Little Bow ASP Project Update
September, 2013
WWW.ZARGON.CA
Advisory – Forward-Looking Information
Forward-Looking Statements - This presentation offers our assessment of Zargon's future plans and operations as at September 1, 2013, and contains forwardlooking statements. Such statements are generally identified by the use of words such as "anticipate", "continue", "estimate", "expect", "forecast", "may", "will",
"project", "should", "plan", "intend", "believe" and similar expressions (including the negatives thereof). In particular, this presentation contains forward-looking
information as to Zargon’s corporate strategy and business plans, Zargon’s ASP oil exploration project inventory and development plans, Zargon’s capital
expenditure program and the allocation and the sources of funding thereof, ASP production and other guidance and the assumptions contained therein, Zargon’s
reserve estimates, Zargon’s drilling, development and exploitation plans and projects and the results there from and Zargon’s ASP project plans, capital expenditures,
costs and the results therefrom. By their nature, forward-looking statements are subject to numerous risks and uncertainties, some of which are beyond our control,
including such as those relating to results of operations and financial condition, general economic conditions, industry conditions, changes in regulatory and taxation
regimes, volatility of commodity prices, escalation of operating and capital costs, currency fluctuations, the availability of services, imprecision of reserve estimates,
geological, technical, drilling and processing problems, environmental risks, weather, the lack of availability of qualified personnel or management, stock market
volatility, the ability to access sufficient capital from internal and external sources and competition from other industry participants for, among other things, capital,
services, acquisitions of reserves, undeveloped lands and skilled personnel. Risks are described in more detail in our Annual Information Form, which is available on
our website. Forward-looking statements are provided to allow investors to have a greater understanding of our business.
You are cautioned that the assumptions, including, among other things, future oil and natural gas prices; future capital expenditure levels; future production levels;
future exchange rates; the cost of developing and expanding 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; the impact of increasing competition; our ability to obtain financing on
acceptable terms; and our ability to add production and reserves through our development and acquisition activities 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 presentation is expressly qualified by this cautionary statement. Our policy for updating forward-looking statements is that 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 - Natural gas is converted to a barrel of oil equivalent (“Boe”) using six thousand cubic feet of gas to one barrel of oil. In certain
circumstances, natural gas liquid volumes have been converted to a thousand cubic feet equivalent (“Mcfe”) on the basis of one barrel of natural gas liquids to six
thousand cubic feet of gas. Boes and Mcfes may be misleading, particularly if used in isolation. A conversion ratio of one barrel to six thousand cubic feet of natural
gas is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. Given
that the value ratio based on the current price of crude oil as compared to natural gas is significantly different from the energy equivalency of 6:1, utilizing a
conversion ratio on a 6:1 basis may be misleading as an indication of value.
The estimates of reserves and future net revenue for individual properties may not reflect the same confidence level as estimates of reserves and future net revenue
for all properties, due to the effects of aggregation. Estimated reserve values disclosed in this presentation do not represent fair market value. Discovered Petroleum
Initially-In-Place (“DPIIP”) is that quantity of petroleum that is estimated, as of a given date, to be contained in known accumulations prior to production. The
recoverable portion of discovered petroleum initially in place includes production, reserves, and contingent resources; the remainder is unrecoverable.
The aggregate of the exploration and development costs incurred in the most recent financial year and the change during that year in estimated future development
costs generally will not reflect total finding and development costs related to reserves additions for that year.
2
Little Bow ASP
Zargon Development Vision
The ASP Facility being constructed at Little Bow is the hub of a phased
Enhanced Oil Recovery program, targeting multiple oil pools, and
providing significant oil reserves and investor returns.
