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At a surface level a reschedule of a reschedule is a bad look. However, you have to put it into context and in the context of Zenith I think that this is clearly a positive sign.

The reschedule would be negative if we were expecting time-sensitive results (for example the issue of the accounts or the conclusion of a drill) where missing the deadline would potentially indicate a negative outcome for the company. This would imply that things had gone wrong and the company needed to establish what was going on before they were able to talk to investors about it.

However, in this case we are not expecting any results. The company could easily have had the investor conference call on Thursday and just talked positively about the annual report, the Tunisian oil production and the record Italian gas profits. Therefore, there was no obvious need for them to postpone the conference call. In this circumstance, and especially because it is a second delay, the postponement can only be because they expect some significant news to arrive in the near future.

I have suspected since the first delay of the conference call where the RNS mentioned that the delay was “due to potential near-term progress” that the company is hoping to announce something major before the call happened. I am hoping that this is connected to the Tilapia license, though it could also be a new acquisition. This second delay has simply solidified my opinion that this is indeed the case. It is clear that the new delay is simply because this major news is taking slightly longer to arrive than was anticipated. In short, I believe that we can expect some very major positive news from the company in the next 3 weeks.

So Zenith have now published via RNS a new income from Italian gas sales this year of €1,372,000 in the last 5 months (since April 2022). They did not actually publish the production numbers or revenue from June but even assuming that this is slightly lower than the May figures it still gives us a revenue of €1.5 million over five months.

Mar-22 1015MWh/month €295/MWh €300,000
Apr-22 974.4MWh/month €236/MWh €230,000
May-22 875.6MWh/month €223/MWh €195,000
Jun-22 ????? ???? ????
Jul-22 996/month €419/MWh €417,000
Aug-22 985.6/month €538/MWh €530,000

Given that we are about to go forward into Winter and the price is likely to increase further then I think that we will continue this run of record prices. I know that there is a lot of talk about gas price caps at the moment but I think that these would prove very hard to implement and may actually cause more problems than they solve in a market that is basically global.

If Europe, for example, decided that they would cap gas price purchases at €450/MWh and other countries did not then the international delivery of gas would simply turn away from Europe and cause more supply problems. I do not think that it would then take long before some of the richer countries broke ranks and just purchased at the market price. Personally, I think what is far more likely to happen is that European governments will subsidise to gas prices for their population by setting a fixed price that the populus will pay and then paying the gas suppliers the excess.

Whatever happened though I think that a winter gas price of at least €510 /MWh is guaranteed this winter (2022-2023) and so I cannot see Zenith generating a net revenue of less than €500k every month between September and March next year. If I am right then this will deliver a total revenue of €5 million from the Italian gas generation for the 2022-2023 tax year. This is also a conservative estimate. It could easily be substantially more.

I had my first look through the annual accounts yesterday and although I am disappointed that they did not book the Tunisian oil sales on an accrual basis it still makes for pretty good reading.

The headline figures on revenue of CAD$8,239,000 (USD$6.3 million) are slightly disappointing but this does not include the sales that were made after the year end and it does not include most of the high value gas sales in Italy either.

The administrative expenses of CAD$12,526,000 (US$9.6 million) are pretty much bang on double of those figures in the half-yearly report so they are exactly as predicted and this gives the company a loss on trade (not including depreciation or other accountancy tricks of US$3.3 million.

Another key element that they annual report gives away to us that we did not know before is the operational cost of getting the oil out of the ground in Tunisia. This is shown in the value that is associated with the 116,391 barrels of oil valued at CAD$5,690,000 (and from an accountancy point of view this is always the vale at this is the cost of getting it out of the ground, not the value of the oil for sale) so now we know that this is $ 4,373,390 which equates to $38 per barrel in production costs.

We also know that the company had stock of 116,391 barrels at the period end. At an oil price of USD$100 per barrel and with the production costs that we now know are $38 per barrel then this gives a valuation that (IMO) really should be in the accounts of $7,216,242 in net revenue. So if this were put into the accounts then they really should have shown a trading profit of $4 million. This is at the lower end of my original calculations (I originally predicted between $3-7 million) but it is still a substantial profit and the basic fact is that the oil had been produced and stored by the end of March so it is very frustrating that it is not properly been included in the accounts just because the sale had not yet been completed.

