Net Asset Value

Zargon’s oil, liquids and natural gas reserves were evaluated using McDaniel’s price forecasts effective January 1, 2017, prior to provisions for income taxes, interest, debt service charges, transaction costs and general and administrative expenses. The estimated values of future net revenue disclosed do not represent the fair market value of the reserves.

Net Asset Value

As at December 31, 2016 ($ millions)

Proved and probable reserves (PVBT 10%)(1) 132
Undeveloped land 2
Working capital (excluding unrealized derivative assets/liabilities) – unaudited 24
Bank debt – unaudited
Convertible debenture – unaudited (58)
Net asset value 100
Net asset value per share
Total ($/basic share)(2) 3.27
  1. McDaniel’s estimate of future before tax cash flow discounted at PV 10 percent.
  2. Calculated using basic total shares outstanding at December 31, 2016 of 30.607 million shares.

The net asset value table above shows what is customarily referred to as a “produce-out” net asset value calculation under which the current value of Zargon’s reserves would be produced at McDaniel’s forecast future prices and costs. The value is a snapshot in time as at December 31, 2016, and is based on various assumptions including commodity prices and foreign exchange rates that vary over time. In this analysis, the present value of the proved and probable reserves is calculated at a before tax 10 percent discount rate. In the net asset value calculation, Zargon’s 45 thousand net acres of land is valued at $2.2 million based on the independent firm of Seaton-Jordan & Associates Ltd. valuation as at December 31, 2016.