Member Info for MarketGunslinger

To reiterate what I said the other day:

I fully expect that we will gain access to the $1.25 million of Ezzaouia money by the end of May. I also expect the Sidi El Kilanii approval to go through the CCH once the Tunisian political situation sorts itself out (hopefully in the near future).

Once this happens then with the $1.25 million in storage from Ezzaouia and the $4,225,000 in storage at Sidi El Kilani (assuming oil at $65) then Zenith will have access to $5.5 million.. When you add on top of this the $5.7 million owed by the SNPC then it looks like later this year Zenith will potentially have access to in excess of $10 milllion cash and will continue to have millions in cash coming in from Tunisian production revenues.

When you add in the expected receipt of the Tilapia license after the election is ratified at the end of this month then the company is starting to look in a very good position – being both cash rich and with massive exploration upside in both Tunisia and Congo.

4. Our situation being made worse now we have purchased Ezzaouia? I cannot see how receiving an operation that will instantly bring in oil production and has stored reserves that outweigh the costs of the purchase of the asset by $500,000 at an absolute minimum makes our situation worse. If you mean that you are now more worried about the amount of time that it will take to get the SLK ownership transfer approved then I can see why this might unnerve you. However, you have to remember that we are applying for a license with SLK (simply a change of ownership). Because of this our approval only needs to get past the CCH and it does not have to be ratified by parliament as the license itself is not being reissued. The CCH approval for Ezzaouia was received in April 2019 and it is the final license approval that seems to have taken the time.

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5. With regard to the question as to whether it will be worth doing any workover work without the license being fully approved, I think that we all just have to trust the company on this. As you have said, AC will assess the risk with a more informed view than any of us and if he did send a workover rig here they he would obviously only do it if he thought that it would be beneficial to the company. It would also show that he was certain that the license extension is in the bag. This is certainly what I understand from re-reading the RNS. As I said in the title of this post In my mind it is 99.9% certain that the 20 year license renewal is already completed.

One other thing that is worth pointing out is that although the CCH recommended license renewal in April 2019 and it has still not been awarded, EPZ have clearly been operating in the license and generating revenue for themselves for the last 2 years without any problems. Production has certainly continued as normal even without the license renewal in place so there is no reason to assume that things will be any different just because EPZ is now owned by Zenith.

Florida – to cover the points that you raised earlier:

1. “What if they decided to form a new government by way of a new election who adopted a new greener energy policy?” The oil industry is one of the main pillars of the Tunisian economy and consequently, I would say that the chances of this happening ARE exactly as unlikely as I think and are actually in fact almost impossible. The only “Green” political party in Tunisia “The Green league” got 0.2% of the vote in the 2019 Parliamentary election and has one seat out of 217 in Parliament. They are not much use to any coalition partner with only one seat.

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2. Why are Candax selling? Why does anybody sell anything at under the market price? It is usually because they are desperate. I have no idea of the exact reasons that they are selling now but presumably they have other debts that are coming in and need to be paid before two months are up. Also they presumably do not want to (or more likely cannot afford to) cover the operational expenses that will be incurred in the next two months before they can liquidate the oil assets. I assume that if they stop paying their way there will also be penalty costs in the contract that would be damaging to them.

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3. Dig Oil – The DRC that you are referring to the Democratic Republic of Congo which is one of the most lawless places on earth and completely different to the (relatively) lawful Republic of Congo in which we operate. I assume that you are just using it as an example of what can happen if a completely lawless government trys to renege on a contract and how a company can protect itself.

I have never heard of Dig Oil company or it’s issues before but a very quick look at the details of the dispute shows that the company was not saved simply by having an oil license. What protected them was the fact that their contract in relation to the production sharing agreement stipulated that the parties agreed to submit disputes to "arbitration in accordance with the Arbitration Rules of the International Chamber of Commerce of Paris." This meant that disputes were policed by independent arbitrators outside of the DRC. I got my details from here https://www.ogel.org/legal-and-regulatory-detail.asp?key=24966 but it was the contract that protected them and was nothing to do with their license or lack therof. I get that the PSA forms part of the license agreement but my point is that it is the content of the contract that saved them – not merely the fact that they had a license.