I had assumed that the oil that had been stored would have been booked in on an accrual basis and therefore would be shown in the 2022 annual accounts and it is extremely frustrating that it has not been because it means that the accounts do not present a true picture of the company’s profitability unless you read into them in detail.

All of the Italian gas production would have been included in this year’s accounts, but it is important to remember that the production up until March while substantial is not anywhere near what is has become since the year ended. In the five months that Zenith announced production for in the 2022 tax year the revenue totalled €1 million and in the three months that they have announced since it is already €840,000.

In my opinion everybody is too focused on Tilapia at the moment and we are all guilty of ignoring the complete company transformation that is taking place in front of our eyes in Tunisia and Italy. I think it will only be when the accounts come out on the 31st August that the market will really wake up and realise how comprehensive the transformation of Zenith Energy really has been. Obviously, it has been helped by sky-high oil and gas prices but when you think of where we are now compared to where we were back in November 2020 when we had pulled out of the Azerbaijan debacle and had not yet got anywhere on Tilapia. The company had zero income, only it’s Italian assets which were deemed largely useless and had a very real risk of ending up as nothing more than a shell. Now it is completely transformed.

Today Zenith is an established and successful oil and gas company. It’s Italian assets look like they will produce an annual net profit in excess of €4 million and with reasonable investment they look like they could increase substantially from there.

The Tunisian assets look like they will deliver a net profit of somewhere between $12-14million per annum in net profit (dependent on oil price moves) and we are due to begin the surface works next month in preparation for drilling the new and fully-funded Rob-3 well in November so the revenue from here is also likely to increase.

We also know that we are still waiting on the Tilapia license approval for which we have been selected as the successful bidder and where the errors in the previously-drilled well are well known so the drilling of the next well will only cost $5 million.

We also know that the company has been looking at acquiring new assets since the beginning of the year and with the income being produced from Tunisia and Italy they have the money to buy them. In my opinion, the delay to the investor conference call that was announced on Friday is an indication that we might have an announcement on this by the end of the month. As another poster on the Norwegian boards pointed out, if the delay was only due to the accounts being out before the call then they would only have needed to delay this until Thursday 1st September. Unless of course this is news on Tilapia, which would the best news that we could all hope for.

Bear, yes updating you on the current annual salaries for the BoD is no problem. It is clearly stated in the company accounts for March 2021.

Salaries in 2021 for the BoD were.

Andrea Cattaneo = CAD$694,000 which equates to USD$ 534,380 and GBP£451,100
Luigi Milano = CAD$61,000 which equates to USD$46,9750 and GBP£39,650
Darido Sodero = CAD$3,000 which equates to USD$2,310 and GBP£1,950
Luca Benedetto = CAD$232,000 which equates to USD$178,640and GBP£150,800

In total this means that the BoD’s compensation is CAD$990,000 / USD$762,300 / GBP£643,500

If you note in my post yesterday I used the phrase “net revenue” which means profit on operations. At €47,000 per month after expenses this means that the additional revenue from S.Antonio-1 well will be €564,000 per annum which equates to USD$565,201 at the current exchange rate. So the projected additional revenue from the S.Antonio-1 well will cover 75% of the BoD’s salaries on its own. This is without including the other €3 million that is generated from the rest of the Italian assets or the $12-13 million that is being generated from the Tunisian assets.

In short, for a company that is making a net revenue of approx. $15.5-$16.5million annually a total salary cost for the Board of Directors of $762,300 is perfectly reasonable. It is only 4.6% of revenues.

As to your question on has anyone “set a date for tilapia deal to be done”? this same question was asked by mls on Tuesday and I answered it then. Here is the answer repeated below for your benefit. Apologies to others who have already read this:

Nobody knows. We know that the granting of the license is in process, that the company passed the ICU test over a year ago and that Andrea has said that he is “very confident in the success of our ongoing transactions or I would not have bought 40 million shares the other month “(Jan/Feb). We do know howeverthat things take time in Africa and the company has other deals in progress.

