TIDMZEN
RNS Number : 3405M
Zenith Energy Ltd
07 January 2019
The information contained within this announcement is deemed by
the Company to constitute inside information as stipulated under
the Market Abuse Regulation (EU) No. 596/2014 ("MAR"). Upon
publication of this announcement via a regulatory information
service ("RIS"), the inside information contained in this document
is now considered to be in the public domain.
January 7, 2019
ZENITH ENERGY LTD.
("Zenith" or the "Company")
Financing and Operational Update
Zenith Energy Ltd. ("Zenith" or the "Company") (LSE: ZEN; TSX.V:
ZEE; OSE: ZENA-ME) the listed international oil & gas
production company operating the largest onshore oilfield in
Azerbaijan, is pleased to provide a financing and operational
update.
Convertible Loan Facility announced on September 5, 2018
The Company can confirm that it has successfully renegotiated
the terms of the unsecured Convertible Loan Facility (the
"Facility") announced on September 5, 2018 for an aggregate amount
of US$1,500,000.
Zenith has agreed with the consortium of lenders that conversion
of the Facility will now not take place before March 1, 2019 and
that the total outstanding liability in relation to the Facility
will stand at US$1,050,000 (approximately GBP825,000; CAD$1.4
million; NOK 9 million) by January 14, 2019.
Further details on the terms of the Facility, including the
conversion terms, were announced by the Company on September 5,
2018.
Loan Agreement announced on April 5, 2018
The Company is pleased to announce that the non-convertible loan
agreement for the total amount of GBP230,000, signed on April 3,
2018, was repaid in full on December 19, 2018.
Convertible Loan Facility
The Company has entered into a new unsecured convertible loan
facility for an aggregate total amount of up to GBP1,000,000 (the
"Loan Facility") with a consortium of lenders (the "Lenders"). The
Loan Facility has a term of 24 months and the Company shall pay
interest on the outstanding amount of the Loan Facility at the rate
of 8% per annum (the "Interest Rate"). The Loan Facility includes a
first closing that was completed on January 4, 2019 of GBP301,500
(approximately CAD$513,000; NOK 3.3 million), and further closings
that might be completed at a later time. The Loan Facility is
repayable on January 15, 2021.
Under the terms of the Loan Facility, the Company will create
share purchase warrants (the "Warrants") equivalent to 10% of the
total amount drawn down under the Loan Facility to subscribe for
the equivalent number of common shares of no par value in the share
capital of Zenith ("Common Shares") at a price of GBP0.043999 per
Common Share subject to the articles of the Company and the terms
and conditions of the Loan Facility.
With certain limitations, the Convertible Loan Notes ("CLNs")
will be convertible into Common Shares of the Company at any time
after the expiry of a 120 day lock up period from the date of issue
of the CLNs, January 15, 2019, as required under applicable
Canadian securities laws.
The conversion price will be the lower of GBP0.04399 (CAD$0.075;
NOK 0.48) per share and 90% of the average of the London Stock
Exchange sterling closing price of a Common Share for the five
Business Days prior to the day on which the relevant conversion
notice is served, with a conversion price to be no lower than
CAD$0.06 (approximately GBP0.035; NOK 0.39 ) per Common Share for
the full duration of the Loan Facility. In addition, conversion of
the CLNs may not occur to the extent that the number of Common
Shares to be issued pursuant to the relevant conversion notice
would take the number of Common Shares issuable in respect of
conversion notices served in any month to exceed 5,000,000 Common
Shares.
An application will be made for any Common Shares issued and
allotted upon exercise of the Warrants or conversion of the CLNs to
be admitted to the standard segment of the Financial Conduct
Authority UK Official List and to trading on the Main Market for
listed securities of the London Stock Exchange (the "Admission") as
well as the TSX Venture Exchange and Merkur Market of the Oslo
Børs. The new Common Shares will rank pari passu in all respects
with the existing common shares of the Company.
The Facility agreement includes normal warranties and default
clauses.
Operational Update
Well C-37, Jafarli Field
The Company can confirm that preparation activities for well
deepening operations in well C-37 of the Jafarli field have been
completed successfully. The estimated saving achieved by utilising
Zenith's A-80 workover rig to complete these activities has been
assessed as approximately US$250,000.
As announced on November 23, 2018, these operations have
involved running in hole with a scraper to perform a cleanout of
the casing to a depth of 3,904 metres.
During these operations an obstruction was encountered at a
depth of 1,830 metres requiring the scraper to be pulled out of
hole and further well cleanout operations to be undertaken.
Once further cleanout activities were completed, Zenith's field
team ran in hole with a
tri-cone drill bit successfully clearing the previously detected
obstruction at a depth of 1,830 metres and reaching the target
depth of 3,904 metres (production casing shoe). The tri-cone drill
bit was subsequently pulled out of hole and a scraper was again run
in hole and successfully cleaned out the wellbore to a depth of
3,904 metres as planned.
Following these activities, wireline logging was successfully
performed, and the well is now deemed ready for well deepening
activities.
Tender Process for Well C-37 Deepening Operation
The Company confirms that a total of 12 companies have
participated in the tender by submitting commercial and technical
bids for well C-37 deepening operations. Zenith is currently
evaluating the aforementioned bids in consultation with its
partner, SOCAR, and expects to award contracts, in accordance with
its tender procedure and with the approval of its partner, during
the next 14 business days.
Jafarli Field Well Deepening Programme
The Company's geological investigations have determined that a
number of wells adjacent to well C-37 in the Jafarli field share a
strong production potential from the Middle Eocene and Upper
Cretaceous formations of the same unexploited structure identified
as the target zone for well deepening operations in well C-37. The
Company's field team is currently determining which well represents
the best candidate for well deepening operations through a series
of well tests and workover activities utilizing its A-80 workover
rig.
