NEWS RELEASE TRANSMITTED BY CCNMatthews
FOR: ZARGON OIL & GAS
TSX SYMBOL: ZAR
MAY 28 2001 - 18:31 EDT
Zargon Oil & Gas Ltd. And Herc Oil Corp. Announce Agreement
For Zargon To Acquire Herc
Zargon Oil & Gas Ltd. ("Zargon") and Herc Oil Corp. ("Herc")
today jointly announced that they have entered into an agreement
whereby Zargon will make an offer to purchase all of the issued
and outstanding common shares of Herc. The aggregate value of the
offer, including the assumption of approximately Cdn. $5.2
million in net debt and crude oil hedge liabilities, is Cdn.
The board of directors of Herc unanimously supports the Offer and
has agreed to recommend that shareholders of Herc accept the
Offer. Certain shareholders of Herc representing approximately 73
percent of the common shares calculated on a fully diluted basis,
including all officers and directors of Herc, have agreed to
irrevocably deposit their shares under the Offer. Herc has agreed
not to solicit or encourage any competing transaction. Herc has
also agreed to pay Zargon a break fee of Cdn. $1.0 million in
certain circumstances. Sayer Securities Limited acted as
financial advisor to Herc in this transaction.
Herc's first quarter 2001 production averaged 1,065 barrels of
oil equivalent per day (10:1) of which 98 percent is oil
production (30 degree API average) located in the Williston
geological basin in Southeast Saskatchewan (40 percent) and North
Dakota (58 percent). After reviewing reserve reports prepared by
independent consulting engineers, Zargon estimates that Herc has
proven reserves of 4.10 million barrels of oil equivalent (before
royalty) with proven and probable additional reserves estimated
at 5.75 million barrels of oil equivalent. Herc operates
essentially all of its production with an average working
interest of over 90 percent. Herc also brings Cdn. $24.8 million
of successored and unsuccessored tax pools plus US $7.8 million
of tax pools and losses from the US subsidiaries.
Zargon's President and CEO, Craig Hansen commented, "The Herc
acquisition achieves several of our goals by providing a
value-added long-life oil acquisition with a substantial
inventory of oil exploitation opportunities. The key asset is a
98.8 percent unitized working interest producing 570 barrels per
day from the North Dakota Haas field located six miles south of
the junction of the Saskatchewan, Manitoba and North Dakota
borders. This field has 47 million barrels of oil-in-place and a
current oil recovery factor of less than 21 percent. By employing
Zargon's disciplined seismic, reservoir engineering and
production engineering skills, we believe that substantial
reserves can be added. The acquisition will be funded from
Zargon's existing bank line, taking our net debt to $38 million,
which will still be less than 1.3 times our previous forecast of
2001 cash flow. On completion of the transaction, Zargon's
production is projected to be more than 3,000 barrels per day of
oil and 19.0 million cubic feet per day of natural gas."
Zargon anticipates mailing a take-over bid circular to Herc
shareholders shortly. The Offer is subject to all necessary
regulatory approvals and to customary conditions, including that
a minimum of 66 2/3 percent of the Herc shares, calculated on a
fully diluted basis, be tendered.
Zargon Oil & Gas Ltd. is an oil and gas company listed on The
Toronto Stock Exchange trading under the symbol ZAR. For
additional information, please contact Craig Hansen, President &
CEO at (403) 264-9992 or visit Zargon's website at www.zargon.ca.
Herc Oil Corp. is private "non-reporting" oil and gas company.
For additional information, please contact Nathan Hollick,
President at (306) 347-3001.