Ezzaouia License Renewal

As I said to Florida yesterday I have just started this morning to look into why the Ezzaouia 20 year license has taken so long to approve. While doing this I realised that I had missed something very significant that should have been blindingly obvious to me as it was written very clearly in the RNS.

The Ezzaouia license has already been given approval for the 20 year renewal.

I can’t believe that I missed this and specifically let me extend my apologies also to Florida for my response to him yesterday where I said that Parliamentary approval was not necessary in Tunisia and also for today where I said that the Tunisian government could decide not to renew it.

The key line in the RNS is “ On April 19, 2019, the Tunisian State represented by the Ministry of Industry and Small & Medium Enterprises informed ETAP and EPZ that the Comité Consultatif des Hydrocarbures ("CCH") had provided a favourable opinion to the application submitted by ETAP and EPZ for a new 20-year concession to be called "Ezzaouia" (the "New Concession"). “

As I mentioned in my post on March 4th the CCH is the body that we are waiting to give approval to us for the transfer of the ownership of SLK from KUFPEC and CNPC to Zenith. The CCH is the body that decides whether any such transfer or license approval goes ahead or not and in the case of the new Ezzaouia license it is decided to approve it. The ratification before Parliament does still need to be done but it is pretty much a rubber stamping exercise – it will be one small line in a long bill of things that will be approved in a bog-standard parliamentary vote where the government is literally just getting through the paperwork.

Obviously, just like our CCH approval this rubber-stamping is being delayed by the paralysis at the heart of the Tunisian government but once they get things running again the license renewal will go straight through. In the meantime we just carry on producing oil as normal and will sell it in the next sales period – which as I have said I believe will be May 20th.

There is no danger (or almost no danger) of the license not being approved as the technical body who makes these decisions (the CCH) have already given their recommendation to approve so the license extension is 99.9% certain to happen.

6. I agree absolutely that the renewal of the 20 year license is completely in the hands of the Tunisian government and they could decide to renew it or not renew it at their own whim. I would far rather that the license is renewed and we end up with a new 20 year license here as well as in Tilapia, but as I have said before the deal is a good one even if we do not. In a worst case scenario we and up with $1,25 million worth of oil having paid out $750,000 for the assets. However, in reality there is going to be additional revenue from new oil generated since the takeover date and I fully expect that if the license is renewed then Zenith would not have to pay the additional $500,000 in royalties as there would have been no significant production to pay these royalties on.

7. I do agree that AC is being conservative with the loan drawdown money, but I think that this is perfectly sensible. The loan is a backup plan that will allow the company to get over any slowdowns in operations and also to purchase new assets very quickly if the opportunities present themselves. To me there is nothing suspicious in this but it is simply prudent business.

For what it is worth I think that Ezzaoiua is a fantastic deal that has been pressed out of a distressed competitor and within a very short timeframe we are going to see significant cashflow benefits from the acquisition.

Hi Florida – it is good to have a detailed debate on things on this board and thanks very much for the points that you raised yesterday. I have looked through them and here are my thoughts.

1. Zenith bought Ecumed Petroleum Zarzis Ltd (EZP). EZP owns the 25,000 barrels that are currently held in storage. Because Zenith now owns EZP then Zenith owns the 25,000 barrels of oil that are in storage. There are no license acceptance hanging over the deal. Once the two payments are made then the deal is done and Zenith own the oil in storage.

2. The idea that you have come up with that the Tunisian government may confiscate the oil belonging to EZP as “an asset of the concession” is a risk factor that so insignificantly small as to be almost impossible. There are legal contracts in place for who owns what and the Tunisian government are not going to be able to unilaterally tear up the contracts and then claim it for themselves without breaking their own laws. Of course they could still technically do this, but the moment they started confiscating oil that was owned by a foreign company then all foreign investment would leave the country – not just in the oil sector but pretty much every sector. It would no longer be a country that foreign businesses would operate in and it would ruin their economy. It is simply not worth the risk.

