Member Info for MarketGunslinger

Err, if you actually read what I said on April 21st, it was:

"I have never seen the oil sector in such a chaotic mess. Oil prices that are actually negative is something that I never thought I would see in my lifetime. However, one thing that is always true is that out of chaos comes opportunity, and those that seize the opportunities that are there now will benefit significantly in the future. As long as we believe that the world will still need cars and planes and ships and plastic then the demand for oil will return with a bang and when it does those who have acquired the right assets in this time period will be the beneficiaries. As Warren Buffet famously said: “Be Fearful When Others Are Greedy and Greedy When Others Are Fearful”.I hope AC still has his buying suit on as this is the opportunity of a lifetime."

Since then AC has acquired 45% of Sidi El Kilani for $800,000 (£620,000) - an asset that should be delivering £3,500,000 per annum of gross revenue and an estimated net revenue of £2,650,000. Seems like an opportunity of a lifetime to me....

Says the man who posted on March 6th 2020:

"But I am done now and this will be my last post on here, good luck."

That is completely untrue ajbennet. AC states point blank in the following video that: “Production in Tunisia is very steady at around 700 barrels gross”. https://www.youtube.com/watch?v=9f19mzALR0U

Once again you are spreading false information simply because you made a bad investment in Zenith in the past.

The field is being sold because it is a marginal field. With the Covid affecting the global economy all of the majors are divesting their smaller fields all over the world. Hence Total and ENI getting rid of their marginal fields in the Congo.

As I said in my post on Tuesday - the April 20th RNS said Sidi El Kilani produces 700bopd: https://www.lse.co.uk/rns/ZEN/acquisition-of-sidi-el-kilani-from-kufpec-m75j0ufa95np8fq.html

45% of 700 is 315 so based on this number and a Brent crude oil price of $40 then the gross revenue generated by Zenith’s share should be: ($40 x 315 = $12,600) x 365 = $4,599,000 (£3,500,000)/

I do not know what the cost of production would be but assuming that it is $10 per barrel then the profit would be $3,449,250 (£2,650,000) per annum. This is in excess of 50% of the current company market cap and it has all been acquired for an outlay of $550,000 (£420,000) plus the additional $250,000 that has been paid for out of the well's own revenue generation.

Nobody is going to retire off the revenue that Tunisia generates but the millions of net profit that it will bring it can be used to service debt to do the drilling in Tilapia.

The ridiculous thing is that some of these disgruntled long term holders are more concerned about whether they can make negative comments on twitter than they are about the 300 bopd production that Zen have acquired in Tunisia for $800,000.

That says everything about their jaundiced view of this stock IMO.

Just to clarify Mudstud, you are not invested here right? You and ajbennet just pop by periodically to moan about the fact that you lost money here in the past and to claim that it is therefor impossible for anybody else to make money here in the future.

Don't let insignificant facts like that Zenith has spent just $550,000 to acquire more production in Tunisia than it ever had in Azerbaijan get in the way. of your incredibly cogent argument - which as best as I can understand it seems to be "I made a bad investment at a high price and therefor your investment at a low price is also bad".

Honestly, Kels I am praying for 1p just so that you can get out and leave me in peace.

Just to be clear, you are going to get out at 1p and leave right?

"I have never self pitied in my life" - that's not true. It is there in black and white at 12.40 today, an entire post simply dripping in self pity.

"I accept all decisions as my own" - again not true. Same post where you blame an unnamed "other" for your loss: "I would have stayed out if It wasn’t for someone"

"I just know what I know about the situation here". You know nothing. Your post of 12.09 today claims that we are not producing oil from Tunisia when the RNS make it explicitly clear that: all the production revenue since the SPA was signed is due to Zenith.

It is just another example of you trying to turn good news into bad because you hate the company because you lost money.

We get it. You don't like the company and you want to get out. However, if you really believe that the share price will not recover then you should sell out now. The fact that you don't means that either (a) you do believe the share price will recover or (b) you are an even worse investor than you would have us believe.

Please just it in and give it a rest. It's boring.

"I would have stayed out if It wasn’t for someone"

That is one of the most self-pitying and pathetic comments I have ever read on this or any other share investment forum. Nobody forced you to purchase shares in Zenith Kels and you have to be man enough to take responsibility for you own investment decisions and not blame them on others.

