HispanicBusiness

2013 CAPITAL AND PRODUCTION GUIDANCE:

--  Zargon's 2013 capital budget has been set at $40 million for (non-ASP)    conventional projects with the drilling of 20 net oil exploitation    wells, plus an additional $38 million for the Little Bow ASP project.    This $78 million capital program is forecast to be funded by cash flows,    bank debt and the sale of $20 million of minor non-strategic oil    properties that are not related to Zargon's six core conventional oil    projects.--  As at the end of the 2012 fourth quarter, Zargon's debt net of working    capital is $113.2 million (unaudited), a level that represents 51    percent of the $222.5 million of credit through convertible debentures    and syndicated loan facilities.--  With the revised (non-ASP) 2013 capital budget of $40 million, Zargon's    2013 oil and liquids production guidance level has been revised to 5,000    barrels per day. This guidance is based on a 21 percent annual corporate    oil and liquids production decline, the fourth quarter 2012 oil and    liquids production rate of 5,065 barrels of oil per day and (non-ASP)    capital program production addition efficiencies of $40,000 per barrel    of oil and liquids per day. These guidance levels will be adjusted for    acquisitions or dispositions as they occur. In the 2013 first quarter,    oil and liquids production is forecast to average 5,150 barrels of oil    per day.--  Zargon's 2013 natural gas production guidance is expected to average    15.0 million cubic feet per day, a production level that reflects a 12    percent "blowdown" corporate decline from 2012 exit rate production    levels of 16.0 million cubic feet per day. In the 2013 first quarter,    natural gas production is forecast to average 15.6 million cubic feet    per day.--  For 2013, Zargon has entered into 2,875 barrels of oil per day of oil    fixed price sales contracts at an average price of $97.94 US per barrel,    which represents 57.5 percent of the 2013 production guidance levels.

--  Zargon's 2012 year end proved and probable total reserves decreased nine    percent to 31.19 million barrels of oil equivalent. These reserves were    appraised by Zargon's independent reserves evaluator McDaniel &    Associates Consultants Ltd. ("McDaniel") and are effective as of    December 31, 2012. On a 6:1 equivalency basis, oil and liquids comprised    74 percent of Zargon's total proved and probable reserves at year end    2012, up from a 70 percent weighting at the end of 2011.--  Zargon's 2012 year end proved and probable oil and liquids reserves    decreased four percent to total 23.05 million barrels. On a per share    basis (basic), Zargon's 2012 year end proved and probable oil and    liquids reserves were 0.77 barrels, a six percent decrease over the    prior year. The proved and probable oil and liquids reserves estimate    includes 4.39 million barrels of probable undeveloped oil equivalent    reserves assigned using a 10 percent incremental reservoir recovery    factor to the ASP tertiary oil recovery project at Little Bow, Alberta.--  Zargon's 2012 year end proved and probable natural gas reserves    decreased 21 percent to total 48.82 billion cubic feet, due to a    combination of production and 7.02 billion cubic feet of negative    reserve adjustments relating to economic factors. Zargon's business is    completely focused on oil exploitation, and Zargon has not drilled a gas    well since the fall of 2010. Over 90 percent of Zargon's proved and    probable discounted cash flows (PVBT 10%) are attributable to oil and    liquids production.--  Zargon's oil properties are characterized by pressure supported    reservoirs (waterflood or natural aquifers) that provide long-life, low-    decline oil production. Consequently, Zargon's proved developed    producing oil and liquids reserve life index is 6.9 years and Zargon's    proved and probable producing oil and liquids reserve life index is 9.3    years. These low decline oil reserves are well suited for Zargon's    dividend paying business model.--  Zargon's year end 2012 "produce-out" net asset value is calculated to be    $12.79 per basic share. This estimate reflects McDaniel's estimate of    the Zargon properties' proved and probable future cash flow using a    before tax 10 percent discount rate and forecast prices and costs plus    an independent appraisal of Zargon's undeveloped land less an allowance    for the year end bank debt, the full future face value of the $57.5    million convertible debenture and working capital deficiencies. On a    proved and probable developed producing reserve assignment basis,    Zargon's "produce-out" net asset value is calculated to be $10.64 per    basic share. The corresponding proved developed producing net asset    value estimate is $7.75 per basic share.