Zenith can confirm that its A-80 workover rig is currently
performing a full cleanout of the well C-26 wellbore to the depth
of 3,920 metres (production casing shoe) in order to confirm the
integrity of the production casing and thereby determine whether
the well might be suitable for well deepening activities.
In the event of a successful result being achieved in well C-37
deepening operations, the Company will mobilise a drilling rig to a
second well location in the Jafarli field to perform well deepening
operations targeting the same Middle Eocene and Upper Cretaceous
formations.
BD-260 Drilling Rig
The Company has received confirmation from B Robotics W S.r.l.,
("Robotics") that the BD-260 drilling rig, purchased by its
oilfield service company subsidiary, Zena Drilling Limited,
("Zena"), has been fully rigged up and that all components have
been fully tested. Robotics is now rigging down the BD-260 drilling
rig in preparation for transportation.
Zenith is currently defining an agreement with an international
logistics company in order to transport the BD-260 drilling rig
from Italy to Azerbaijan. The Company will make an announcement
once transportation of the BD-260 drilling rig begins.
2019 Production Target
Zenith's oil production target for the 2019 calendar year
remains unchanged at 1,000 barrels per day. The arrival of new
equipment including a 260-ton drilling rig, a 100-ton truck-mounted
workover rig, and the planned leasing of a 180-ton truck-mounted
drilling rig from a local drilling contractor, to be used on the
basis of detailed geological and reservoir investigations, is
expected to enable the Company to achieve this target.
The Company's current average production is approximately 270
barrels per day generating gross monthly revenue of approximately
US$450,000.
The decline in oil production has resulted from the temporary
shutting-in of certain wells in the Jafarli and Muradkhanli fields
due to uneconomical performance caused by high watercut, and the
necessary suspension of production from wells undergoing well
preparation for deepening activities in the Jafarli field.
2019 Drilling Campaign
As announced on August 13, 2018, the Company has completed two
comprehensive geological studies to optimise the selection of
potential drilling locations and workover opportunities across the
Muradkhanli, Jafarli and Zardab fields.
The study focussed on the Muradkhanli and Jafarli fields enabled
the identification of a new, previously unexplored, Mesozoic
carbonate prospect running across the two fields beginning from the
south-western flank of the Muradkhanli field.
The Zardab field geological study enabled an identification of
the main producing target reservoirs, seal and source rocks, a
comprehensive analysis of all well test results, digitalisation of
all well logs, the creation of stratigraphic logs and structural
logs, as well as several structural maps.
The Company is finalising a drilling programme that is planned
to initially include the spudding of an appraisal well during the
first six months of 2019, to be named ZEN-01, to target the
aforementioned unexploited Mesozoic carbonate prospect in the
Muradkhanli and Jafarli oilfields.
Andrea Cattaneo, Chief Executive Officer, commented:
"We are pleased to have successfully renegotiated the
convertible facility announced on September 5, 2018, and to have
obtained additional funding from a new loan facility that will be
invested directly into our operations as we begin highly
prospective drilling operations in Azerbaijan.
As is clear, considerable progress has been made in a number of
areas and we are increasingly positioning ourselves towards
achieving the transformational potential of our asset indicated by
our independently assessed 2018 CPR 2P reserves (proved plus
probable) of 31.7 million barrels of oil. The significant
improvements in our knowledge of the field's geology, combined with
the equipment we shall soon be able to deploy, should have a
determining influence on the success of the intensive workover and
drilling activities that we have planned during 2019.
I am excited about our planned activities during the months
ahead which should enable us to reward the commitment of Zenith
investors."
Neither the TSX Venture Exchange nor its Regulation Service
Provider (as that term is defined in the policies of TSXV) accepts
responsibility for the adequacy of this release.
Further information:
Zenith Energy Ltd.
Andrea Cattaneo
Chief Executive Officer
E-mail: info@zenithenergy.ca
Tel: +1 (587) 315 9031
Daniel Stewart & Company Plc - (Joint Broker)
Robert Emmet- Corporate Broking
Tel: + 44 (0) 207 776 6550
Optiva Securities - (Joint Broker)
Christian Dennis
Tel: + 44 (0) 203 137 1903
Allenby Capital Limited - (Financial Adviser)
Nick Harriss
Nick Athanas
Tel: + 44 (0) 203 328 5656
Notes to Editors:
Zenith Energy Ltd. is an international oil and gas production
company, listed on the TSX Venture Exchange (TSX.V:ZEE) and London
Stock Exchange (LSE:ZEN). In addition, the Company's common share
capital was admitted to trading on the Merkur Market of the Oslo
Børs (ZENA:ME) on November 8, 2018. The Merkur Market is a
multilateral trading facility owned and operated by the Oslo
Børs.
The Company was assigned a medium to long-term issuer credit
rating of "B+ with Positive Outlook" on October 8, 2018 by Arc
Ratings, S.A.
The Company operates the largest onshore oilfield in Azerbaijan
following the signing of a 25-year REDPSA, (Rehabilitation,
Exploration, Development and Production Sharing Agreement), with
SOCAR, State Oil Company of the Republic of Azerbaijan, in
2016.
The Company's primary focus is the development of its Azerbaijan
operations by leveraging its technical expertise and financial
resources to maximise low-cost oil production via a systematic
field rehabilitation programme intended to achieve significantly
increased revenue. Zenith also operates, or has working interests
in, a number of natural gas production concessions in Italy. The
Company's Italian operations produce natural gas, condensate and
electricity.
Zenith's development strategy is to identify and rapidly seize
value-accretive hydrocarbon production opportunities in the onshore
oil & gas sector. The Company's Board of Directors and senior
management team have the corporate and technical expertise to
develop the Company successfully.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
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