Zenith Energy Regulatory News (ZEN)

June 20, 2018

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED STATES OF AMERICA, AUSTRALIA, JAPAN, SOUTH AFRICA, REPUBLIC OF IRELAND, SWITZERLAND OR ANY OTHER JURISDICTION WHERE IT IS UNLAWFUL TO DISTRIBUTE THIS ANNOUNCEMENT

This announcement is not an offer of securities for sale, or an offer or solicitation to buy or subscribe for, directly or indirectly, securities to any person in the United States or any other jurisdiction, including in or into Canada, Japan, South Africa, Republic of Ireland, Switzerland and Australia or any other jurisdiction in which such offer or solicitation is unlawful ("Excluded Territory"). This announcement is an advertisement and not a prospectus. Investors should not purchase or subscribe for any transferable securities referred to in this announcement except on the basis of information contained in the prospectus in its final form published by Zenith Energy Ltd. in connection with a placing of, subscription for and offer of new common shares and the proposed admission of those new shares to the Standard Listing segment of the Official List of the UK Listing Authority and to trading on the London Stock Exchange plc's main market for listed securities. The issuance of such new common shares has received conditional approval from the TSXV. A copy of the Prospectus will be available shortly on the Company's website (www.zenithenergy.ca) and will be available shortly for viewing at the National Storage Mechanism at www.morningstar.co.uk/uk/nsm. Neither this announcement nor any part of it shall form the basis of or be relied on in connection with or act as an inducement to enter into any contract or commitment whatsoever.

This announcement contains inside information for the purposes of Article 7 of EU Regulation 596/2014 ("MAR"). In addition, market soundings (as defined in MAR) were taken in respect of the fundraising described in this announcement with the result that certain persons became aware of inside information (as defined in MAR), as permitted by MAR. This inside information is set out in this announcement. Therefore, those persons that received inside information in a market sounding are no longer in possession of such inside information relating to the Company and its securities.

ZENITH ENERGY LTD.

("Zenith" or the "Company")

Publication of Prospectus

Placing and Subscription to raise £2.02 million

Zenith Energy Ltd., ("Zenith" or the "Company"), (LSE: ZEN; TSX.V: ZEE), the international oil and gas production company operating the largest onshore oilfield in Azerbaijan, has today published a prospectus (the "Prospectus") in connection with a placing and subscription to raise £2.02 million (before expenses) through the issue of 50,500,000 new common shares of no par value in the capital of the Company ("Common Shares") at an issue price of 4p per share (the "Issue Price") (the " Placing and Subscription").

The Issue Price is a discount of 21.6 per cent. to the closing middle market price of 5.10 pence per existing Common Share on the LSE on 19 June 2018, being the last business day prior to this announcement.

The Prospectus, which includes full details on the Group and the terms and conditions of the Placing and Subscription, has been approved by the UK Listing Authority. A copy of the Prospectus will be available shortly from the Company's website (www.zenithenergy.ca) and a copy has been submitted to the National Storage Mechanism and will shortly be available for inspection at: www.morningstar.co.uk/uk/nsm.

http://www.rns-pdf.londonstockexchange.com/rns/0436S_1-2018-6-20.pdf

Capitalised terms used in this announcement shall have the meanings set out in the Prospectus.

The Company highly values its retail investor base and is pleased to provide its private investors alongside institutional investors with the opportunity to participate in the Subscription by applying for Offer Shares through the PrimaryBid.com platform. A further announcement will be made providing further details however it is expected that PrimaryBid will launch an offer for subscription to raise up to £800,000 via PrimaryBid (the "PrimaryBid Offer") and that the PrimaryBid Offer will remain open until, at the latest, 9.00 p.m. (London time) tonight. Subscriptions will be considered by the Company on a "first come, first served" basis and are subject to the conditions set out in the Prospectus. PrimaryBid will not charge commission for this service. The PrimaryBid Offer has not been underwritten.

The Company also announces that its shares have been placed in a trading halt on the TSXV with immediate effect pending the release of an announcement in relation to closing of the PrimaryBid Offer.

Use of Proceeds from the Placing and Subscription

The Company's intention is to use the net proceeds from the Placing and Subscription as follows (in order of priority):

Use Amount (GBP)

Deposit for the leasing of a new drilling rig £1.50 million

Working capital £0.21 million

Details of the Placing and Subscription and PrimaryBid Offer

Any net proceeds of the PrimaryBid Offer will be applied for general working capital purposes.

The Placing comprises a total of 46,500,000 Placing Shares to be issued by the Company at a Placing Price of 4 pence per new Common Share, to raise gross proceeds of approximately £1,860,000 (before expenses). The estimated Net Proceeds of the Placing amount to approximately £1,548,300. Each prospective investor has been offered Placing Shares at the Placing Price and the Placing Shares have been conditionally subscribed for by investors. Investors have executed irrevocable placing letters undertaking to subscribe for 46,500,000 Common Shares in aggregate at the Placing Price. The undertakings are conditional on Admission.

