Zargon Puts Saskatchewan Assets On Market

To buy SW MB Manitoba assets & selected properties in Elswick area of SE SK.

Zargon Oil & Gas Ltd. (TSX:ZAR) (TSX:ZAR.DB) has executed two definitive agreements totalling $36 million with private companies for the sale of all of its southwest Manitoba assets and for selected properties in the Elswick area of southeast Saskatchewan, subject to normal course closing adjustments.

The transactions will have effective dates of May 15, 2012 and June 1, 2012, are scheduled to close prior to the end of June 2012, and will be subject to standard industry closing conditions. The proceeds from the transactions will be applied to reduce indebtedness under Zargon's outstanding credit facilities. Zargon anticipates net debt to be approximately $95 million following the closing of the two transactions. The net debt includes Zargon's recently issued $57.5 million five year convertible debentures (ZAR.DB) and approximately $37.5 million of bank debt and working capital deficiencies. Zargon's syndicated borrowing base is currently set at $180 million, and the effect of the proposed dispositions will be integrated into the annual borrowing base review process which is scheduled to be concluded by June 30.

Upon the closing of these dispositions, Zargon will provide updated guidance regarding its capital programs and production guidance.

Based in Calgary, Alberta, Zargon's securities trade on the Toronto Stock Exchange and there are currently 29.514 million common shares outstanding.