Zargon Oil & Gas Ltd ZARFF

RE:Great news today in Canadian oil patch..

[pablo87]

Right now, the main problem is WCS and its record differential with WTI.  This reflects a lack of egress AND record oil sands production (up 500,000 bpd since April according to AER) - there is a good article in today's BOE report on the plight of small producers.  

If the differential was more reasonable such as in July, Zargon would be generating some nice cashflow. So barring a narrowing of the differential, I still think the most likely outcome is a sale of the North Dakota asset AND another concurrent transaction (because the company is not sustainable without North Dakota's cashflow so any sale of North Dakota almost requires another transaction to be completed) such as: drilling in Canada + partial repayment of debentures; sale of the Canadian assets outright; partial repayment of debentures and convert the rest into shares; go private; etc, etc, etc.  

Meanwhile, I don't see the value of Zargon's North Dakota asset going down - if anything it could be rising - compared to almost all other assets, this asset has almost no decline which means minimal capex which means more real cashflow (as opposed to field cashflow).

Since the enterprise value is around $35MM right now (shares $8M, debentures $27M) , I see more upside than downside at this time but as usual YMMV.  GLTA.