Strategy

In 2016 the Company entered into a 25-year Rehabilitation, Exploration, Development and Production Sharing Agreement (REDPSA) with SOCAR (State Oil Company of the Azerbaijan Republic) for the largest onshore oilfield in the country. The 2P reserves of the field have been independently assessed as 31.7 million barrels of oil in the Company’s 2018 CPR, with an approximate net present value discounted at 10% of US$469 million

The Board of Directors views Azerbaijan as a very reliable jurisdiction in which to do business and as the ideal springboard for the Company’s successful expansion. Azerbaijan occupies a strategic geographical position at the crossroads between the East and West, and is the world’s oldest oil and gas producing country with the first commercial production of oil recorded in 1834. Since independence in 1991, Azerbaijan’s energy strategy has centred on the Caspian Sea with a series of highly successful production sharing agreements with international oil majors such as BP, ExxonMobil, Lukoil and Statoil among others.

Zenith’s 2016 Azerbaijan acquisition has been a turning point for the Company and I am fully confident that it will prove transformational. Current production averages approximately 300 BOPD and historical production once averaged 15,000 BOPD during the Soviet Union period after oil extraction first began in 1971.

Andrea Cattaneo

The decline in production to current levels is the result of a series of cumulative mechanical failures that have over time affected a number of wells across the field, following a lack of sustained investment in field infrastructure. To be sure, it is a complex field with deep wells presenting a series of geological and technical challenges, but at the same time, as indicated by its very significant 2P reserves of 31.7 million barrels of oil, the field has enormous production potential.

One of Zenith’s defining traits is its low-cost structure and strong fundamentals, supported by low-cost profitable energy production activities. The Board of Directors recognises the dangers presented by imprudent cost undertakings and will always seek to implement the most cost-effective solutions to achieve its objectives. More specifically, we prefer to use our own internal resources and personnel to the greatest extent, and thereby avoid using costly third-party service companies whenever possible. The progressive arrival of new, latest generation oil production equipment will significantly enhance our operational capabilities, as well as substantially decreasing our operational expenditure.

The Company has also announced that it has purchased a 1,200hp drilling rig to perform its Azerbaijan drilling programme scheduled to begin in 2019. Operating our own drilling rig will be a game changer by providing unparalleled operational independence and significantly reducing drilling expenses. This will enable the Company to drill new wells systematically and mitigate the risk of unsuccessful drilling activities.

The rehabilitation and development of our Azerbaijan acquisition is the Company’s primary focus. I am confident that the use of modern production techniques and new equipment will significantly increase production, especially as some very promising sectors of the REDPSA area, specifically Zardab, have been left untouched for the past twenty years.

It is important to emphasise that Zenith is not a ‘make or break’ energy exploration venture whose existence is predicated on uncertain, speculative exploration activities. Zenith is an energy production company with a diversified portfolio, generating revenue each month. This significantly de-risks the Company when compared to many other junior listed energy companies who lack productive, cash-generating assets

The energy sector has undergone a period of transition with many companies overcome by insurmountable levels of debt and unable to perform in a low-price oil environment. We view the current market environment as an ideal context for counter-cyclical expansion opportunities, especially for companies that have strategic vision, adequate funding and a strong operational skillset.

The Board of Directors, some of whom founded Zenith and are significant shareholders in the capital of the Company, recognises the fact that ambitious objectives require strong funding. The Company will always seek to achieve the appropriate funding to support its operational objectives, whilst seeking to avoid undesirable equity dilution. Indeed,  Zenith has a small number of shares in issue compared to other listed energy companies of our size.

Zenith will actively look for any value-accretive opportunities to further strengthen and diversify its asset portfolio, including the possible acquisition of a renewable energy production activity.

I am determined for Zenith to succeed by fulfilling its vast development potential. I greatly look forward to the journey ahead.

Baku, Azerbaijan

September 2018

Andrea Cattaneo
Chief Executive Officer

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  • DISCLAIMER

    PLEASE READ THIS NOTICE CAREFULLY, AS IT APPLIES TO ALL PERSONS WHO VIEW THIS WEBPAGE. PLEASE NOTE THAT THE DISCLAIMER SET OUT BELOW MAY BE ALTERED OR UPDATED. YOU SHOULD READ IT IN FULL EACH TIME YOU VISIT THE SITE.

    ELECTRONIC VERSIONS OF THE MATERIALS YOU ARE SEEKING TO ACCESS ARE BEING MADE AVAILABLE ON THIS WEBPAGE BY THE COMPANY IN GOOD FAITH AND FOR INFORMATION PURPOSES ONLY.

    Viewing the materials you seek to access may not be lawful in certain jurisdictions. In other jurisdictions, only certain categories of person may be allowed to view such materials. Any person who wishes to view these materials must first satisfy themselves that they are not subject to any local requirements that prohibit or restrict them from doing so.

    In particular, unless otherwise determined by the Company and permitted by applicable law and regulation, it is not intended, subject to certain exceptions, that any offering of the common shares in the capital of the Company mentioned in the materials (the “Common Shares“) by the Company would be made, directly or indirectly, in or into, the United States, South Africa, Canada, Australia and Japan.

    The information contained in this website, including any materials you may hereafter access, does not constitute, and may not be used for the purposes of, an offer to sell or an invitation or the solicitation of an offer or invitation to subscribe for or buy, any Common Shares by any person in any jurisdiction (i) in which such offer or invitation is not authorised; (ii) in which the person making such offer or invitation is not qualified to do so; or (iii) in which, or to any person to whom, it is unlawful to make such offer, solicitation or invitation.

    The distribution of the materials and the offering of the Common Shares in certain jurisdictions may be restricted. Accordingly, persons who obtain access to the materials are required to inform themselves about, and to observe any restrictions as to the offer or sale of Common Shares and the distribution of, the materials under the laws and regulations of any territory, including obtaining any requisite governmental or other consent and observing any other formality prescribed in such territory. The Company does not accept any responsibility for any violation of any of these restrictions by any other person.

    The Common Shares have not been and will not be registered under the U.S. Securities Act of 1933 (the “Securities Act“), or the securities laws of any state or other jurisdiction of the United States or qualified for sale under applicable securities laws of South Africa, Canada, Australia and Japan. Subject to certain exceptions, the Common Shares may not be offered, sold, resold, reoffered, pledged, transferred, distributed or delivered, directly or indirectly, within, into or in the United States or to or for the account or benefit of U.S. persons (as defined in Rule 902 under the Securities Act) or to persons in the United States, Australia, Canada (other than pursuant to exemptions from the prospectus requirement under Canadian securities legislation) or Japan or any other jurisdiction where such offer or sale would violate the relevant securities laws of such jurisdiction.

    If you are not permitted to view materials on this webpage or are in any doubt as to whether you are permitted to view these materials, please exit this webpage.

    Access to electronic versions of these materials is being made available on this webpage by Zenith Energy Ltd. in good faith and for information purposes only. Any person seeking access to this webpage represents and warrants to Zenith Energy Ltd. that they are doing so for information purposes only. Making press announcements and other documents available in electronic format does not constitute an offer to sell or the solicitation of an offer to buy Common Shares in Zenith Energy Ltd. Further, it does not constitute a recommendation by Zenith Energy Ltd or any other party to sell or buy Common Shares in Zenith Energy Ltd.

    Electronic versions of these materials are not directed at or accessible by persons located in the United States, South Africa, Australia and Japan or any other restricted jurisdiction.

    I have read and understood the disclaimer set out above. I understand that it may affect my rights. I agree to be bound by its terms. By clicking on the “Accept” button, I confirm that I am permitted to proceed to electronic versions of these materials.