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This is good news. The company continuing with the policy of acquiring production assets and exploration assets to mean that they are slowly building a powerful base for future upward movement.

Interesting how someone has been leaking information to both Tom Winnifrith and AEI recently.

As MudPump mentions this has the feel of that shower of penniless idiots at Oxford Energy and Jub Capital about it - and we all know which serial loser was behind them don't we?

The really interesting thing is that the source has not even fed AEI correct information . After all they claim in an article issued today that Zenith are claiming to still be in charge of TIlapia yet the RNS released on the 10th August that they had handed operatorship back to the SNCP https://www.lse.co.uk/rns/ZEN/preparations-for-tilapia-ii-licence-c5pu6945bczfkx9.html

Is Alex going for a hat-trick of losses?

Looking at that upstreamonline piece, it looks like a couple more acquisitions should be on the way soon. If Zenith continue with their plan of a mix of production and exploration assets then they could end up with a very interesting portfolio indeed.

But somebody passed TW the letter.

So once again, the question becomes: who is spreading the malicious rumours, and why?

Key elements to note in the RNS are IMO – “Zenith Congo has been established at the request of the Ministry of Hydrocarbons for the purpose of receiving a new 25-year licence”.

This is not unexpected and is all part of the process that the company needs to go through to get the new license sorted. It also seems evident that the only reason for keeping AAOG Congo alive is because this is the entity that is owed the $5.3 million.

Hopefully we get an update soon on the situation with the license itself.

The bottom line is this. No matter what the rumours say Zenith have not lost the Tilapia license and Zenith do have a wide swathe of assets under their control. The reason that there is so much fuss over Tilapia is that it is so valuable. Zenith acquired it for a mere £200k and I fully expect that it will still be under the company’s control after the license renewals are announced. Nothing else makes sense about the way that the Congo govt has acted. In my opinion, we are going to look back at now in a few months and think that this was the ideal time to acquire shares. But we all need to make our own decisions and we are all solely responsible for our own decisions when we hit the buy and sell buttons. Just my thoughts…

Good luck all.

MG

What a kerfuffle in the last 24 hours! However, a bit of a mountain out of a molehill in my opinion. Anybody who has followed this company with any degree of attention over the last few months knows that we are waiting for the Tilapia license to be renewed, so it is hardly news that it hasn’t been yet.

There have also been a number of people who seem to do their best to distabilise Zenith whenever they get a chance – not least among them a certain very bitter director from AAOG who has failed himself to acquire Tilapia with his penniless partners who now all look to be in serious trouble of their own and who has made laughable claims about the company requiring $35 million in cash to get the renewal.

What has changed since last week though? Share Prophets have made a big fuss over the fact that they claim that the company has lost its only asset but they appear to have either been wrongly briefed or have not done their research properly. After all, last time I checked, not only were the company still in control of Tilapia but they also owned their Italian assets, the Azerbaijan exploration license and the Tunisian production asset. Hardly the look of a company that has just lost its only asset.

Also, if you look at what I have been saying again and again on this board – this is a complete vindication of the strategy that the company has been following in the last 8 months of diversifying their assets over different geographical areas. Imagine that this was all happening in Azerbaijan back in the day when it was the only territory that Zenith operated in. It would have been a disaster. However, the wide spread of assets over different regions mean that the risk is also spread and significantly reduced.

The other thing to consider is this. All of the scuttlebutt and noise around Tilapia just goes to show how valuable an asset it is that AC has acquired for a mere £200k. It is a fantastic deal to acquire the $5.3 million debt for this figure and it has certainly put the company in pole position for the renewal of the license. AC has been out negotiating with the Congolese authorities for the license and the repayment of the $5.3 million and has announced that it is going well.

Most importantly, the company has announced that it is continuing to operate tilapia while the renewal of the license continues. If, as it would appear that some want us to believe, the assets is going to go to one of the many other companies that they have listed when why did the Congo not simply kick Zenith out on the 18th July? It would have been easy to do this and made it clear that they wanted new money and new blood. Isn’t the answer obvious? Zenith are going to get the license renewed. AC has been pictured on twitter with the President of the Congo, his connections go to the very top.

So in conclusion, nobody actually sees the Coro deal as a lost opportunity then and everyone agrees that it was sensible to pull the plug on it?

Good, if any further proof was needed I suggest you head to the Coro annual accounts on page 55 where it shows the Coro Italian assets having an $8.8 million loss in 2019 and a similar loss in 2018.

https://www.coroenergyplc.com/media/2190/coro-energy-annual-report-2019.pdf

Tunisia is over the line. Yes, I know that it still requires final approval from the govt but this is just a formality. Zenith wouldn't have handed over the $250k if they hadn't had the nod that they would get approval - nobody would.

The Tunisia production in not legitimate then?

How can anyone be disappointed that we have pulled out of the Coro deal? It would have meant massive dilution at a price fixed before Covid for some assets that were over-valued.

