Zenith Energy Regulatory News (ZEN)

June 25, 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")

Signing of Commitment Letter for Genesis BQ500 2000HP Drilling Rig

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 that its oilfield service company subsidiary, Zena Drilling Limited, ("Zena"), has signed a revised commitment letter (the "Commitment Letter") for the operating lease of a Genesis BQ500 onshore drilling rig with Olieum Services WLL ("Olieum"), an integrated oilfield services and equipment joint venture based in Bahrain.

The Genesis BQ500 ("BQ500") is a 2000HP automated hydraulic drilling rig built by B Robotics W S.r.l., ("Robotics"), a leading Italian drilling rig manufacturer based in Piacenza.

The Company had communicated to the market that it had signed a commitment letter with Olieum for a BQ500 drilling rig on November 1, 2017.

On June 22, 2018, Zena signed a Commitment Letter, superseding the aforementioned commitment letter signed on November 1, 2017, for the operating lease of a BQ500 drilling with Olieum. The Commitment Letter includes more favourable terms for the Company in a number of areas.

Key terms of the Commitment Letter:

- Six-year operating lease of a BQ500 2000HP automated hydraulic drilling rig

- Option to renew the operating lease for a further six years upon completion of the first six-year term

- The BQ500 shall be gifted to the Company once all payments are made during an operating lease period of twelve years

- Six-month 'grace period' starting from the beginning of drilling operations using the BQ500 during which time the Company will not pay any leasing costs

Technical Overview of the BQ500

- 2000HP automated hydraulic onshore drilling rig

- Drilling depth capacity of up to 6,300 metres

- Full rig-up takes up to 48 hours to complete with no cranes required. Average rigging up time for drawworks drilling rigs of this size is 12-16 days

- 360-degree walking system

- Static hook load capacity of 450 metric tons

- Top drive tripping speed: 1.5 metres/sec. By comparison, the average speed of conventional drawworks drilling rigs is approximately 0.5-0.6 metres/sec

- Improved transportation capabilities with a reduction of approximately 50% in loads over conventional drilling rigs

- Two AC driven 1600HP mud pumps

- 'Hands-free' drilling and tripping ensures an optimisation of safety as no manual intervention is required for these tasks

- Crew of four technicians working 12-hour shifts

- Seven tank mud system

The BQ500 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. 

The Company will comply with all applicable procurement protocols in preparation for the scheduled delivery of the BQ500 rig December 2018.

Andrea Cattaneo, Chief Executive Officer of Zenith, commented:

"We are continuing to implement our stated intention of operating the key equipment required for the long-term development of our asset portfolio. As detailed in our 2018 CPR, we have proven plus probable (2P) reserves of approximately 31.7 million barrels to produce for the duration of our REDPSA agreement in Azerbaijan and 16.4 BCF of 2P natural gas reserves in Italy. As announced previously, our ongoing geological study has identified a number of highly promising drilling locations which the Company will be finalising in the lead-up to the beginning of drilling activities later this year.

I look forward to inviting Zenith investors to view the rig's assembly at the Robotics factory as construction progresses in the months ahead and, more importantly, when it arrives on location later this year."

For further information please contact:

Zenith Energy Ltd.

Andrea Cattaneo 

Chief Executive Officer 

E-mail: info@zenithenergy.ca

Tel: +1 (587) 315 9031

Vigo Communications - PR Adviser

Patrick d'Ancona

Chris McMahon 

Kate Rogucheva

Tel: +44 (0) 20 7830 9700

Daniel Stewart & Company Plc - (Joint Broker)

Robert Emmet- Corporate Broking

Nikhil Varghese- Corporate Finance 

Tel: + 44 (0) 207 776 6550

Optiva Securities - (Joint Broker)

Christian Dennis

Tel: + 44 (0) 203 137 1903

Allenby Capital Limited - (Financial Adviser)

Nick Harriss

Nick Athanas

Tel: + 44 (0) 203 328 5656

Notes to Editors: 

Zenith Energy Ltd. is an international oil and gas production company, dual listed on the TSX Venture Exchange and London Stock Exchange. 

The Company operates the largest onshore oilfield in Azerbaijan following the signing of a 25-year REDPSA, (Rehabilitation, Exploration, Development and Production Sharing Agreement), with SOCAR, State Oil Company of the Azerbaijan Republic, in 2016. 

The Company's primary focus is the development of its Azerbaijan operations by leveraging its technical expertise and financial resources to maximise low-cost oil production via a systematic field rehabilitation programme intended to achieve significantly increased revenue. Zenith also operates, or has working interests in, a number of natural gas production concessions in Italy. The Company's Italian operations produce natural gas, natural gas condensate and electricity.

Zenith's development strategy is to identify and rapidly seize value-accretive hydrocarbon production opportunities in the onshore oil & gas sector. The Company's Board of Directors and senior management team have the experience and technical expertise to develop the Company successfully.

To find out more, visit www.zenithenergy.ca or follow Zenith on Twitter @zenithenergyltd