3. It is important to remember that the Ezzaouia license does not just run itself and spit out oil like a cash machine. It needs to be operated and these operations cost money on an ongoing basis. EZP have been paying money each moth to keep the operations going under Candax and they will continue to do so under Zenith. There is no way that Candax would have agreed to continue putting funding into the project if they were not contractually assured that even operating outwith the formal license period that they would be able to own their share of the oil produced during this time. Nor would Zenith have bought EZP if this assurance was not in place.

4. The idea that the oil can only be sold at a time and place of the Tunisian government’s choosing is also not plausible. There will be fixed points deliniated in contracts when the oil can be sold. No business would sign up to a deal whereby they could only sell their product at the whim of a random official.

5. While we do not know exactly when we will be able to sell the stored oil at the moment it is possible to calculate when the oil was last sold. The RNS tells us that Zenith’s share of Ezzaouia’s production is 210 bod. Since they are now storing approx. 25,000 barrels of oil then we know that this is 119 days worth of stored oil, which means that the last sale date was November 19th or thereabouts. I would assume that the sales process would occur on a 6 month basis which would mean that we can expect the next sale to take place in the middle of May – which is only two months away.

Florida, I did miss that post, apologies. My attention was grabbed by the post before that you directed at me.

I have now read your post of 9.52. From my point of view I do not think that you are deramping at all. It is perfectly reasonable to raise legitimate concersn about what is going on with the company - that is, after all, what these discussion forums are for.

I have to say that I was unaware that the license renewal had been in progress for two year as I only started looking into the specifics of Ezzaouia on Monday afternoon. My initial assumptions are that they first stage of issuing any 20 year license (even if it is to the incumbents) always takes a significant amount of time - a year to go through the whole renewal process seems to be pretty standard. I imagine that the rest of the delay has been caused by the Tunisian political issues that have caused the delay in the approval of our SEK license transfers. However, this is just a gut feeling and I will look into it properly this evening.

In terms of the second part of your question aboit the license approval " if it's not, (approved) what happens" - I think that I have already answered that in my previous post to you. In the event that it is not approved then Zenith will have the value of all of the 25k barrels that are stored (approx $1.25 million) to sell plus whatever else is produced between now and the time that the authourities decide to give the license to somebody else.

Presumably in this circumstance Zenith would not need to pay 10 years worth of $50k royalty fees to Candax but even if they do then that only means that they have paid $750,000 for $1,25 million + worth of oil and therefore come out of the deal up a minimum of $500k.

The fact it thought that I think it is very unlikely that the license renewal will not be granted. If the Tunisians wanted to get rid of EPZ then they could easily have done this when the license was over and just transferred the whole license over the ETAP. This is, after all, what happened to us in Congo when the got transferred the license over to SNPC in whole until a new deal was completed and it would have been the perfect time to do it. The fact that they have let the operations continue as normal suggests that they want EPZ on board for the license renewal.

Hi Kels, in answer to your question about why is the Zenith share price down from the peaks of January 2020 – the simple answer is Coronavirus and the global pandemic.

You may well say that the oil price is up bit you have to compare the Zenith performance to a group of small cap peers and if you do this then you see that pretty much all of them have been equally damaged by the pandemic.

Comparing the January 2020 highs then you see the following:

Zenith Energy - High: Jan 13th 2020 = 2.55p Today = 1.15p
Block Energy – High: Jan 15th 2020 = 5.45p today = 3.1p
Coro Energy – High Jan 9th 2020 = 1.95 today = 0.365
Scirocco = High = Jan 1st 2020 = 2.425 today = 1.05
UKOG – High Jan 1st 2020 = 0.825 today = 0.12p

In percentage terms this means that:

Zenith are trading at 45.10% of their January highs
Block are trading at 56.88% of their January highs
Coro are trading at 18.72% of their January highs
Scirocco are trading at 43.4% of their January highs
UKOG are trading at 14.55% of their January highs.

In short all small cap oil companies have been very badly hit by the pandemic and the global crisis that this has caused. However, where Zenith have been clever is in the acquisitions that they have made in this time period. They drove the Tilapia purchase price down from £1 million to £200,000 and they have acquired all of their Tunisian assets for less money than they value of the oil in storage of each of them. As the world commences the beginnings of recovery then Zenith will be very well positioned to benefit from both the production that they have bought in and the exploration potential that they have access to.

