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Zargon Oil & Gas Ltd (4)
Symbol C : ZAR
Shares Issued 22,993,894
Close 2019-08-14 C$ 0.34
Recent Sedar Documents

Zargon loses $570,000 in Q2

2019-08-14 18:24 ET - News Release

Mr. C.H. Hansen reports

ZARGON OIL & GAS LTD. PROVIDES 2019 SECOND QUARTER RESULTS

Zargon Oil & Gas Ltd. has released its second quarter 2019 results.

Financial and operating highlights (three months ended June 30, 2019):

  • Funds flow from operating activities of $2.17-million compared with $1.23-million recorded in the prior quarter, and $580,000 reported in the second quarter of 2018. The increase from the prior quarter was primarily due to higher commodity prices, reduced operating expenses and lower interest expenses due to the settlement of the convertible debentures.
  • Second quarter 2019 production averaged 1,790 barrels of oil equivalent per day, a 1-per-cent decrease from the preceding-quarter production rate of 1,808 barrels of oil equivalent per day and a 15-per-cent decrease from the second quarter 2018 production rate of 2,118 barrels of oil equivalent per day. The reduction in production volumes from the prior quarter was primarily due to electrical outages, spring blizzards and spring breakup. Second quarter oil production averaged 1,539 barrels per day, a 2-per-cent decrease from the preceding quarter rate of 1,576 barrels per day.
  • Second quarter 2019 field oil prices averaged $64.51 per barrel, 14 per cent higher than the prior-quarter price of $56.54 per barrel but 1 per cent lower than the second quarter 2018 price of $64.94 per barrel.
  • Second quarter 2019 field operating netbacks defined as sales (excluding hedges) less royalties and operating/transportation costs were $19.82 per barrel of oil equivalent, an increase of 42 per cent from the prior-quarter field operating netback of $14 per barrel of oil equivalent. The corresponding second quarter 2019 field operating cash flow was $3.23-million, a 42-per-cent improvement from the prior quarter's $2.28-million.
  • For the second quarter of 2019, field revenues (unhedged) were $56.33 per barrel of oil equivalent ($51.04 per barrel of oil equivalent in first quarter 2019), royalties were $7.73 per barrel of oil equivalent ($5.59 per barrel of oil equivalent in first quarter 2019) and operating (including transportation) costs were $28.78 per barrel of oil equivalent ($31.45 per barrel of oil equivalent in first quarter 2019).
  • Second quarter 2019 capital expenditures were $790,000, a $40,000 increase from $750,000 recorded in the prior quarter. The cash constrained reduced program was primarily allocated to oil exploitation programs, well reactivations and pipeline construction projects. No wells were drilled in the quarter.
  • Second quarter 2019 abandonment and reclamation costs totalled $470,000, a $250,000 increase from $220,000 recorded in the prior quarter.
  • At June 30, 2019, the company's combined debt net of working capital was $1.41-million, which compared with $2.26-million reported in the prior quarter. The improvement in net debt resulted from the generation of free cash flow of $910,000 in the second quarter of 2019, compared with $260,000 and negative $850,000 recorded in the prior quarter and the second quarter of 2018, respectively.
  • Effective May 30, 2019, the company consolidated its issued and outstanding common shares on the basis of one new common share for every 20 preconsolidation shares held. As a result of the share consolidation, the 459.81 million preconsolidation shares were consolidated to 22.99 million postconsolidation shares.

The outlook for Zargon is improving in 2019 with the narrowing of the WTI (West Texas Intermediate)-WCS (Western Canadian Select) differentials and the settlement of the company's $41.94-million principal amount of convertible debentures. For further information regarding Zargon's properties, opportunities and outlook, please refer to the company's updated corporate presentation, which is available at the Zargon website.

Strategic alternatives process update (1)

In 2015, Zargon formed a special board committee to examine alternatives available to maximize shareholder value. Macquarie Capital Markets Canada Ltd. is currently engaged as Zargon's exclusive financial adviser to evaluate strategic alternatives available to Zargon, which may include a sale of the company or a portion of the company's assets, a restructuring of the company's current capital structure, the addition of capital to further develop the potential of the assets, a merger, a farm-in or joint venture, or other such options as may be determined by the board of directors to be in the best interests of the company and its stakeholders.

                               FINANCIAL HIGHLIGHTS

                                               Three months ended          Six months ended
                                                     June 30,                  June 30,
                                                2019         2018         2019         2018
Income and investments ($ millions)
Gross petroleum and natural gas sales          $9.17       $10.84       $17.48       $20.55
Funds flow from operating activities            2.17         0.58         3.39         0.27
Cash flows from operating activities            2.79         1.98         1.85         2.78
Free cash flow                                  0.91        (0.85)        1.15        (3.27)
Net earnings/(loss)                            (0.57)       (1.68)       24.51        (6.02)
Net capital expenditures                        0.79         1.19         1.54         2.69  
Abandonment and reclamation costs               0.47         0.24         0.70         0.85 
Per share, basic             
Funds flow from operating activities 
($/share)                                       0.09         0.37         0.01         0.18
Net earnings/(loss) ($/share)                  (0.02)       (1.09)       (0.20)       (3.90)

Funds flow from operating activities is an additional generally accepted accounting 
principle measure presented on the consolidated statement of cash flows. It represents 
cash flow from operating activities adjusted for asset retirement expenditures and 
changes in non-cash operating working capital. 

                                     OPERATING HIGHLIGHTS
                                                           Three months ended      Six months ended
                                                                  June 30,              June 30,
                                                              2019       2018       2019       2018
Average daily production
Oil and liquids (bbl/d)                                      1,539      1,805      1,557      1,877
Natural gas (MMcf/d)                                          1.51       1.88       1.45       2.37
Equivalent (boe/d)                                           1,790      2,118      1,799      2,272
Average selling price (before the
impact of financial risk management
contracts)
Oil and liquids ($/bbl)                                     $64.51     $64.94     $60.50     $58.50
Natural gas ($/Mcf)                                           1.04       0.99       1.63       1.58

Netback ($/boe)
Gross petroleum and natural gas sales                        56.33      56.23      53.68      49.97
Royalties                                                    (7.73)     (8.13)     (6.66)     (6.94)
Realized (loss) on derivatives                                   -      (8.07)         -      (5.85)
Operating expenses                                          (28.12)    (26.75)    (29.46)    (26.86)
Transportation expenses                                      (0.66)     (0.49)     (0.65)     (0.52)
Operating netback                                            19.82      12.79      16.91       9.80

Wells drilled, net                                               -          -          -          -
Undeveloped land at period-end (thousand net acres)                                   33         33
                                                                                 -------    -------

The calculation of barrels of oil equivalent (boe) is based on the conversion ratio 
that 6,000 cubic feet of natural gas are equivalent to one barrel of oil.

Filings

Zargon has filed with Canadian securities regulatory authorities its unaudited financial statements for the three and six months ended June 30, 2019, and the accompanying management's discussion and analysis. These filings are available on the Zargon website and under Zargon's SEDAR profile.

About Zargon Oil & Gas Ltd.

Zargon is a Calgary-based oil and natural gas company working in the Western Canadian and Williston sedimentary basins, and is focused on oil exploitation projects (water floods and tertiary ASP) that profitably increase oil production and recovery factors from existing oil reservoirs.

We seek Safe Harbor.

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