As pre the 3rd December RNS https://www.lse.co.uk/rns/ZEN/acquisition-of-coro-energy-italian-assets-hgdylz5eq4q7acp.html the value of the Coro assets was a gross revenue of Euros 3.6 million per annum. It would have delivered an additional 265 (approx) bopde and the cost of the deal would have been up to £3.5 million.

When you think that Zenith have since acquired 22.5% of Sidi El Kilani (which has gross annual revenues of $15 million and has a flow rate of 700 bopd) for what is effectively $250,000 of company money then you would have to be mad to continue with the Coro deal. It was ridiculously overpriced and is simply a good example of how the market has changed post covid.

Serious question: Is there anyone on this board who genuinely thinks that getting out of the Coro deal is a bad thing?

How can anyone be disappointed that we have pulled out of the Coro deal? It would have meant massive dilution at a price fixed before Covid for some assets that were over-valued.

As pre the 3rd December RNS https://www.lse.co.uk/rns/ZEN/acquisition-of-coro-energy-italian-assets-hgdylz5eq4q7acp.html the value of the Coro assets was a gross revenue of Euros 3.6 million per annum. It would have delivered an additional 265 (approx) bopde and the cost of the deal would have been up to £3.5 million.

When you think that Zenith have since acquired 22.5% of Sidi El Kilani (which has gross annual revenues of $15 million and has a flow rate of 700 bopd) for what is effectively $250,000 of company money then you would have to be mad to continue with the Coro deal. It was ridiculously overpriced and is simply a good example of how the market has changed post covid.

Serious question: Is there anyone on this board who genuinely thinks that getting out of the Coro deal is a bad thing?

It's neither. Alex makes it up as he goes along which is why AAOG under his watch was such a disaster and why AC managed to pick up the asset for peanuts.

We can either believe a serial failure on a bulletin board of we can believe the RNS of July 20th where AC stated: "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."

My money is on the official announcement and not the site lunatic.

Highlander, welcome back to the board. Unfortunately you are back spouting your usual nonsense. I was particularly intrigued when you said this:

"Well well not the slam dunk you have all believed this to be. Zenith up against some serious competition, all have cash and technical resources."

I'm not sure that I take your word terribly seriously when it comes to knowing anything about serious competition in Congo. After all you considered yourself and your partners to be serious competition in acquiring Tilapia from AAOG but it turned out that Oxford Energy Ltd was dissolved with no money in March this year: https://beta.companieshouse.gov.uk/company/10613965 and your other backer Jub Capital are also now suspended: https://www.londonstockexchange.com/information-sheet/jub-capital-management-llp/2020/44

Maybe you should pick your allies better Alex. It certainly casts doubt on whether you know what "serious competition with cash and technical resources" actually means because none of your backers had any of that. Ever.

6) Zenith also have all of the exploration potential in Azerbaijan which is still huge. They also have a workover rig and a drilling rig plus all of the associated equipment. The paid £250k for the workover rig https://polaris.brighterir.com/public/zenith_energy/news/rns/story/wv57ypx and E2,250,200 for the drilling rig so they probably have between £2.5-£3 million worth of equipment in Azerbaijan which will mean that their future exploration work can be carried out very inexpensively. It is also a hell of a lot of assets to have on the balance sheet when the market cpa of the company is only £6 million.

So, if you invest in Zen at the moment, you get all of the above and you are getting it for 0.7p per share. This is why I invested, Your investment is your call…

ZENITH THE POSITIVES

Key positives for Zenith for an investment case are:

1) They have a clear policy to acquire a mix of producing assets that can deliver cashflow into the business (such as Sidi El Kilani and the proposed Gabon acquisitions) alongside higher risk, higher reward exploration projects (Tilapia in the Congo, Azerbaijan, the Nigerian marginal fields and the targets of the Congo JV). To me this is a very sensible way to go about things. Having cash-flow coming into the company means that there is the ability to service debt which means that the exploration projects would not necessarily have to be paid for by dilution.

2) Because Zenith’s assets are now spread over a pretty wide geographical area they are not guilty of having all of their eggs in one basket as they were with the original business that was focused solely on Azerbaijan. In Azer the local govt knew that they could not walk away so their negotiating position was non-existant.

3) AC is a great deal-maker. He is taking advantage of the opportunities that have arisen from the Covid pandemic to pick up assets for a much cheaper price than they would otherwise have been available for. He reduced the Tilapia price from £1 million to £200k and he got Sidi El Kilani for $250k down and the rest paid for out of the well’s own operating profit. I expect that the Gabon deals will also be bargins when they come through.

4) Tilapia is potentially a huge asset. It drove the AAOG market cap up to a value of £30 million back in January 2019 and the AAOG management often talked about it as being worth up to £100 million. They intended to get it producing 5000 bopd (seen they AAOG annual report for details) and claimed that the production costs could be as low as $5 per barrel. Even at today’s oil prices this is big money.

