Zargon Oil & Gas Ltd. provided a Little Bow Alkaline Surfactant Polymer tertiary oil recovery project update, an operational update, Zargon has commenced commissioning the Little Bow ASP tertiary oil recovery project and continues to forecast that first chemical injections will occur in March 2014. This ASP project entails the injection of large volumes of a dilute chemical solution into a partially depleted oil reservoir to recover incremental oil reserves. In addition, the project has included oil battery upgrades, pipeline replacements/upgrades, water injector conversions, well reactivations and the drilling of two injection wells. Including the $35.3 million and $6.5 million of ASP costs spent in 2013 and 2012, respectively, the total capital cost of the wholly owned phases 1 and 2 of the Little Bow ASP project will be approximately $61 million. This estimate is essentially unchanged from the forecast cost provided in February 2013 when the project was sanctioned. The phase 1 and 2 chemicals will be injected over the seven year chemical injection period from 2014 to 2021. Phase 1 of the Little Bow ASP project is expected to provide 100 barrels of oil per day of incremental production in 2014, which will be comprised of an initial production response in the 2014 third quarter and a 2014 year end rate of 350 barrels of oil per day. Incremental production is expected to exceed 900 barrels of oil per day in 2015 and then increase to 1,550 barrels of oil per day in 2016, once phase 2 production begins. Using forecast rates with an estimated field oil price of $67 per barrel, a 12% incremental tertiary royalty rate and operating costs of $10 per barrel of incremental oil, the project is forecast to provide a field netback of more than $48 per barrel of incremental oil production and deliver a property capital recycle ratio of over 1.8 times.

For the fourth quarter 2013, the company's oil and liquids production volumes averaged 4,625 barrels per day, a 4% decrease from 4,816 barrels per day in the prior quarter and two percent above production guidance levels of 4,550 barrels per day. The quarter over quarter reduction in oil production volumes was due in part to the effect of 360 barrels per day of fourth quarter property sales that reduced fourth quarter production volumes by 200 barrel of oil per day. Natural gas production volumes averaged 15.90 million cubic feet per day, a 3% decrease from the prior quarter rate of 16.46 million cubic feet per day and 6% above production guidance levels of 15.00 million cubic feet per day, due in part to prior period adjustments. On a combined basis, fourth quarter 2013 total production averaged 7,276 barrels of oil equivalent per day, a 4% decrease from the prior quarter's rate of 7,560 barrels of oil equivalent per day.

For the year 2013 fourth quarter, Zargon spent $12.6 million on field capital programs in addition to $11.7 million on the Little Bow ASP project. The quarter's drilling activity totalled 8.5 net wells and included 5.5 net conventional oil exploitations wells and 3.0 net wells at the Little Bow ASP project. Zargon spent $40.8 million on field activities and a further $35.3 million on the Little Bow ASP project. The capital expenditures included 16.6 net wells that resulted in 13.6 net oil exploitation wells at Taber, Bellshill Lake, Harmattan and Williston Basin properties and 3.0 net ASP related service wells at Little Bow.

For the first quarter of 2014, natural gas production is anticipated to average 14.0 million cubic feet per day, and calendar 2014's production forecast to average 13.5 million cubic feet per day although this estimate will depend on the magnitude and timing of the company's 2014 property disposition program.