Is it frustrating that the granting of the Tilapia license is taking so long? Of course it is. However, I fail to see that this is Zenith’s fault. Short of paying bribes, which would be illegal and the company has said it would not do then there is no way to speed up the decisions of the Congolese authorities. This is also not just a Congolese issue. If we look at the court case relating to NHNL and ADM Energy (which we are thankfully well out of) we will see that the court date is currently over a year after the case was originally raised and it is likely to take longer still. This is just how things happen in Africa.

If people on this site do want a debate then I, for one, am happy to do so. It is often rare to have sensible debate on this forum but in the spirit of investors co-operation then let’s do this.
To answer the questions raised by mls first:

A) When will we have Tilapia news?

Nobody knows. We know that the granting of the license is in process, that the company passed the ICU test over a year ago and that Andrea has said that he is “very confident in the success of our ongoing transactions or I would not have bought 40 million shares the other month “(Jan/Feb). We do know howeverthat things take time in Africa and the company has other deals in progress.

Is it frustrating that the granting of the Tilapia license is taking so long? Of course it is. However, I fail to see that this is Zenith’s fault. Short of paying bribes, which would be illegal and the company has said it would not do then there is no way to speed up the decisions of the Congolese authorities. This is also not just a Congolese issue. If we look at the court case relating to NHNL and ADM Energy (which we are thankfully well out of) we will see that the court date is currently over a year after the case was originally raised and it is likely to take longer still. This is just how things happen in Africa.

B) Will we see a 0.6p share price?

This is an unanswerable question as nobody knows where the market will take the company on no news or when news will be released that will send the share price rocketing upwards.

However, in my opinion the mathematics of the market cap suggest that it is unlikely that the company’s share price will drop as low as 0.6p. At todays price of 0.725p the market cap of the company is £13.5 million and as I said yesterday the oil revenue from Tunisia and the gas revenue from Italy give the company a net revenue stream of approximately £13 million.

If the share price dropped to 0.6p then the net revenue would still be £13 million but the market cap would drop to £11.2 million. Frankly I cannot see this happening but in the unlikely event that it did then it would be a massive buying opportunity for investors.

Over to others for their contributions to the debate now…

When you add in the fact that the company still expect to receive the Tilapia license and are working on acquiring other assets then you can see that the only way this is going is up. AC said in the last investor conference call that “I know that sometimes our shareholders are frustrated with how long it takes between talking about a deal and then completing it but in Africa time is very difficult and there is nobody about (our size) who is completing transactions quicker than us. Zenith is a very aggressive company but we do things above board and so we are not worried about falling foul of authorities. This means that we cannot speed up African bureaucracy but our solution is to have multi-pronged deals in process so when one is stalled then others are in progress. I am very confident in the success of our ongoing transactions or I would not have bought 40 million shares the other month.”

Importantly though, once again Zenith are not reliant on just Tilapia coming in. Once again this is a great sign of the company not putting all of its eggs in one basket. We know that the company tried to acquire ONL141 in Nigeria (which had a potential production of 2,000 bopd) and this deal would have almost certainly gone through were it not for the fact that NNHL and ADME got in a legal spat about ownership which has still not been resolved.

As I have said before, I do not believe for a second that we are just waiting for Tilapia and Rob-3 and that nothing else is going on in the interim. AC is a busy many and an active deal-maker and in the last investor conference call he made the following four statements which should give us all confidence that we will almost certainly be acquiring new assets in the very immediate future:

1,.“Zenith has many other negotiations going on in Africa which have not reached announceable stage yet. However, we are looking at trying to acquire assets that can be closed quickly. “

2,.“There are also possibly other acquisitions in Tunisia but our initial strike took all of the small and easily available assets and so we prefer to focus in other jurisdictions where we can complete deals more quickly.

