Gordon Stein, CFO of CleanTech Lithium, explains why CTL acquired the 23 Laguna Verde licenses. Watch the video here.
Source? Which account on X?
In this arbitration, the court seem to being asked to rule simply:
a) Was the license entitled to be renewed for an extended period under the terms of the CNAOG contract which Zenith inherited when it bought CNAOG from the China National Petroleum Company?
b) If so then what was the amount of production that was lost by this breach of contract and therefore what is the financial value of this loss
Obviously in addition to the CNAOG losses which seem quite straightforwards there is also the losses related to the Kuwait Foreign Petroleum Exploration Company (K.S.C.C)’s 22.5% but I feel that this could be a bit more complex because I am not sure that this deal was ever approved by the Tunisians.
The third arbitration seems to be by far the most complex of the three as it deals with issues related to the Tunisans deliberately blocking Zenith developing Sidi El Kilani and Ezzaouia. If this deliberate obstruction can be proved then Zenith can claim the potential for greater production that would have been achieved from both assets and therefore additional losses separate from those related to the second arbitration. But obviously there are many “ifs” and “maybes” in this one and I can see why it is going to take the longest. I do think that it is clever that Zenith have separated out the second and third arbitrations though.
I also think that the fact that Anima Dispute Resolutions have resigned from representing the Tunisians in this court case is very significant. According to their website they are a very experienced and internationally renowned law firm, so why would they stop representing the Tunisians in this case? It is not just because they think that they might lose as they would get paid for the work that they do anyway and lawyers do not walk away from high paid legal cases for no reason. To me, their resignation hints that there is something in there on the Tunisian side that is very rotten and they do not wish to be involved with – and if this is the case then it is potentially very beneficial for Zenith.
Finally, the mention of granting an extraordinary dividend to shareholders if the various arbitrations are successful is a very interesting move by the company and would be much welcomed by all of us. Obviously, I would like more information about what percentage of any award this extraordinary dividend would represent, but given that according to the 13th Feb 2024 fundraising RNS Andrea currently owns 9% of Zenith then it would obviously be in his own personal interest for any dividend to be as large as possible.
Decent posting by MGS
An interesting update from Zenith on the Tunisian arbitrations this morning. Here are my thoughts so far.
Arbitration 1 for $7.5 million expected to be decided this year
Arbitration 2 for $85.8 million to be decided by this time next year
Arbitration 3 for $48 million expected to be decided in 2027
On the face of it this all seems to make sense. The latest RNS has given a pretty comprehensive summary of what all of the arbitrations are about and where they sit in terms of settlement time periods.
The first arbitration is a relatively simple matter, as far as these things go. It is effectively a court case brought about by the fact that ETAP sold oil that was owned by EPZ (Zenith’s subsidiary) and did not pay Zenith their share of the money. So, as I have said for a long time now, this should be a pretty simple case to determine. If Zenith are owed the money then they need to be paid. It is also worth noting that this is the arbitration in which Zenith have already announced that they have seized $6.5 million of funds from an ETAP Swiss bank account. This means that the vast majority of the money is available for Zenith to receive as soon as the court order is made.
The second arbitration is less straightforward than the first as it has additional elements to it regarding loss of earnings based on Zenith not being able to operate their assets since the breach of contract by the Tunisians. As far as I understand the RNS this seems to relate to revenue that should have been received by Zenith from the moment of the company purchasing the CNAOG 22.5% of SLK, but that was not paid between then and the expiry date of the license in December 2022. It also relates to money lost from the Tunisian government refusing to grant Zenith the right to renew the license that CNAOG appear to have possessed in their original agreement – though it is not made clear how long this right to renew was for. This arbitration also includes a similar claim related to the KSCC 22.5% of SLK.
This arbitration is a fair bit more complex than the first one as it relates to loss of earnings and potential earnings rather than just the non-payment of a bill (as per arbitration 1) but it still does not seem too complex. In this case, the vast majority of the damages it seems to me relate to loss of earnings from the refusal to renew the 22.5% license from December 2022 for an extended term. Assuming that the CNAOG contract with the Tunisians was watertight, and based on the fact that the previous owner of CNAOG was China’s national oil company and the Tunisians would not have dared to mess them around it is probably safe to assume that it was. Then the case relates to damages for years worth of oil production that Zenith has not been able to access and this is why the numbers in this one are so big. Obviously we do not know how long the license was to be renewed for, but Zenith do and it must be for a substantial period.
Taverham In the event of a favorable outcome in the court case, I anticipate that enforcement will not present significant obstacles. Tunisia's close ties with Europe render it unlikely to pursue an independent course akin to Iran's defiance of international law. Moreover, Tunisia's ongoing application for assistance from the International Monetary Fund (IMF), coupled with the recent appointment of a new central bank governor, underscores its commitment to financial stability and compliance. Failure to honor international arbitration penalties, particularly those mandated by Washington, would jeopardize Tunisia's access to IMF funding. Additionally, specialized international funds exist to purchase granted but unenforced awards from successful claimants at a discounted rate, assuming responsibility for enforcement and subsequently realizing profits upon receipt of funds. This practice is now commonplace within the international arena.
