Zenith Energy

Zenith Energy Ltd. is an international oil and gas production company, incorporated in Canada, dual listed on the London Stock Exchange (ZEN) and the TSX Venture Exchange (ZEE).The primary focus of the Company is the development of large onshore oil & gas fields in countries that offer strong asset protection and a business atmosphere conducive to stable and profitable production activities.  Zenith operates the largest onshore oilfield in Azerbaijan through its fully owned subsidiary, Zenith Aran Oil Company Limited. The Company’s Italian subsidiary operates, or has working interests in, a number of concessions producing electricity, condensate and natural gas.  Zenith’s overarching strategy is to identify and rapidly seize opportunities in the onshore oil & gas sector. Specific attention is directed to fields formerly controlled by oil majors and state oil companies. These assets often have significant untapped potential and the capacity to produce sizeable volumes of oil & gas with technological investment and new management supervision.

OPERATIONS

An international energy production and exploration company that recently acquired the largest onshore oilfield in Azerbaijan following the signing of a 25-year ‘Rehabilitation, Exploration and Development Production Sharing Agreement’ (REDPSA) with SOCAR in 2016.  The Company also operates, or has a working interest in, a number of energy production assets in Italy producing natural gas, natural gas condensate and electricity.

Our Journey

Established in 2007 and listed on the Toronto Stock Exchange in 2008, Zenith was admitted to the London Stock Exchange in 2017 following the Company’s transformational Rehabilitation, Exploration, Development and Production Sharing Agreement with SOCAR (State Oil Company of the Azerbaijan Republic) for the largest onshore oilfield in Azerbaijan

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.

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 is negotiating the acquisition of a new, latest generation drilling rig for its development drilling programme scheduled to begin in 2018. 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.

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.

Operations

Zenith operates the largest onshore oilfield in Azerbaijan through its fully owned subsidiary, Zenith Aran Oil Company Limited.  The Company also operates, or has a working interest in, a  number of natural gas production and exploration assets in Italy through its subsidiary.