However, one interesting thing that looking at the old RNS has made me notice is that the deal to get the second 22.5% is nearly 50% cheaper than the deal to get the first 22.5%.

Zenith will ultimately have paid $800,000 to acquire an asset that will generate $4,500,000 worth of revenue per annum.

Kels, I know you hate the company because you have lost money on your investment here but your relentlessly negative view of good news is making look pretty foolish.

Do you genuinely think that the field has stopped producing oil pending approval of the acquisition? As per the same RNS that you have just quoted they make it explicitly clear that: all the production revenue since the SPA was signed is due to Zenith (which they are using to pay of the second half of the $500k bill).

Also, there is no way that Tunisia wants to annoy CNPC by reusing the approval as that is effectively the same thing as annoying the Chinese state.

The April 20th RNS said Sidi El Kilani produces 700bopd: https://www.lse.co.uk/rns/ZEN/acquisition-of-sidi-el-kilani-from-kufpec-m75j0ufa95np8fq.html

45% of 700 is 315 so I think that it is likely that Zenith will be producing more than 300 bopd rather than less.

The current oil price is $41 so Zenith are now looking at $4.5 million in revenue per annum from Sidi El Kilani. This is substantually more than the CAD$4.2 million (USD$3.2 million) that was generated in revenue from Azerbaijan in 2018 (as per page 74 of the annual report).

The US$4.5 million equates to £3.4 million in Sterling per annum of 68% of the current market cap coming in as revenue annually.

Q11 - Can you summarise the key highlights which shareholders in the UK and Norway should expect from Zenith in the next 3-6 months which may help the share price to rise and make the mood of long term investors and new investors much more satisfied.

Q11 – The mood regarding investor perception has been driven by others rather than by Zenith. Tilapia has become tremendously contentious and investors have been shocked by the smear accusations and counter activities of the other contenders for the license. For psychological reasons, the most important thing is to announce that Zenith have been granted the Tilapia license “we are confident that it will come”.

The second most important thing is the second acquisition that Zenith are developing in Tunisia which will mean we have two equally important oil producing assets. Tunisia is neat to Europe and has historical relations with Italy and France so it is extremely easy for producers there to sell their oil, which is what Zenith intend to do. When a company sells it’s own oil then it enters a new sphere of the oil business (oil trade) and there is a lot of finance connected with this. So when the two announcements are made: the advance in Tunisia and the acquisition of Tilapia2 then the company’s credibility will be shown and the share price will reflect this.

In addition to this there is also the West African acquisition and the development in Nigeria which will also drive the share price up to become stronger but the most immediate driving force for investor sentiment is Tilapia 2 and the second development in Tunisia which is already half done and just needs the final move.

Final Remarks

Some investors have lost money with Zenith over the last twelve months because the price was above 40 and is now below 10 (talking about the Norwegian exchange) but the company wants to remind investors that there have been two facts of tremendous importance:

1) The change of company focus from Azerbaijan to Africa.
2) The tremendous drop in share price shown at the beginning of covid.

The company is making great advances but shareholders are still concerned that the potential transactions will not be realised. As soon as the first transaction is completed then shareholders will realise that the company has made clever decisions and can deliver. The company can then go forward and work together with shareholders on a much more confident basis.

Q7 - Can you explain the benefits of not focusing exclusively on one asset but rather diversifying Zenith’s portfolio across a number of African countries and how this will help Zenith in obtaining non-dilutive finance?

A7 – There is a great interest in in what Zenith is doing as can be seen by the amount of websites that publish articles on Zenith in order to gain views. This is because once the deals Zenith are involved in are completed then Zenith will have a diversified and sizeable portfolio that will be interesting for other larger companies to participate in or acquire. The history of the Canadian junior market is to create a portfolio and then have this purchased by larger organisations. Zenith have also chosen good countries to operate in where there is no terriorism or religious rivalries.

Q8 - The payment Zenith is owed from SOCA in Azerbaijan from previous production – Zenith have announced that $1.2 million is owed but only $500k has been paid. When will the rest be received?

A8 – An additional $358,000 was announced as being paid and so the total amount Zenith have received is $858,000 out of a total of $1.2 million. However, the amount owed to Zenith is not in money but in barrels of oil. Previously the receivables value was based on the very low oil price in March and April and now it has risen dramatically then the amount of money to be paid to Zenith will also have risen significantly. So Zenith are owed at least $400k and probably much more.