MGS - in your view, has the ETAP, EPZ 20 year licence been ratified through Tunisian parliament?

Florida - no, the new 20 year license for Ezzaouia has not been approved by the Tunisian authoutrities (it does not take parliamentary approval in Tunisia - that if how it is working on Congo).

At the moment the Ezzaoulia license is operating on an ad hoc basis and the old operators (ETAP and EPZ) are just carrying on generating oil (which will now be 45% owned by Zenith) until a new decision is taken.

In a best case scenario the 20 year license is renewed with some new drilling conditions added (as seems likely from the RNS) and in a worst case scenario the license is not renewed or is given to someone else at which point Zenith just have the 25,000 barrels of stored oil plus whatever is produced between now and then meaning that they only make $500,000+ on the deal.

So worst case Zenith make $500k+ even if the license is not renewed and best case they make millions more on an ongoing basis if it is.

I fully expect the Sidi El Kilanii approval to go through once the Tunisian political situation sorts itself out and it is clear that this is a problem with Tunisia and not Zenith as otherwise CNPC would not have granted Zenith the extension to the purchase agreement. Once this happens then with the $1.25 million in storage from Ezzaouia and the $4,225,000 in storage at Sidi El Kilani (assuming oil at $65) then Zenith will have access to $5.5 million. Even if they cannot access the oil immediately then they will be able to get banks to lend against these known assets and the cash will continue coming on as the wells continue to pump. When you add on top of this the $5.7 million owed by the SNPC (which I do admit is not as cast iron guaranteed as the Tunisian oil money) then it looks like later this year Zenith will potentially have access to in excess of $10 milllion cash and will continue to have millions in cash coming in from Tunisian production revenues. When you add in the expected receipt of the Tilapia license after the election is ratified at the end of this month and the company is starting to look in a very good position – being both cash rich and with massive exploration upside in both Tunisia and Congo.

Apologies everyone - for some reason the first part of my post got completely missed out and has maybe confused the message - here it is again as it was meant to be: in the first place.

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Hi Florida – just to be clear I did not say that Zenith will have access to the $1.25 million instantly. In fact, I said the opposite. They are not 100% not getting instant access to the money as if they were then Candax would have got instant access to the $1.25 million and would not need the $250,000 that Zenith are going to pay them for the asset.

It is clear that the stored assets at Ezzaouia can only be sold on an occasional basis (though this is not unusual for countries with fairly centralised controls on their economies) and so Zenith are going to have to wait until a selling period comes around again before they can cash in on the oil barrles held in stock. I also assume that this period is some distance off of Candax would just have held on for a while and cashed in themselves.

However, the big difference between Zenith and Candax is that Zenith, as a publicly listed company, are able to raise money by placings and debt underwritten by shares if necessary. In fact this is precisely what they have done in making the Ezzaouia acquisition in the first place. If you recall, the RNS of February 24th https://www.lse.co.uk/rns/ZEN/credit-line-agreement-debt-settlement-783hvxo0sog67ls.html announced that the company had agreed an EUR1,500,000 credit line which means that not only did they have the free cash to make the initial $100,000 payment to Candax but also that operational costs would all be covered both in Tunisia and in Congo until the Tunisian oil payments were received by the company.

To avoid any confusion, what I did say was that Zenith via their purchase of Ecumed Petroleum Zarzis Ltd now did own 45% of the Ezzaouia Concession (or they will as soon as the payment terms are met). This means that they will instantly own the oil that is in storage but not that they will instantly be able to sell it and have access to the $1.25 million in cash. I hope this clears things up.