5) The purchase of Tilapia for £200k also came with a debt that was owed to AAOG Congo by the governmental partner in the asset the SNPC. The value of this debt totals $5.3 million and this money is now owed to Zenith. It is unlikely (impossible) that this money will be repaid in one lump sum but it is highly likely that it will start to be paid in instalments soon. The Congo have a £458 million credit line with the IMF that was put in place one year ago and to keep this open they have to ensure that governmental entities pay their debts. In the last RNS Zenith also announced that they were “ 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."

ZENITH THE NEGATIVES

They key negatives from the naysayers are to criticise the following points about Zenith.
1) The CEO’s wages – which were £910,472 last year. The four year average is £425k and he took a large chunk of it in shares but it is definitely something to look into.

2) The amount of placings that Zenith carry out. Zenith do have a habit of raising money once every couple of months. It is never huge amounts and they have tended to raise approx. £5 million per annum which is not too bad by small cap standards. UKOG for example raised £57 million since 2017 whereas Zenith have raised £18 million from 2017 to date. Personally, I do not have too much of a problem with placings as long as they are used to acquire assets or work on the business but you will have to make your own mind up on that.

3) The Tilapia license has not yet been renewed. The cut off point for this was officially July 18th 2020 and Andrea Cattaneo has been out in Congo negotiating with them since June 19th. The Congolese authorities have let Zenith continue with the license while they consider the 25 year renewal application and according to the latest RNS we should know if 30 days. However, we have seen photos on twitter of AC with the President of the Congo, the country’s biggest newspaper has announced the takeover and Brokerman Daniel claims to have heard that the license extension has been approved. On top of all of this is the fact that if the Congo govt did not want to approve the license renewal why would they extend it now? They could just have said “times up” and taken it away. In my opinion it will definitely be renewed but again it is something for you to look into.

ZENITH THE NOW
In 2020 Zenith have also
1) Acquired 22.5% of the 700bopd producing well Sidi El Kilani from the Kuwait Foreign Petroleum Exploration Company. This well generates approx. $15 million of gross revenues per annum.

2) They have (slightly bizarrely) also established a PPE manufacturing subsidiary for Africa (we assume to ensure that employees are protected and to give some value-added leverage when they are negotiating with local politicians).

3) The have participated in a bid for marginal oil fields in Nigeria.

4) They are in the process of negotiating the purchase of two fields in Gabon – one a field that is producing 500 bopd and one that is currently mothballed but was previously producing 500bopd.

5) They have handed back all of the Contract Rehabilitation Area assets to the Azerbaijani partner SOCAR while keeping the exploration rights.

6) They have announced a JV agreement for another acquisition on the Congo.

Now, as with any share that has been around for a few years and has previously traded at much higher levels than it is now there are many detractors. There are a bunch of long-term holders here who are locked in at higher prices and who hate everything about the company and the CEO. Their attitude is that because Azerbaijan did not work then Africa will not work and nothing the company ever does will work. But as I am sure you are aware, that is pretty much par for these forums.

Personally I would never have invested in Zenith when it had all its eggs in one basket (Azerbaijan) but now it has distributed its risk profile across a number of territories I think that it is a much more sensible proposition. Equally, while the share price being under 1p is terrible news for long term holders who bought in anything up to 10p, it is a real bargain for those who are getting into the company now – which, of course, can irritate some people even more…

Fallingknife1 - I can definitely give you my investment case, here goes.

ZENITH THE HISTORY

Zenith was an oil exploration and development company that was listed on LSE on Jan 12th 2017. The placing price was 7p and it closed on day one at 8.125p with a market cap of £8 million.It was focused on assets in Azerbaijan which were a combination of exploration potential and also cash flow from workovers of existing Soviet era wells that were producing in very small quantities but could potentially be made much more productive.

The idea was that the additional cash flow that came out of the workover wells would make a significant contribution to the exploration expenses and enabling a degree of debt funding. They also purchased their own workover rig in Jan 2018 and a BD-260 drilling rig in September 2018. These still remain in Azerbaijan.

The value of the shares peaked at 12p on the 10th November 2017 giving the company a market cap of £16 million.

The Azerbaijan adventure was a good idea but it was ultimately unsuccessful. The workover wells were in much worse condition than the company had been expecting and the data on them also turned out to be largely inaccurate so they failed to produce the increase in production that was hoped for. Costs were also more than expected when working with SOCAR and ultimately this meant that although they were producing fairly significant amounts of oil (revenue of CA$ 5,733,000) the operating costs and the administrative expenses were approx. CA$ 5.9 million and so it was actually losing money.

At the tail end of 2019 when the company share price was down at 1.8p they announced what has since become evident was a complete change in strategy when they made a bid for AAOG’s Tilapia asset in the Congo. Tilapia was the asset that AAOG had been set up to develop and had been listed on AIM at 20p before peaking at 29p and the company had a market cap that peaked at £29 million in January 2019. However, despite raising £14 million in less than a year to spend on drilling AAOG (due to extremely bad management) were unable to make Tilapia work and were unable to raise any more money on the markets – becoming a cash shell.

There were a number of different deals in place for the purchase of Tilapia (AAOG Congo) ranging from Zenith buying 80% of AAOG’s share for £1 million through to the final deal that was done of 100% for £200,000.