Q9 - What do you expect Zenith’s production to be in 12 months time?

A9 – Zenith have announced a lot of deals that they are trying to complete and AC understands that shareholders do not know if what they have announced will really happen. The first 6 months of the next 12 will be focused on the delivering of these deals which AC believes will be reflected in the share price. The second 6 months will start to see the results of an increase in production in Tunisia and also the start of drilling in Tilapia.

Q 10 - If Zenith complete the transactions that have been discussed how do the board proposed that the required technical and financial support will be given to each asset.

A10 - The first thing Zenith need to do is to complete these transactions to get ownership of the fields. Once Zenith have ownership not only will there be relief for investors but also significant attraction to new larger counterparties. This will permit Zenith to have many different options on financing – joint ventures, farmouts and no longer just the issuing of equity.

There is also the Covid pandemic which should deliver more opportunities for Zenith. Zenith would like to start moving technical people around and start producing more oil in Tunisia and drilling for oil in Tilapia as soon as possible. But is this is not possible due to Covid then they will continue to acquire more assets.

I also had time over the weekend to write up the questions side of things on the conference call

Q1 - Please clarify what the $12.5 million novated to AAOG Congo novated to Zenith means?

A1 – AAOGC had $12.5 million invested in by AAOG (the topco) to carry out the drilling programme. It still owes this money. However, because Zenith bought AAOGC (and Zenith is now the topco) AAOGC now owes this money to Zenith. This means that the first $12.5 million

Q2 – Why has there been a delay in Zenith’s financial results?

A2 – Because auditing is done in London and the audit companies have had to stop work due to Covid. The same is true in Canada. Authorities in both locations have agreed that because of Covid the 30th Sept will substitute for the 30th June.

Q3 – How confident are you that you will recover the $5.3 million in receivables from the Congo? (One from Kellsbells here I would guess ??

A3 – Zenith are fully confident that they will recover this money. Covid has had an impact here as well since remote working is not possible in Congo (lack of infrastructure). Congo borders are only opening on Aug 24th and there is an 8pm curfew so working hours have been reduced (most people travel 2 hours to get to and from work but still have to be back and have bought food by 8pm). The delay in the Tilapia announcement and the delay in the debt repayment have gone hand in hand.

Q4 - Can we get an update on the manufacture of PPE for Africa?

A4 – The gel equipment has been purchased and they are agreeing on a location with their African counterparty. There will be an update when this has been done. Masks will follow after.

Q5. Total and ENI are looking to dispose of some of their assets in the Congo and the wider West African region. What does this mean for Zenith in this region?

Zenith will be negotiating with the majors who have announced that they are to leave Congo and Gabon.

Q6. When do you expect to update shareholders on the West African transaction?

A6 - They don’t know. Sometimes deals are closed quickly like the one with AAOG for Tilapia where the initial understanding was reached after a week and sometimes they take longer. They are pressuring on this all the time but the response is in the hands of the counterpart.

They then returned to talking about Tunisia and said that they are already starting a programme to artificially stimulate the El Sidiki well. They are going to take over operatorship with AC being appointed to deputy general manager of the well in 2020. AC then talks about the fact that there has been a lot of dilution as more shares have been issued recently in order to pay for the acquisition of new assets including Tunisia, Congo plus potentially Nigeria and an unnamed West African Country.. He said that their first choice would have been to use the Euro 25million medium term notes but with covid and the bond market as it is then they have had to make the cash purchases buy issuing shares.
He pointed out that when investors first came into Zenith they only had one oil producing asset (Azerbaijan) and now they have three countries including Nigeria and with the looming West African acquisition then they should shortly have four countries where they are producing crude oil as well as the gas and electricity from Italy. He pointed out that compared to peers in both London and Oslo Zenith is undervalued when compared to its peers who have assets and reserves in the same country. He pointed out that with the SNPC payment and the recovery in the bond market then Zenith will be able to move forward with much less dilution in future.

He ended up talking about Italy where he said that their experience in producing electricity from flare gas would be useful in their African projects and they could showcase this working in Italy to visiting African delegations.

He also pointed out that Zenith own two drilling rigs – one stationary heavy one and the other a truck-mounted workover rig. He pointed out that they can use these rigs in whatever country that they want and this could easily be Congo after the confirmation of the Tilapia2 license.