The recent Regulatory News Service announcement presents both favorable and unfavorable aspects. The notable drawback is the issuance of an additional 38 million shares, resulting in an approximate 16% dilution. However, a positive element emerges as two company directors have personally invested a substantial sum in this issuance, while efforts persist to finalise the debt financing for the Devonian deal.
This fundraising action appears to be a proactive step in addressing capital needs. At the beginning of this year Zengas accurately hinted at the company's impending shortfall in working capital, and this has indeed proved to be the case. I had personally hoped that that bond raising efforts would obviate the need for equity issuance, but it would appear that the company have thought it prudent to carry out the recent fundraising initiative in order to proactively address any cash-flow issues between now and the completion of the bond issuance.
It remains pertinent to acknowledge Zenith's intention to finance the Kazakhstan drilling campaign through debt, a detail confirmed in the recent RNS. The company's pursuit of a €25 million bond program, as previously disclosed in their semi-annual accounts, has been underway for some time.
Given the recent £1,260,000 raised, with no immediate allocation to the Kazakhstan acquisition and development, it appears plausible that progress is being made on the bond issue. Consequently, the equity raising serves as a temporary measure to ensure solvency until the bond issuance concludes. While the RNS mentions earmarking some of the £1.26 million for acquisitions in America and development in Italy, it seems judicious to delay such expenditures until after securing the bond financing, thereby preserving current working capital to facilitate the deal's completion.
This fundraising effort instills confidence in Zenith's future prospects. The relatively modest amount raised, coupled with its non-allocation to major acquisitions, underscores its role as a short-term liquidity solution. The personal investments made by Andrea Cattaneo and Luca Benedetto, which total almost £250,000 of their own funds, demonstrate their confidence in the company's strategy. Successful execution of the €25 million bond issue, as envisaged, would position the company with a robust cash position and ample opportunities for development, such as the Devonian drills. My sentiment on Zenith is, therefore, very positive and I agree with the final line of the RNS: the year 2024 does indeed hold significant potential for shareholder value creation.
Ezhik, I appreciate the insightful points you've raised in your last post. However, I would like to express some minor differences of opinion regarding certain aspects of your comments.
Upon careful examination of the RNS concerning the acquisition, it is evident that the existing licenses extend until July 2025, precisely 18 months from the present date. However, I believe the drilling of the well within the current year, as you suggest, is a prudent approach.
The RNS explicitly outlines that drilling a well and reprocessing seismic data are the last two criteria mandated by the Kazakhstani government for the license transition from a six-year exploration license to a 25-year production license. It appears that successfully completing this well fulfills the remaining requirement, positioning the company to secure the 25-year license.
Contrary to your observation about drilling a deep well, I find no indication in the RNS that suggests Zenith would be drilling such a well. While the document mentions a deep well, AK-1P, drilled in Soviet times down to 6,290m, the document also makes clear that this was intended to drill to 7,000m but encountered difficulties with high gas pressure. I cannot see any circumstance whereby the company would drill to this depth for the first well.
To me, the RNS clearly suggests that the next well will be an appraisal well, signaling a transition from exploration as the license development advances toward a production permit. This leaves the choice between the AK-20 well, which recovered oil at 2,660m and gas at 1,913m, and the KM-1 well, encountering 30m of oil-bearing sands between 1,680 to 1,720. My inclination is toward the KM-1 well, given the additional details provided in the RNS and the known oil deposits. However, I defer to your expertise in the oil-field domain for correction or guidance on my assumptions.
Considering the relatively shallow depth of a well drilled to approximately 1,700m, as indicated in the RNS, and drawing on the example of the BD-260 rig's successful drilling to a total depth of 4,350 meters in the C37 drill in Azerbaijan, the rig demonstrates the capability to drill more than twice the required depth for the KM-1 well in Kazakhstan.
In my opinion, Zenith appears to possess the necessary equipment capable of drilling the anticipated shallow well, and finding a competent team to operate it should be feasible. The primary remaining question, as you rightly pointed out, is the duration required to recondition the BD-260 rig for drilling readiness. While I tentatively estimate 2-3 months as sufficient, I defer to your superior knowledge in this domain. However, I am strongly inclined to believe that the well will be drilled within the current year, hopefully early H2,, and I find no compelling reason to incur additional expenses on an external rig for this purpose.
Ezhik, thanks you for your sensible points. Your detailed knowledge of the Azerbaijan drills is certainly useful to me and I appreciate it.
