Zargon Oil & Gas Ltd ZARFF

ZAR's US financing

[stockfy]

ZAR receives great pricing for its North Dakota properties. 
Their oil in Bakken is sold with zero differentials and their property has zero decline rate, contact ZAR to verify. So they will use the cash to drill there.  They have several drilling locations there in North Dakota, see presentation.

[rad10]

yeah only the ND property has value in this environment. Fact is debentures will own this next year. I am not thrilled about that prospect but we could get 25 - 40 million in recovery value out of it. Tax pools ND property etc. WTI / WCS differentials are not going to stay this way forever. Any narrowing of the differential will be too late for Zargon - the damage is done. There has been zero

[Philbert77]

Can you expand on that idea - "debt recovery play"? What does that mean?

[pablo87]

Receivership/bankruptcy.  Which was a possibility before the financing but now unlikely since on Dec 31, 2019, Zargon has option to convert debentures into shares so that "debt" goes away.

[Philbert77]

So the financing allows them to pay the distributions on the debentures until they can convert them in Dec 2019? Then all the debenture holders get stuck with stock and hope that the company can be liquidated and they actually get some money back? Ugh... sure wish we could get some oil out of this country... Its ridiculous that with the price of oil globally oil producers in Canada are suffering

[pablo87]

Yes this is the most likely scenario IMO.  But there are other scenarios of course. Please understand that these debentures are not "debt" in the traditional sense. This was a financial vehicle (read many of these indentures, legal language almost identical) created by the big banks to offload the debt owed to them by o&g's. Offload to whom you ask? Well their own clients

[rad10]

They wont make it to December 2019. They will make a recapitalisation proposal early next year. Shareholders wiped out / diluted into oblivion hence the insider selling en masse. maybe shareholders keep 5% of the equity. Debentures converted into equity - hopefully we get at least 95% plus of the company. Do the math as to what you think the assets and tax pools are worth. WTI/WCS differentials

[pablo87]

You may be right. Personally I would like to see it in Q3 or Q4 in order for WCS to recover  - an earlier conversion is beneficial to debentureholders IMO. Let's see what happens with the US drilling. I had done the WHAT IF scenario a while back on this and the cashflow impact of drilling was quite positive. Keep in mind, they have no tax pools in the US and once the debentures are gone,