Zargon Oil & Gas Ltd ZARFF

ZAR's new Presentation with the 10 "drill-ready" locations

[stockfy]

ZAR is a typical tax loss candidate, so the stock has dropped and there is a huge disconnect between its current market cap and its upside potential. Thanks to the recent financing in USD, it has cash to drill some of its drill-ready locations, at least those in North Dakota. I guess it will drill those 2 drill-ready locations in North Dakota and will sell this great low-decline asset in 2019 with better WTI prices. So it will eliminate its recent loan in USD and keep the remaining cash to redeem some of the debentures. WTI must recover by early 2019. Oil price in North Dakota is based LSB stream, a significant premium to WCS crude, read the presentation, slide 7.

AECO has risen a lot while WCS is expected to rise by early 2019, so ZAR will receive for its Canadian oil and gas production much higher oil price than the current WCS.

Actually, ZAR has drill-ready oil-weighted locations both in North Dakota (2 locations) and in Alberta (8 locations), see new presentation:

https://zargon.ca/wp-content/uploads/2018/11/Zargon-Corporate-Presentation-November-13-2018-v4.pdf

[rad10]

(e) Going Concern: These financial statements have been prepared in accordance with generally accepted accounting principles applicable to a going concern, which assumes that the Company will be able to realize its assets and discharge its liabilities in the normal course of business. As of September 30, 2018, the Company has working capital of $1.17 million and generated a net loss for the nine

[Cardboard1]

The interest due can be paid in shares equivalent by the way. So that could allow them to reduce stress until next payment in September and a return of more sane differentials. Cardboard

[rad10]

I never read a PIK interest clause in the prospectus Cardboard - I will have to go back and take another look.  Interesting - you have piqued my curiosity.  Bedtime reading on SEDAR tonight ;-)

[pablo87]

The procedure outlined in the indenture calls for the trustee to hire a broker to sell the shares for cash. That seems completely impractical given the current share price and trading volume.

[rad10]

you beat me to it Pablo.  The payment in kind does not apply to interest payments only redemption or cancellation.  Allotted shares have to be sold and the debenture holders receive cash.  This strengthens our position and should be a huge alarm bell to current common share holders.

[pablo87]

It all depends on what happens to oil prices. After the financing, Zar has ~$8M cash on hand but at current oil prices they could go thru $2M this quarter leaving $6M at December 31. If the WCS differential continues into Q1 with no sign of abating, then yeah its probably prudent to save the company cash and issue shares instead.   But that seems to be the worst case scenario as they could