I find it interesting that the significance of the rig acquisition becomes context-dependent, influenced by the temporal perspective from which it is observed. Initially, the decision to procure the rig aligned with strategic plans for extensive well drilling, presenting a cost-effective measure for long-term savings. However, with the subsequent utilization limited to a single well in Azerbaijan, the expenditure appeared imprudent and fiscally inefficient
.
Presently, as the organization strategises to undertake multiple well drilling projects in Kazakhstan utilizing their proprietary equipment, the earlier acquisition is reevaluated as a judicious investment. The dynamic nature of the oil drilling industry often renders judgments on such acquisitions subject to the evolving circumstances and outcomes.
In reflecting on this variability, an apt analogy is drawn from the words of Ian Fleming: "The distance between insanity and genius is measured only by success." This sentiment underscores the volatile nature of success in the oil drilling sector, where decisions may oscillate between brilliance and folly based on the realized outcomes and prevailing conditions.
We can only hope for a successful outcome in the drilling of the Kazakhstan license. However, to me it seems like a sensible commercial decision at this point in that the potential rewards of Kazakhstan considerably outweigh the potential risks, which are essentially the same as in any other drill. The program is neither genius nor insanity but it will inevitably be re-evaluated as one or the other when we look back at events with the benefit of hindsight.
Ezhik not sure what happened to your post it disappeared as I was responding. In the Azerbaijan drilling project, it's important to clarify that Zenith's rig demonstrated no issues with drilling capacity when employed for a deeper and more modern well. The failure in the cement job, as acknowledged, was attributed to the contractor and not the rig itself.
The absence of modern data for drilling operations in Azerbaijan clearly posed a significant challenge during the project and to claim otherwise is simply to engage in a historical reinterpretation that, from my perspective, lacks accuracy.
A notable hurdle in Azerbaijan was clearly the mandatory use of local Azerbaijani teams for all project-related work by Zenith. The inability to leverage international expertise became a central challenge in the drilling operations in the country and was a major contribution to the project’s failure.
Contrastingly, the upcoming project in Kazakhstan presents a different operational landscape for Zenith. The government's apparent openness to international collaboration, a proactive stance toward learning from international partners, and a more favorable approach to workforce utilization make Kazakhstan a more promising venture. Additionally, the availability of newer 3D seismic data in Kazakhstan distinguishes it significantly from the situation in Azerbaijan. Drawing direct comparisons between the two countries is erroneous given their distinct operational contexts as the one has no relationship with the other.
Responding to the previous poster however the post got deleted. either way shall still post the reply intended
A comparison between Azerbaijan and Kazakhstan is not warranted unless one harbors a bias related to events that transpired almost a decade ago. The challenges encountered in Azerbaijan stemmed from inaccuracies in Soviet-era well data. It became evident only during drilling that the provided information was significantly flawed. In such circumstances, success was unattainable, irrespective of the entity conducting the drilling. Notably, there were no issues with the rig itself in Azerbaijan; it successfully drilled all wells, but the erroneous data impeded oil flow.
Conversely, the situation in Kazakhstan is more promising. Updated 3D seismic data, acquired within the past decade, covers 70% of the license area. This stands in stark contrast to the reliance on 50-year-old data in Azerbaijan. Additionally, a comprehensive Petroleum Resource Assessment (CPR) indicates P50 resources totaling 120 million barrels of oil. Armed with a proven rig and benefiting from the region's historical success in producing significant oil fields, Zenith is presented with a substantial opportunity. The apparent support from the Kazakhstani government further reinforces the prospect of success.
Https://www.naturalgasworld.com/kazakhstan-hikes-oil-and-gas-condensate-output-7-in-2023-109079
Kazakhstan increased its crude oil and gas condensate production by 7% in 2023 to 89.9 million metric tons (1.8 million barrels per day), slightly below a planned 90.5 million tons, Reuters calculations based on official data showed on Tuesday.
Zengas, I appreciate your engagement, it is a pleasure to find somebody with whom one can have a sensbile conversation about accounts. We are rather a rarity on these forums.
I have to be honest with you and confess that the $1 million figure I previously mentioned was a rounded estimate from the half-yearly accounts. I acknowledge your point that the current cash balance may have evolved since then, considering both expenditures incurred and revenues generated from Italian electricity sales. Although the exact revenue remains unknown, my expectation is that this revenue would likely surpass the figures reported in the recent half-yearly report, given the typically increased winter prices.
Regarding the €25 million bond, I am confident that no warrants will be issued in connection to it. It is crucial to distinguish between debt and equity instruments, as they belong to distinct markets and warrants are typically associated with equity positions and are not issued in formal bond market settings. It is certainly common that warrants would be issued to private lenders, but never in the bond markets, it is just not done Personally, I find warrants used by any company acceptable if issued at a reasonable price, as they generate revenue when exercised. However, I am certain that they will not be issued in this instance for the aforementioned reasons.
