Last checked at 16 Feb 2018 07:00
February 16, 2018
The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulation (EU) No. 596/2014 ("MAR"). Upon publication of this announcement via a regulatory information service ("RIS"), the inside information contained in this document is now considered to be in the public domain.
ZENITH ENERGY LTD.
("Zenith" or the "Company")
Filing of Quarterly Results
Zenith Energy Ltd., ("Zenith" or the "Company"), (LSE: ZEN; TSX.V: ZEE), the dual listed international oil & gas production company operating the largest onshore oilfield in Azerbaijan, is pleased to announce the filing of its consolidated quarterly results for the three and nine months ended December 31, 2017.
In accordance with Canadian securities laws, the Company's quarterly results were filed on SEDAR on February 15, 2018.
Highlights for the three and nine months ended December 31, 2017 include the following:
· During the three and nine months ended December 31, 2017, the Company produced 22,317 and 70,271 barrels of oil from its assets in Azerbaijan.
Production from a number of the Company's wells in Azerbaijan was suspended during Q3 as a result of field rehabilitation operations, specifically the installation of electrical submersible pumps and well interventions. Daily production from the field was also affected as a result of the Company receiving faulty chemical to treat its oil production from an international chemical supplier. Zenith is now seeking to have the faulty chemical replaced and has ordered new chemical supplies to avoid similar problems being incurred in future.
· During the three and nine months ended December 31, 2017, the Company sold 3,578 and 13,199 mcf of natural gas production from its Italian assets.
· During the three and nine months ended December 31, 2017, the Company sold 295 and 782 barrels of condensate production from its Italian assets.
· During the three and nine months ended December 31, 2017, the Company sold 1,922 and 7,185 MWh of electricity production from its Italian assets.
· On November 1, 2017 the Company announced that it had signed a commitment letter with Olieum Services WLL ("Olieum"), an integrated oilfield services and equipment joint venture based in Bahrain, for the procurement of a Genesis BQ500 onshore drilling rig. Olieum has worked closely with the Company to structure a unique lease arrangement that aligns Zenith's targeted growth plans and cash flows with its future equipment requirements.
The Genesis BQ500 is the latest generation, automated onshore hydraulic drilling rig to be manufactured by B Robotics W S.R.L, a founding partner in Olieum, and a leading Italian oil and gas innovation company specialising in the design and manufacture of advanced oil and gas drilling equipment. The rig is expected to deliver enhanced automation, efficiency and safety to the Company's drilling operations, whilst driving down costs and time-to-production. This has largely been achieved through extensive research and development in modular rig design, and in key components including the monkey board, slips, lay-up and down machine, pipe containers, roughneck, subs and bits loader, and all the working floor tools.
Manufacturing of the Genesis BQ500 is scheduled to begin upon the fulfilment of the preliminary conditions detailed in the commitment letter. This is expected to take place in early 2018, with delivery anticipated in late 2018.
· The Company recorded revenues of CAD$1,620k for its production during the three months ended December 31, 2017.
· The Company incurred CAD$3,418k of capital expenditures in the nine months ended December 31, 2017, primarily resulting from the field rehabilitation programme underway in Azerbaijan.
Zenith Chief Executive Officer, Andrea Cattaneo, commented:
"Although we have faced some operational challenges in recent months, I believe these are now being successfully addressed and the Company has a very exciting development journey ahead, coupled with potential transactions to enhance the portfolio and broaden the risk profile of our assets. Accordingly, I look forward to announcing increased production revenue in the next set of quarterly results as we improve well performance and look to grow our daily production levels."
