of factors and conditions existing from time to time, including fluctuations in commodity prices, production levels, capital expenditure requirements, debt service requirements, operating costs, royalty burdens, foreign exchange rates and the satisfaction of solvency tests imposed by the Business Corporations Act (Alberta) for the declaration and payment of dividends.

On April 9, 2010, Zargon announced the adoption of a Distribution Reinvestment Plan (the "DRIP"). Under the Arrangement, the DRIP has been amended and restated as a Dividend Reinvestment Plan (the "Amended DRIP") and all existing participants in the DRIP are deemed to be participants in the Amended DRIP. The Amended DRIP allows eligible shareholders of New Zargon to direct their cash dividends be reinvested in additional common shares which, when issued from treasury, will be issued at 95 percent of the Average Market Price (as defined in the Amended DRIP) on the applicable dividend payment date. A complete copy of the Amended DRIP is available on Zargon's website or by calling the Account Manager, for Zargon at Valiant Trust Company at (403) 233-2801 or (866) 313-1872.

Zargon Oil & Gas Ltd. is a Calgary based oil and natural gas company working in the Western Canadian and Williston sedimentary basins with a long history of earnings and distributions. Zargon's smaller size and technical focus provides a unique opportunity to deliver profitable oil exploitation results from 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 shareholder 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 listing of our common shares, 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, 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 Oil & Gas Ltd.
    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