I fully expect the Sidi El Kilanii approval to go through once the Tunisian political situation sorts itself out and it is clear that this is a problem with Tunisia and not Zenith as otherwise CNPC would not have granted Zenith the extension to the purchase agreement. Once this happens then with the $1.25 million in storage from Ezzaouia and the $4,225,000 in storage at Sidi El Kilani (assuming oil at $65) then Zenith will have access to $5.5 million. Even if they cannot access the oil immediately then they will be able to get banks to lend against these known assets and the cash will continue coming on as the wells continue to pump. When you add on top of this the $5.7 million owed by the SNPC (which I do admit is not as cast iron guaranteed as the Tunisian oil money) then it looks like later this year Zenith will potentially have access to in excess of $10 milllion cash and will continue to have millions in cash coming in from Tunisian production revenues. When you add in the expected receipt of the Tilapia license after the election is ratified at the end of this month and the company is starting to look in a very good position – being both cash rich and with massive exploration upside in both Tunisia and Congo.

It is clear that the stored assets at Ezzaouia can only be sold on an occasional basis (though this is not unusual for countries with fairly centralised controls on their economies) and so Zenith are going to have to wait until a selling period comes around again before they can cash in on the oil barrles held in stock. I also assume that this period is some distance off of Candax would just have held on for a while and cashed in themselves.

However, the big difference between Zenith and Candax is that Zenith, as a publicly listed company, are able to raise money by placings and debt underwritten by shares if necessary. In fact this is precisely what they have done in making the Ezzaouia acquisition in the first place. If you recall, the RNS of February 24th https://www.lse.co.uk/rns/ZEN/credit-line-agreement-debt-settlement-783hvxo0sog67ls.html announced that the company had agreed an EUR1,500,000 credit line which means that not only did they have the free cash to make the initial $100,000 payment to Candax but also that operational costs would all be covered both in Tunisia and in Congo until the Tunisian oil payments were received by the company.

To avoid any confusion, what I did say was that Zenith via their purchase of Ecumed Petroleum Zarzis Ltd now did own 45% of the Ezzaouia Concession (or they will as soon as the payment terms are met). This means that they will instantly own the oil that is in storage but not that they will instantly be able to sell it and have access to the $1.25 million in cash. I hope this clears things up.

pawnsacrifice - yes that is exactly right.

The 45% of the license was held by “Ecumed Petroleum Zarzis Ltd” and is still held by “Ecumed Petroleum Zarzis Ltd”. This means that from a legal point of view all of the permits etc are in the same name and the ownership of the license has not changed and so there is no need for Tunisian political/administrative approval. All that has changed is that the shareholding of “Ecumed Petroleum Zarzis Ltd” is different.

This is totally different from the Sidi El Kilani positions where Zenith bought the share in the license of KUFPEC and CNPC - this was an official changing ownership and the name on the license hence it requiring approval.

Conclusion

Sorry for the long post. The basic takeaways from this are simple and I think that the market will wake up to them soon:

1. Zenith have purchased the license in a way that is different from their Tunisian purchases and which does not need governmental approval. Once they make the payments then the deal is done and they own the license and the 25,000 barrels that come with it.

2. The $1,250,000 value attached to the 25,000 barrels of stored oil is very conservative and values it at $50 per barrel based on the fact that the future price could go down as well as up. At today’s price it is valued at $1,675,000 and if oil went up to $80 per barrel (random number choice) then it could be worth up to $2,000,000.

3. AC has carried out another blinding deal at the expense of a distressed competitor. They have sold at a massively discounted sale price not because they want to, but because they have to.

4. The deal is a no-lose deal. The value of the oil currently stored is greater that the money paid (even taking into account the royalties from the next 10 years) and so even in the unlikely event that the license is not renewed for a further 20 years then Zenith will still make a minimum of $500,000 on this deal. If the license is renewed as expected then Zenith will make may millions more.

5. The upside from a workover programme should be very considerable. The fact that Candax have inserted a royalty clause that only pays off for them if production goes above 900bopd shows that they believe that this is likely to happen. This would mean a minimum of 400bopd net to Zenith post-workover and at $65 oil a gross revenue of $9,500,000 to Zenith.

The market will soon wake up to the potential of this deal and all the other opportunities that Zenith has so much going for it at the moment. We should get news the other Tunisia assets in the near future and they will deliver another cash windfall of several million dollars and the Congo election is less than a week away. Assuming a favourable result for Zenith is received (and the incumbent President wins another term) then I expect that the 20 year renewal of the Tilapia license will be received by May at the latest and we will start a work program there designed to net us another 1,000-5,000 bopd. There is big money to be made by Zenith in 2021 and there is big money to be made by all us investors in this time period too.