Consolidated Statement of Comprehensive Income |
| ||
Continuing operations |
| Nine months ended | |
|
| 31 December 2017 | 31 December 2016 |
|
| Unaudited | Unaudited |
| Note | CAD $'000 | CAD $'000 |
Revenue | 22 | 4,402 | 2,984 |
Royalties |
| - | (7) |
|
|
|
|
Cost of Sales |
|
|
|
Production costs |
| (1,959) | (1,804) |
Depletion and depreciation | 7 | (976) | (523) |
Gross Profit / (Loss) |
| 1,467 | 650 |
|
|
|
|
Administrative expenses | 4 | (962) | (3,697) |
Gain on business acquisition |
| - | 771,189 |
Operating Profit / (Loss) |
| 505 | 768,142 |
|
|
|
|
Fair value movements |
| - | (40) |
Gain (loss) on sale of marketable securities |
| - | 4 |
Foreign exchange |
| - | 221 |
Net Interest expense | 5 | 64 | (570) |
|
|
|
|
Profit/(Loss) for the period before taxation | 569 | 767,757 | |
|
|
|
|
Taxation | 6 | - | (153,044) |
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|
|
|
Profit/(Loss) for the period from continuing operations |
| 569 | 614,713 |
|
|
|
|
(Loss)/Profit from discontinued operations, net of tax |
| - | - |
|
|
|
|
Profit/(Loss) for the period |
| 569 | 614,713 |
|
|
|
|
Other Comprehensive Income |
|
|
|
Items that may be subsequently reclassified to profit or loss: |
|
|
|
Exchange differences on translating foreign operations, net of tax |
| 68 | (8,428) |
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|
|
|
Total Comprehensive Income for the period attributable to equity holders for the parent company |
| 637 | 606,285 |
|
|
|
|
Earnings per share (CAD$) | 20 |
|
|
Basic from profit / (loss) for the period |
| 0.01 | 10.59 |
Diluted from profit / (loss) for the period |
| 0.01 | 5.90 |
From continuing operations - basic |
| 0.01 | 10.59 |
From continuing operations - diluted |
| 0.01 | 5.90 |
From discontinued operations - basic and diluted | 0.01 | 5.90 | |
Consolidated Statement of Financial Position | Nine months ended | ||||||||
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|
| 31 December 2017 | 31 December 2016 | |||||
|
|
| Unaudited | Unaudited | |||||
ASSETS |
| Note | CAD $'000 | CAD $'000 | |||||
Non-current assets |
|
|
| ||||||
| Property, plant and equipment | 7 | 1,075,743 | 1,066,398 | |||||
| Capitalised expenses | 8 | 2,378 | - | |||||
| Other financial assets | 9 | 430 | 161 | |||||
|
|
| 1,078,551 | 1,066,559 | |||||
Current Assets |
|
|
| ||||||
| Inventory | 19 | 296 | 322 | |||||
| Trade and other receivables | 22 | 1,912 | 1,956 | |||||
| Financial instruments at fair value through profit or loss | 12 | 0 | - | |||||
| Cash and cash equivalents |
| 2,358 | 315 | |||||
|
|
| 4,566 | 2,593 | |||||
TOTAL ASSETS |
| 1,083,117 | 1,069,152 | ||||||
EQUITY AND LIABILITIES |
|
|
| ||||||
Equity attributable to equity holders for the parent company |
| ||||||||
| Share capital | 10 | 20,867 | 11,456 | |||||
| Share warrants and option reserve | 11 | 1,172 | 1,800 | |||||
| Contributed surplus |
| 2,232 | 2,231 | |||||
| Retained earnings / (deficit) |
| 554,646 | 590,687 | |||||
| Total equity |
| 578,917 | 606,174 | |||||
Non-current liabilities |
|
|
| ||||||
| Borrowings | 13 | 2,339 | 2,376 | |||||
| Deferred consideration payable | 15 | 484,034 | 287,044 | |||||
| Convertible loans | 14 | - | 1,309 | |||||
| Decommissioning provision | 16 | 7,980 | 9,704 | |||||
| Deferred tax liabilities | 6 | 2,398 | 153,927 | |||||
| Total non-current liabilities |
| 496,751 | 454,360 | |||||
Current Liabilities |
|
|
| ||||||
| Trade and other payables | 22 | 3,857 | 4,893 | |||||
| Oil share agreement |
| - | 1,063 | |||||
| Borrowings | 13 | 2,771 | 1,946 | |||||
| Deferred consideration payable | 15 | 440 | 502 | |||||
| Convertible loans | 14 | 381 | 214 | |||||
| Total current liabilities |
| 7,449 | 8,618 | |||||
TOTAL EQUITY AND LIABILITIES |
| 1,083,117 | 1,069,152 | ||||||
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Consolidated Statement of Changes in Equity | Share capital | Warrants and share option reserve | Contributed surplus | Retained earnings / (deficit) | Total |
| |||
| CAD$'000 | CAD$'000 | CAD$'000 | CAD$'000 | CAD$'000 |
| |||
Balance as at 1 April 2016 | 9,578 | 1,510 | 2,231 | (15,598) | (2,279) |
| |||
Income/(loss) | - | - | - | 606,285 | 606,285 |
| |||
Other comprehensive income | - | - | - | - | - |
| |||
Total comprehensive income | - | - | - | 606,285 | 606,285 |
| |||
Share issue net of costs - conversion of loan notes | 300 | - | - | - | 300 |
| |||
Share issue net of costs - debt settlement | 45 | - | - | - | 45 |
| |||