On the point about Zenith giving a formal refusal to issue more equity, I think that it is unlikely we would ever receive this in an annual or half yearly report as it would definiteively eliminate a potential fundraising avenue. However, it is notable that Zenith has only issued 300 million (30 million post-consolidation) shares since the 2022 annual report, suggesting that reliance on equity issuance is not currently prevalent. I would agree with you here though, I would not like to see existing shareholders diluted any further than they already have been.
On the matter of the Devonian acquisition, I believe the dates may not be as definitive as you have presented here. My understanding, based on the RNS, is that payment is contingent upon receiving formal regulatory approvals from the Republic of Kazakhstan and not by any set date; though please correct me if I am in error on this. Regardless, I would certainly hope that they plan to have the €25 million bond in hand sooner rather than later. It would be better for the company all round.
I concur with the need for clarity on Leopard's operational plans and support your call for a more detailed presentation, not only for Kazakhstan but for the entire company. I also agree that Andrea Cattaneo deserves some success alongside all of us long-suffering shareholders. However, I feel optimistic that this year holds significant promise for Zenith Energy. We have certainly endured our fair share of challenges and deserve a positive turn of events to even up the scales.
Zengas I have read through the Zenith half-yearly account and am very happy with what I can see there. The Italian assets continue to generate a reasonable revenue even with the gas prices nowhere near as high as they were last year.
Despite the company having only $1 million in cash in the bank,, it is important to note that Zenith Energy is solvent and well positioned to fund its Kazakhstan assets through a €25 million debt program.
While the cash balance may seem low, it is essential to consider the company's overall financial health. Zenith Energy has a strong asset base, which includes revenue generating assets in Italy and an incredible deal in place for enormously valuable oil and gas reserves in Kazakhstan. It is well positioned to fund its Kazakhstan assets through a €25 million debt program. This clearly plays a crucial role in Zenith’s ability to fund its operations and further develop its assets and provides the necessary financial resources to support the company's growth strategy.
It is also important to highlight that Zenith Energy has a solid track record of successfully executing its debt programs in the past. This demonstrates the company's ability to manage its financial obligations effectively. Additionally, and even more importantly, it show that Zenith has established strong relationships with financial institutions, which further supports its ability to secure funding for its operations, both now and in the future.
The Zenith management team have a proven track record of making excellent acquisition decisions that have delivered valuable assets to the company for very little up-front cost. The Tunisian acquisitions made the company a huge amount of money before the Tunisian government broke the contract and they look like they may deliver hundreds of millions more in compensation from the various arbitrations that are in progress.
Once the company commence the debt program then the Kazakhstan and US acquisitions can be funded with no dilution to shareholders so it is evident that the business plan in place is sensibly financed and more than enough to deliver the ambitious company objectives. If they are successful with the Kazakhstan drilling operations then this is likely to be a transformative year for the company.
Botham that’s incorrect the deal has been fully closed.
Wiping out spreads about to bounce naughty games by the MMs
Courtesy of MGS
It looks like Zenith have gotten really serious really quickly with this arbitration process, this latest arbitration is bigger than the other two combined and takes the total amount that Zenith are suing for to US$140,300,000. This is serious money.
I liked the details in the latest RNS of exactly what they are claiming for, and I really really like the fact that the amount of $US85.8 million is a figure that has been assessed by a third-party independent expert. This is big money Zenith are after from Tunisia – more than 10 times the company’s current market cap in this arbitration alone, and almost 20 times the market cap when all three are put together. It will obviously take time to go through the system, but ultimately if they are successful then Tunisia will have no choice but to pay.
It wouldn’t be the first time that a small oil company have been successful in an arbitration against a nation state either. In August 2022 the International Centre for Settlement of Investment Disputes ruled in favour of Rockhopper against the Italian state when Italy unilaterally rejected Rockhoppers legal license to drill. In this case the International Centre for Settlement of Investment Disputes awarded Rockhopper €190 million plus interest https://rockhopperexploration.co.uk/2023/04/update-on-arbitration/ , and this was for damages on a well that was never even drilled. Obviously, Italy have appealed and the process is still continuing, but it is looking very likely that Rockhopper will see their money in 2024.
If Zenith can start acquiring US and Kazakhstani production assets as the company has planned and these deliver regular cashflow over the next few years then the company’s share price will increase significantly anyway. With the arbitration process grinding on in the background while this happens then at some stage there is going to be a huge share price increase if/when the final award comes in.
I’ve got to hand it to AC. He acquired the Tunisian assets for $250k and is now suing for $140m in damages because of the acquisition. If he is successful then that will be a hell of a return on his investment.
I bagged 31249 shares earlier….strong close I think
Money flooding back in
Tyb showing 14% Google price
Great news
'Pauldeano the more I read your posts the more I release you have no clue about the company LOL.'
I concur also