3
Little Bow Alkaline Surfactant Polymer (“ASP”) Project
Enhanced Oil Recovery Using Proven Technology
Little Bow ASP: Phase 1&2 Development
Alberta
•
EOR in a mature, southern Alberta Waterflood
•
Project Capital: $60 Million (excludes chemical)
15-18W4
o
$18.8 million incurred through Q2 2013 (From
2012/01)
o
$29 million in H2 2013 to Phase 1 Startup
o
2015: $12 million (Phase 2)
Little Bow Mannville “P” Pool
Little Bow
Little Bow Mannville “I” Pool
Zargon Land
Zargon Wells
•
Current Little Bow Oil
400 bbl/d
•
First ASP Injection
Q1 2014
•
Zargon Forecast Incremental Oil Rate:
Phase 1 Area
Phase 2 Area
2014 Exit: 500 bbl/d
2016 avg: 1,350 bbl/d
2018 avg: 1,600 bbl/d
•
Zargon Forecast Incremental Oil Recovery:
4.9 Million Barrels (12% DPIIP)
4
Little Bow ASP
Project Evolution
5
2009
Little Bow assets acquired from Masters Energy Inc.
2010
Reservoir Studies
2011
Lab Work, Facilities Scoping Studies
2012
Well workovers, Detailed Engineering,
Key Equipment Orders; Reservoir Study Update
2013
Construction: Facilities and Pipelines, Chemical Supply
2014
ASP Injection Commences
Little Bow ASP
Phases 1 & 2 Capital Costs
Phase 1
Phase 2
Total
($ millions) ($ millions) ($ millions)
30.0
1.7
31.7
ASP Facility
Battery
9.5
3.2
12.7
Pipelines
2.2
3.2
5.4
Water Disposal/Source
1.5
0.0
1.5
Subsurface/Surface/other
4.3
4.2
8.5
47.5
12.3
59.8
32.6
34.0
66.6
80.1
46.3
126.4
ASP Chemical
Total
• Phase 1 costs: $6.5 million in 2012 and $42.0 million in 2013.
• Phase 2 costs occur in 2014 and 2015.
• Capital reported in “as spent” dollars.
6
Little Bow ASP
Key Project Services and Suppliers
Executing an ASP project involves specialized laboratory studies, facility
design and equipment. Zargon benefits from the Increasing numbers of
commercial ASP projects and the resulting industry experience.
7
Lab work and Simulation
ASP formulation
ASP formulation
Reservoir modeling and simulation
SURTEK
Weatherford Labs
CMG
Colorado, USA
Calgary, Alberta
Calgary, Alberta
Engineering
Engineering, Procurement & Construction Mgmt
Wood Group PSN
Calgary, Alberta
Major Equipment Supplier Examples
Water Treatment Equipment (De-oiling)
Water Treatment Equipment (De-oiling)
Water Treatment Equipment (Softening)
Polymer Preparation and Injection Equipment
Tanks
Specialty Tanks
Process Pumps
Process Pumps
Equipment Packaging/Buildings
Ecodyne Ltd.
Siemens Energy Inc.
Anderson Water Systems Inc.
SNF Inc.
Argo Sales
Precisioneering Ltd.
National Oilwell Varco
Schlumberger Canada
CADO Industries
Burlington, Ontario
Louisiana, USA
Dundas, Ontario
Georgia, USA
Calgary, Alberta
Scarborough, Ont.
Edmonton, Alberta
Calgary, Alberta
Calgary, Alberta
Little Bow ASP
ASP Facility Site
The Little Bow ASP Facility will be adjacent to the existing Zargon Gas Plant and Oil Battery
Little Bow ASP: Phase 1&2 Development Areas
16-31 Battery
Zargon Land
Zargon Wells
8
Phase 1 Area
Phase 2 Area
Little Bow ASP Facility
Travers Gas Plant
Little Bow ASP
Recent and Upcoming Project Milestones
Q1 2013
• Zargon sanctions construction of Little Bow
ASP Facility
• Little Bow field pipeline upgrades
Q2 2013
• ASP Facility Site Preparation Begins
Q3 2013
• ASP Site preparation & Piling completed
• Majority of Tanks and Equipment delivered
to site
Q4 2013
• Mechanical / Electrical Construction
• ASP Chemical Supply Contracts
• Well Tie-ins
• Service Wells
• Operator Training
9
Little Bow ASP Facility
Construction Progress Update
June 6, 2013
ASP site preparation is underway.
Rain and wet conditions slows progress.
16-31 Battery
Travers Gas Plant
ASP Facility
field of view
July 31, 2013
ASP Site & Road constructed.
Piling is complete.
August 28, 2013
Two thirds of the tanks and
equipment are delivered.
10
Little Bow ASP Project Update
September, 2013
WWW.ZARGON.CA