Zargon Oil & Gas Ltd. reported earnings and operating results for the third quarter and nine months ended September 30, 2016. For the quarter, the company reported funds flow from operating activities of a negative $0.61 million or $0.02 per basic share compare to positive $3.29 million or $0.11 per basic share reported in the third quarter of 2015. The reduction in funds flow is primarily due to one-time employee severance costs of $1.72 million and transaction costs of $0.92 million relating to the sale of Zargon's Southeast Saskatchewan and Killam, Alberta properties. Third quarter 2016 capital expenditures (excluding property dispositions) were $1.90 million and included $1.36 million of expenditures related to the Little Bow ASP project. Cash flows from operating activities were $3.19 million compared to $7.65 million a year ago. Net earnings were $13.81 million or $0.45 per basic share compared to net losses of $41.16 million or $1.36 per basic share a year ago. Gross petroleum and natural gas sales were $12.33 million compared to $16.23 million a year ago.

For the nine months period, the company reported gross petroleum and natural gas sales of $35.47 million compared to $52.96 million a year ago. Funds flow from operating activities were $2.64 million or $0.09 per basic share compared to $20.52 million or $0.68 per basic share a year ago. Cash flows from operating activities were $6.44 million compared to $21.30 million a year ago. Net losses were $0.28 million or $0.01 per basic share compared to $49.81 million or $1.65 per basic share a year ago. Net capital expenditures were $86.56 million. Net debt as at September 30, 2016 was $32.99 million compared to $116.96 million a year ago.

For the quarter, oil and liquids production averaged 2,915 barrels per day, a 15% decrease from the preceding quarter rate of 3,413 barrels of oil and liquids per day. Third quarter 2016 natural gas production averaged 3.39 million cubic feet per day, a 5% decrease from the preceding quarter. Total production averaged 3,480 barrels of oil equivalent per day, a 13% decrease from the preceding quarter.

For the nine months, oil and liquids production averaged 3,275 barrels per day compared to 3,760 barrels oil and liquids per day a year ago. Natural gas production averaged 3.67 million cubic feet per day compared to 5.28 million cubic feet per day a year ago. Total production averaged 3,887 barrels of oil equivalent per day compared to 4,640 barrels of oil equivalent per day a year ago.

The company provided production guidance for the fourth quarter of 2016. For the quarter, the company expects oil and liquids production of 2,050 barrels per day, including 460 barrels of oil per day and total production ­ 2,500 barrels of oil equivalent per day.