3,.“ We are already in negotiation of 5-6 Nigerian deals and the appeal of OML141 was quick production and staggered payment. We understand that retail investors don’t want long-drawn out negotiations and we are always looking at speed of executions without bureaucratic complications (transactions between private companies) and that can be brought to productions quickly. However at the same time this is Africa . For example Baraccuda would have been perfect if it was not for the malicious court case and so we could have completed the transaction in a matter of hours were it not for the court case. Note that this is not the only opportunity that we have and we have many many good opportunities.”

Bear666 if you are looking back at history then yes the whole Azerbaijan era was a disaster and that explains the historical shareprice fall from 12p down to 0.35p in November 2020 but this 12p high was over 5 years ago now and Zenith no longer even own the assets in Azerbaijan.

Since the 0.35p low then the charts look much healthier and even today the share price is still more than double the point it was when Azerbaijan was abandoned. Also the idea that Zenith are producing no oil is nonsense. They produce approx. 450bopd from the assets they acquired for almost nothing in Tunisia and this is generating approx. $11-13 million at the moment.

It was only in April that they sold $6.4 million worth of oil from Tunisia and they expect to sell another $5.4 million any time now. Not to mention that they are generating a profit of over 3 million Euros from the Italian gas. This means that they are generating over £13 million per year of profit which is nearly the entire market cap (currently £14 milliom). When Tilapia or any other new assets come on board then this will fly.

You have to put aside the Azerbaijan days as that was a completely different company and, as I have said repeatedly in the past it was a ludicrously risky adventure to put all of the company eggs in that one basket and investors really should have seen it for the high-risk-high-reward gamble that it was.

What has been very interesting about Zenith since then is how they have learned from their mistakes and absolutely not put all of their eggs in one basket. They have the Tunisian assets which are cash-generative. They have the Italiian assets which are also cash generative and have the potential to be significantly expanded to generate more. I have continuously advocated on this board that Zenith should be focusing on developing the Italian assets before they move back into Tunisia to do more work there so that the company portfolio is not reliant solely on the Tunisian oil production and the Tunisian jurisdiction but is also focused on gas and Italy. This spreads the risk and would show that they have absolutely learned the lesson form the Azerbaijan debacle of being wholly at the mercy of the legalities of one (very dubious) country.

Hedgehog – my apologies. I agree that we are on the same page with regard to the bright future that is ahead of Zenith. On furth consideration I also think that you are absolutely correct in that slippage does happen and that in the big scheme of things the delay from June to September (for the civil works) is actually totally normal. I think that I just got caught up in the word “November” and missed out on the crucial point that the civil works will commence in September which is only two months away. Thanks very much for the correction.

The other thing that I absolutely in agreement with you about is that Zenith have a lot going on. I do not believe for a second that we are just waiting for Tilapia and Rob-3 and that nothing else is going on in the interim. AC is a busy many and an active deal-maker and in the last investor conference call he made the following four statements which should give us all confidence that we will almost certainly be acquiring new assets in the very immediate future:

1,.“Zenith has many other negotiations going on in Africa which have not reached announceable stage yet. However, we are looking at trying to acquire assets that can be closed quickly. “
2,.“There are also possibly other acquisitions in Tunisia but our initial strike took all of the small and easily available assets and so we prefer to focus in other jurisdictions where we can complete deals more quickly.

3,.“ We are already in negotiation of 5-6 Nigerian deals and the appeal of OML141 was quick production and staggered payment. We understand that retail investors don’t want long-drawn out negotiations and we are always looking at speed of executions without bureaucratic complications (transactions between private companies) and that can be brought to productions quickly. However at the same time this is Africa . For example Baraccuda would have been perfect if it was not for the malicious court case and so we could have completed the transaction in a matter of hours were it not for the court case. Note that this is not the only opportunity that we have and we have many many good opportunities.”

4. “July 2021 AC mentioned that they company was looking for big assets that might enable the company to increase 10-15 times in size – 2022? At the moment we are in two negotiations of this size. They are not yet at an annoucneable stage but we have developed new avenues in new countries that were not previously knows.”

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