I have also now listened to the investor conference call and think that it is a massive reiteration of the company’s prospects looking good from every different angle.

As a synopsis, it basically breaks down as follows:

The two main company assets are in Tunisia and Congo (Tilapia). At the moment Tunisia only produces 40,000 bopd but the govt wants to increase this dramatically and other (presumably marginal) fields will become available. The Sidi El Kilani field because it has always been managed by three massive state oil companies (ETAP, CNPC and KUPEC) it has always been considered a marginal field and not had any attention paid to it. Zenith will focus a lot of attention on it and try to improve production as it matters more to Zenith.

Tilapia in the Congo is referred to as the company’s “giant” opportunity. They note that they had a lot of what they call “antagonism” about this asset from the very beginning when a minority of AAOG investors (Align Research, Jub Capital etc all) opposed the purchase as they felt that it was too good a deal for Zenith. There have been a lot of people who have been trying to get hold of the Tilapia license but Zenith are “completely confident that we have this field with the Tilapia 2 license for 25 years as the operator”. They also said that they feel that there has been a bit of a smear campaign against them by some competitors. Zenith say that the reason that everything is taking so long is that the Congo borders have been closed for a long time and the only reason that AC was allowed in is because he is a resident of the Congo and so was allowed to enter. He said specifically that he is confident that Zenith have the license.

The Congo govt asked them to create Zenith Energy Congo to apply for the license and they have been continuously been told that they are the top competitor and are confident that Zenith will be the company that finally sign the production agreement. The new license will be issued in the name of Zenith Energy Congo and AAOGC will be a 100% subsidiary of Zenith Energy Congo. The reason for keeping AAOGC is that this is the entity that is owed $5.3 million by the SNPC.

They say that the reason so many people have been attracted to the Tilapia license is because of the amount of money spent on it by AAOG and that this well was never fully completed but this is actually a good thing because the execution was poor and completion may have damaged the reservoir structure, so Zenith will need to deepen it by drilling a sidetrack which is technically convenient and not a complicated process. They plan to produce from the Djeno and they do not have an opinion of how many barrels of oil that this may produce because their technical team have not yet been able to analyse the reservoir – but they note that AAOG expected it to produce 5,000 bopd.

Well assuming that at least one of your other investments has made a profit that you can offset your losses against why not leave again now? It seems rather pointless to be invested in a share where you do not trust the board and think that the price will go down.

Personally, when I feel like that about an investment I sell out. Every time.

If you believe that then why not just cut your losses and get out now? I never understand people that hang around moaning about a share that they do not believe in. Losses themselves do not even matter as long as you are making profits elsewhere they can become an asset to offset against tax.

Please don not put words in my mouth Kelsbells. I realise that you are a long-term holder who is down a considerable amount of money and are desperate to get out at your 1.5p price, but I am still perfectly happy with my investment here.

As you are fully aware Zenith spend £200k on acquiring not just the Tilapia license but also the $5.3 million debt owed to AAOGC. The original consideration to be paid was £1 million and it was negotiated down to £200k to reflect the fact that the project would have to go through a license reapproval. By any reckoning spending $200k to acquire $5.3 million is a no-brainer decision.

AC has been consistently clear on the fact that he believes that Zenith are going to acquire the Tilapia license. We know that he has had meetings with the Congo President about this very issue going back as far as February and as recently as the July 20th RNS the company has announced that:

A) “The Tilapia asset has transformational production potential and the award of a new 25-year licence will represent the first important successful milestone in our journey in the Congo. It is our hope and expectation that we shall achieve this goal in due course.”

B) “I am also pleased to confirm that negotiations are nearing a conclusion with regards to defining a payment plan for the repayment of the US$5.3 million debt owed by Société Nationale des Pétroles du Congo to AAOG Congo.”

You seem to insist on only seeing the negative side about anything to do with Zenith. I get that you have lost money but your constant demands for everything to happen “now, now now!” are starting to look a bit like a toddler having a tantrum because they do not get their own way.

From my point of view, I see Zenith set up for a big push forwards with so much potential good news due to come in any day from so many different locations (which is very different to the days when all of their eggs were in one basket in Azerbaijan) . I have certainly not lost an ounce of faith that Zenith will deliver great things over the next few months.