GLA

4. Although the asset is out of license terms at the moment it appears to just be inches from the finish line of getting another 20 year deal and from what has been stated in the RNS it appears that this renewal will go through once the Tunisian political situation has sorted itself out and in the meantime the license just continues to be operated on an ad-hoc basis. In a worst-case-scenario if the license does not get renewed then Zenith will walk away with a $500,000+ profit anyway, so it is a no-lose deal.

5. Perhaps the most interesting part of the whole deal though is the fact that Candax inserted a clause asking for a royalty of $0.35 per barrel of $50,000 per year for the next ten years – whichever is greater. This shows that they think that the workover activities which are aimed at increasing production to over 1,000 bopd have a very good chance of working.

Candax have owned a share in the license for over 10 years and I found a report from 2011 where they announced that after a workover programme carried out in 2010 the field is “currently producing at over 1,000 bopd subsequent to the previously announced 2010 / 2011 side-track and work-over campaign”. https://www.euro-petrole.com/candax-announces-production-update-on-ezzaouia-field-onshore-tunisia-n-i-5210 They have clearly been content to live off the profits of this decade-old workover for many years and have obviously not had the money to carry out any new work at least since they were delisted from the TSX in 2015.

The potential for a workover programme to increase production at Ezzaouia here is clearly significant and it is equally significant that Candax have asked for the $0.35 per barrel royalty rather than a flat fee of $50,000 per annum as gross production would have to go above 900 barrels of oil per day for this to deliver any additional value to them. Having owned the asset for at least the last ten years then they clearly think that this is possible.

3. Andrea Cattaneo looks like he has pulled off another masterful deal by purchasing an asset from a distressed company that has been compelled to sell this asset far below its real worth. Zenith have agreed to pay $250,000 now and another $500,000 over ten years (at $50,000 per annum) – so in total $750,000 (though this could go up if oil production significantly increases. For this they have already received access to the 25,000 stored barrels of oil worth $500,000 more that the sum which they have paid.

Of course the key consideration here is that this money is clearly not accessible in the near future (as otherwise Candax would have held on to it) and there will presumably be ongoing production costs which will need to be paid before the asset is cashed in on. This is what I like about AC’s deal-making though – he really knows how to take best advantage of a distressed competitor.

I spent some of last night looking into Candax and it is clear that they have been in trouble for a number of years. They were originally listed on the TSX but were delisted (by the exchange, not by their choice) in 2015 because the market value of the company had fallen below the minimum acceptable levels https://www.newswire.ca/news-releases/tsx-delisting-review---candax-energy-inc-symbol-cax-522149481.html. They were then taken over by a company called Geofinance in a deal that valued the company at a miniscule CAD$2,056,250.

In the circumstances that they find themselves in any normal public company would easily be able to get bridge funding based on the 25,000 barrels of oil but a private company with a poor credit history and other debts piling up would obviously struggle. AC has clearly seen this and grabbed the opportunity – just like he did when he bought Tilapia for £200,000 even with AAOGC being owed $5 million from the SNPC.

Afternoon, everyone. What a great RNS from Zenith yesterday, I am surprised that the market did not react better to it but I think that they are taking time to cotton on to what a good deal this is. I suspect that as the impact sinks in then it will respond as it should.

The key takeaways from the RNS are as follows:

1. Zenith have not just purchased a stake in the Ezzaouria license from Candax (like they did with the purchases of Sidi El Kilani from CNPC and KUFPEC). In this instance they have bought 100% of “Ecumed Petroleum Zarzis Ltd” which owns the 45% stake of the Ezzaouria license. This may seem a little difference but it has huge implications as it means that there is no governmental approval required for the asset purchase as the license owner has not changed.