Share issue net of costs - private placement | 1,533 | - | - | - | 1,533 |
| |||
Value of options issued | - | 290 | - | - | 290 |
| |||
Expired options | - | - | - | - | - |
| |||
Total transactions with owners recognised directly in equity | 1,878 | 290 | - | - | 2,168 |
| |||
Balance as at 31 December 2016 | 11,456 | 1,800 | 2,231 | 590,687 | 606,174 |
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|
| |||
Consolidated Statement of Changes in Equity | Share capital | Warrants and share option reserve | Contributed surplus | Retained earnings / (deficit) | Total |
| |||
| CAD$'000 | CAD$'000 | CAD$'000 | CAD$'000 | CAD$'000 |
| |||
Balance as at 1 April 2017 | 17,229 | 1,877 | 2,332 | 554,009 | 575,447 |
| |||
Income/(loss) | - | - | - | 637 | 637 |
| |||
Other comprehensive income | - | - | - | - | - |
| |||
Total comprehensive income | - | - | - | 637 | 637 |
| |||
Share issue net of costs - conversion of loan notes | - | - | - | - | - |
| |||
Share issue net of costs - debt settlement | 15 | - | - | - | 15 |
| |||
Share issue net of costs - private placement | 1,343 | - | - | - | 1.343 |
| |||
Share issue net of costs - exercise of options | 2,280 | (685) | (100) | - | 1,495 |
| |||
Expired options | - | (20) | - | - | (20) |
| |||
Total transactions with owners recognised directly in equity | 3,638 | (705) | (100) | - | 2,833 |
| |||
Balance as at 31 December 2017 | 20,867 | 1,172 | 2,232 | 554,646 | 578,917 |
| |||
Reserve Description and purpose
Share capital Amount subscribed for share capital
Warrants and share Relates to possible increase in equity for options issued option reserve
Combined surplus Cumulative earning from non-operational sources
Retained earnings (deficit) Cumulative net gains and losses recognised in the consolidated statement of comprehensive income.
Consolidated statement of cash flows | Nine months ended | ||
|
| 31 December 2017 | 31 December 2016 |
OPERATING ACTIVITIES | Note | CAD $'000 | CAD $'000 |
Profit/(Loss) for the year before taxation |
| 569 | 614,714 |
Items not involving cash: |
| - | - |
Shares issued for services |
| 15 | 131 |
Shares issued for accrued interest |
| - | - |
Options issued |
| 685 | 290 |
Options expired |
| (20) | - |
Gain (loss) on sale of marketable securities |
| - | (4) |
Fair value adjustment on marketable securities |
| - | 40 |
Foreign exchange |
| 68 | 61 |
Gain on business acquisition |
| - | (771,189) |
Deferred taxation |
| - | 153,044 |
Gain on conversion of convertible notes |
| - | - |
Fair value adjustment on derivative liability |
| - | - |
Depletion and depreciation |
| 976 | 523 |
Impairment of property and equipment |
| - | 2 |
Other expense |
| - | - |
Finance expense |
| (64) | 194 |
Change in working capital | 18 | 546 | 285 |
Net cash used in operating activities |
| 2,775 | (1,909) |
INVESTING ACTIVITIES |
|
|
|
Proceeds on sale of marketable securities |
| - | 11 |
Cash on disposal of subsidiary |
| - | - |
Investments in subsidiaries |
| (3,996) | - |
Purchases of property, plant and equipment |
| (3,418) | (103) |
Change in working capital | 18 | - | 11 |
Net cash used in investing activities |
| (7,414) | (81) |
FINANCING ACTIVITIES |
|
|
|
Repayment of notes payable |
| - | - |
Proceeds from issue of shares, net of transaction costs |
| 1,343 | 1,325 |
Proceeds from exercise of options | 10 | 2,280 | - |
Proceeds from issue of bonds |
| - | 191 |
Repayments of loans |
| (550) | - |
Proceeds from loans |
| - | 360 |
Net cash generated from financing activities |
| 3,073 | 1,876 |
Net increase/(decrease) in cash |
| (1,566) | (114) |
Foreign exchange effect on cash held in foreign currencies |
| - | (5) |
Cash at beginning of nine-month period |
| 3,924 | 138 |
Cash at end of nine-month period |
| 2,358 | 19 |
For more information please visit: www.sedar.com
For further information, please contact:
Zenith Energy Ltd.
Andrea Cattaneo | Luca Benedetto |
Chief Executive Officer | Chief Financial Officer |
Email: info@zenithenergy.ca |
|
Telephone: +1 (587) 315 9031
Vigo Communications - PR Adviser Patrick d'Ancona Chris McMahon Kate Rogucheva Tel: +44 (0) 20 7830 9700 |
|
Beaufort Securities Limited - (Joint Broker)
Jon Belliss
Telephone: +44 (0) 207 382 8300
Daniel Stewart & Company Plc - (Joint Broker)
Robert Emmet- Corporate Broking
Nikhil Varghese- Corporate Finance
Telephone: + 44 (0) 207 776 6550
Optiva Securities - (Joint Broker)
Christian Dennis
Telephone: + 44 (0) 203 137 1903
Allenby Capital Limited - (Financial Adviser)
Nick Harriss
Nick Athanas
Telephone: + 44 (0) 203 328 5656