Zargon Oil & Gas Ltd. Provides an Update to the Little Bow Alkaline Surfactant Polymer ("ASP") Project

CALGARY, ALBERTA--(Marketwire - Jan. 4, 2012) - Zargon Oil & Gas Ltd. (TSX:ZAR) ("Zargon") announces that it has completed the Little Bow ASP tertiary oil recovery project design studies and is proceeding with the project's detailed engineering and the procurement of long lead time equipment. This tertiary oil recovery project entails the injection of chemicals in a water solution into the Southern Alberta Little Bow Upper Mannville I pool reservoir to recover incremental oil reserves. The project schedule anticipates first chemical injections in July 2013, with a significant oil production response forecast to occur by January, 2014. Zargon's independent engineers, McDaniel & Associates Consultants Ltd. are reviewing the proposed Little Bow ASP project and will be incorporating their project reserve appraisal in Zargon's year end reserve analysis that is currently scheduled to be released on February 15, 2012.

The total capital cost of phases 1 and 2 of the ASP project is approximately $48 million with $21 million to be spent in 2012, of which more than 75 percent of the expenditures will occur in the second half of the year. An additional $11 million of capital expenditures are forecast to be spent in 2013, with the remainder of the capital costs relating to the project's phase 2 implementation scheduled for 2014 and 2015. Prior to proceeding with the significant capital expenditures in the second half of 2012, Zargon will carefully examine all available financing options for this project, which may include forward hedges, if commodity pricing is supportive, sales of non-related properties, or third party participation in the project through partial farm-outs, sell-downs or joint ventures.

Excluding the ASP expenditures Zargon's 2012 net capital budget continues to be set at $55 million. Similar to the 2011 capital budget, field programs are focused entirely on oil exploitation activities designed to increase oil recovery factors in existing reservoirs. Currently, Zargon's debt net of working capital is less than $110 million, a level that represents approximately 60 per cent of Zargon's $180-million syndicated loan facility.

FORWARD-LOOKING STATEMENTS

This press release offers our assessment of Zargon's future plans and operations as at January 4, 2012, and contains forward-looking statements. All statements other than statements of historical fact may be forward-looking statements. Such statements are generally identified by the use of words such as "anticipate", "continue", "estimate", "expect", "forecast", "may", "will", "project", "should", "plan", "intend", "believe" and similar expressions (including the negatives thereof). In particular, this press release contains forward-looking statements pertaining to the following:

• our business plans and strategy;
• anticipated reserve additions;
• ASP and other recovery and development plans and the results therefrom;
• anticipated capital costs and expenditures;
• the amount of, timing and allocation of our capital expenditure program;
• anticipated property dispositions;
• risk management strategy;
• our dividend policy and payment of dividends;
• the sources of funding of our capital expenditures;
• timing of the release of our reserves report.

By their nature, forward-looking statements are subject to numerous risks and uncertainties, some of which are beyond our control, including such as those relating to results of operations and financial condition, general economic conditions, industry conditions, changes in regulatory and taxation regimes, volatility of commodity prices, escalation of operating and capital costs, currency fluctuations, the availability of services, imprecision of reserve estimates, geological, technical, drilling and processing problems, environmental risks, weather, the lack of availability of qualified personnel or management, stock market volatility, the ability to access sufficient capital from internal and external sources and competition from other industry participants for, among other things, capital, services, acquisitions of reserves, undeveloped lands and skilled personnel. This press release also contains test results for various wells. Actual production from these wells could differ materially from these test results. Risks are described in more detail in our Annual Information Form, which is available on our website and at .

Forward-looking statements are provided to allow investors to have a greater understanding of our business. You are cautioned that the assumptions, including among other things, future oil and natural gas prices; future capital expenditure levels; future production levels; future exchange rates; the cost of developing and expanding our assets; our ability to obtain equipment in a timely manner to carry out development activities; our ability to market our oil and natural gas successfully to current and new customers; the impact of increasing competition, our ability to obtain financing on acceptable terms; and our ability to add production and reserves through our development and acquisition activities used in the preparation of such information, although considered reasonable at the time of preparation, may prove to be imprecise and, as such, undue reliance should not be placed on forward-looking statements. Our actual results, performance, or achievement could differ materially from those expressed in, or implied by, these forward-looking statements. We can give no assurance that any of the events anticipated will transpire or occur, or if any of them do, what benefits we will derive from them. The forward-looking information contained in this document is expressly qualified by this cautionary statement. Our policy for updating forward-looking statements is that Zargon disclaims, except as required by law, any intention or obligation to update or revise any forward looking statements, whether as a result of new information, future events or otherwise.

FURTHER INFORMATION

Zargon Oil & Gas Ltd. is a Calgary based oil and natural gas company working in the Western Canadian and Williston sedimentary basins that has delivered a long history of returns, dividends (distributions) and value creation. Zargon's size provides a unique opportunity to pursue oil exploitation projects where we employ a careful reservoir engineering inspired technical approach to profitably increase oil recovery factors from existing oil reservoirs.

In order to learn more about Zargon, we encourage you to visit Zargon's website at where you will find a current shareholder presentation, financial reports and historical news releases.