2. The value of the 25,000 barrels of oil being held in storage is valued at $1,250,000 to Zenith. This values each barrel at $50 which is a very conservative estimate considering that the oil price today is currently at $67 (which would value the oil at $1,675,000). Presumably the reason for the conservative valuation is based on the fact that the oil is not available to sell today and so Zenith have to take into account the fact that the oil price may well go down as well as up in the future when it comes to be sold.

Hi Florida,

There seems to be a bit of a mix up in your last post between Congo and Tunisia.

1. Congo

It is in Congo that Zenith are in the process of acquiring a 25 year license extension from the license that was originally held by AAOG. This process seems to be proceeding as expected (albeit with some degree of disruption from Africa Intelligence and politicians who are operating on their own agendas). The company has completed the IPU part of the license application and should now have moved on to the discussion of the Production Sharing Agreement. After this is agreed then the PSA goes to a cabinet of ministers to be ratified and then will then be sent to parliament for ratification into law.

I assume that PSA negotiations are probably ongoing at the moment but clearly with the Congolese election coming up on March 21st there is no chance of approval by cabinet ministers or parliament until the elections are over. This should also provide a solution to the company’s Teresa Goma problem as it seems very clear that AC thinks that she is an ally of the opposition and is likely to be dismissed should the President Dennis Sassou Nguesso win the latest election (and note that he won the 2016 election with 60% of the vote).

IMO things will start moving much faster after the election is over.

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2. Tunisia

Uplands is operating in Tunisia and this has nothing to do with Zenith’s license renewal application in Congo. Although they are asking for the same thing (a license extension) they are completely different jurisdictions, and completely different circumstance and so it is impossible to compare the two any more than you could say that because a license renewal takes 4 months in Britain then it should also take four months in China.

In Tunisia Uplands have received a 1 year license extension on a permit that they own but Zenith have asked for political approval for their purchase of a producing asset that is currently owned by other foreign companies. As I mentioned last night these are totally different things and they are approved by totally different parts of government. The license extension is essentially a technical (official) decision but the ownership approval is a more political one – hence requiring the input of the Minister for Energy, Sofien Ben Touns, whose room to manoeuvre is being caught up in the political battle between the Prime Minister and the President in Tunisia. Hopefully this mess gets sorted out soon and we can get access to the millions of dollars worth of oil that the asset has accumulated for us during the delay.

There is absolutely no reason that our approval in Tunisia will not come through but we just have to wait for the government (political) machinery in Tunisia to start moving again.

GLA

Hi Florida,

I was just catching up on the activities on this board and I noticed what you had mentioned about Upland Resources receiving the renewal of their extension within quick time and wondering how they can get their license renewed when they are acquiring the same license under the exact same terms as Zenith.

The simple answer is that they are not operating under the same terms as Zenith at all.

1) Uplands extended an exploration permit that they already co-owned, and they were simply extending for a year. This is an administrative matter that only needed the approval of the Direction Générale des Hydrocarbures of the Ministry of Industry, Energy and Mines – see rns: https://www.lse.co.uk/rns/UPL/tunisia-one-year-extension-and-new-prospectivity-w1h6zxs8d6ata0m.html It is also worth nothing that even this (relatively) simple permit extension was originally applied for in August and not received until January and so it still took 6 months.

2) Zenith are purchasing a percentage of a producing asset that they do not currently own. They need approval for the purchase to be granted by the Comité Consultatif des Hydrocarbures ("CCH") of the Republic of Tunisia – see rns: https://www.lse.co.uk/rns/ZEN/acquisition-of-sidi-el-kilani-from-cnpc-7100kzptm254ox5.html The CCH is a completely different body to the Direction Générale des Hydrocarbures of the Ministry of Industry, Energy and Mines. The transfer of ownership and revenues from a producing asset is also a much more sensitive process than the short-term extension of an exploration permit and with the mess that is politics in Tunisia at the moment it is not surprising that it is taking longer.

That said – I really do hope that the Tunisian political situation gets itself sorted out and we receive the approval soon. I hope this helps to clarify the query.

PS – It is a pleasure to finally converse with someone who has done quite as much extensive research into their investment as I have. I believe that we will both be richly rewarded for our efforts in the very near future alongside the rest of the Zenith faithful.

GLA