The Placing Shares will be issued credited as fully paid and will, on Admission, rank pari passu in all respects with all other Common Shares including the right to receive all dividends or other distributions declared, made or paid after Admission. The Placing Shares to be issued by the Company pursuant to the Placing will represent approximately 22.10% of the Enlarged Common Shares in Issue (excluding the Offer Shares).

The Subscription is for 4,000,000 Subscription Shares at the Subscription Price of 4 pence per Common Share.

The Subscription Shares will be issued credited as fully paid and will, on Admission, rank pari passu in all respects with all other Common Shares including the right to receive all dividends or other distributions declared, made or paid after Admission.

On Admission the Company will have a market capitalisation (at the Placing Price) of approximately £8.42 million assuming 46,500,000 Placing Shares are issued at the Placing Price and 4,000,000 Subscription Shares are issued at the Subscription Price.

The PrimaryBid Offer for up to 20,000,000 Offer Shares at the Offer Price of 4 pence per Common Share will be open between 4.30 p.m. (London time) and 9.00 p.m. (London time) on 20 June 2018. This will raise gross proceeds of up to £800,000. The PrimaryBid Offer is not underwritten.

All Offer Shares will be issued, payable in full, at the Offer Price. The Offer Shares will be issued credited as fully paid and will, on Admission, rank pari passu in all respects with all other Common Shares including the right to receive all dividends or other distributions declared, made or

paid after Admission.

The Company expressly reserves the right to determine, at any time prior to Admission, not to proceed with the Placing, Subscription and/or the PrimaryBid Offer.

Following Admission, the net proceeds from the Placing and the Subscription and the net proceeds of the PrimaryBid Offer will be placed on deposit with the Company's bankers.

Investors should make their own investigations into the merits of an investment in the Company. Nothing in this announcement amounts to a recommendation to invest in the Company or amounts to investment, taxation or legal advice.

It should be noted that a subscription for Offer Shares and investment in the Company carries a number of risks. Investors should consider the risk factors set out in the Prospectus before making a decision to subscribe for Offer Shares. Investors should take independent advice from a person experienced in advising on investment in securities such as the Offer Shares if they are in any doubt. 

Andrea Cattaneo, Chief Executive Officer of Zenith, commented:

"The proceeds of the fundraising will be used almost entirely for our operational development, which remains our strategic focus given the scale of our asset in Azerbaijan. We have sought to keep the amount raised to the minimum necessary in order to mitigate the effects of dilution and enable the Company to raise more capital to support Zenith's growth at a later date with far more favourable valuations of its stock on the back of the strong operational results we are hoping to achieve. Our current share price presents a highly attractive investment case on the basis of our existing production, our 2P reserves of 31.7 million barrels of oil in Azerbaijan, and the near-term completion of our operations in the potentially prolific Zardab field."

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

EXPECTED TIMETABLE OF PRINCIPAL EVENTS

These dates and times are indicative only, subject to change and may be brought forward as well as moved back, in which case new dates and times will be announced. All references to time in this timetable are to London, UK time unless otherwise stated and each of the times and dates are indicative only and may be subject to change.

PLACING, SUBSCRIPTION AND PRIMARYBID OFFER STATISTICS

Information to Distributors

Solely for the purposes of the product governance requirements contained within: (a) EU Directive 2014/65/EU on markets in financial instruments, as amended ("MiFID II"); (b) Articles 9 and 10 of Commission Delegated Directive (EU) 2017/593 supplementing MiFID II; and (c) local implementing measures (together, the "Product Governance Requirements"), and disclaiming all and any liability, whether arising in tort, contract or otherwise, which any "manufacturer" (for the purposes of the Product Governance Requirements) may otherwise have with respect thereto, the Placing Shares and Subscription Shares have been subject to a product approval process, which has determined that the Placing Shares and Subscription Shares are: (i) compatible with an end target market of retail investors and investors who meet the criteria of professional clients and eligible counterparties, each as defined in MiFID II; and (ii) eligible for distribution through all distribution channels as are permitted by MiFID II (the "Target Market Assessment"). Notwithstanding the Target Market Assessment, investors should note that: the price of the Placing Shares and the Subscription Shares may decline and investors could lose all or part of their investment; Placing Shares and Subscription Shares offer no guaranteed income and no capital protection; and an investment in Placing Shares and Subscription Shares is compatible only with investors who do not need a guaranteed income or capital protection, who (either alone or in conjunction with an appropriate financial or other adviser) are capable of evaluating the merits and risks of such an investment and who have sufficient resources to be able to bear any losses that may result therefrom. The Target Market Assessment is without prejudice to the requirements of any contractual, legal or regulatory selling restrictions in relation to the Placing and the Subscription. Furthermore, it is noted that, notwithstanding the Target Market Assessment, only investors who have met the criteria of professional clients and eligible counterparties have been procured. For the avoidance of doubt, the Target Market Assessment does not constitute: (a) an assessment of suitability or appropriateness for the purposes of MiFID II; or (b) a recommendation to any investor or group of investors to invest in, or purchase, or take any other action whatsoever with respect to Placing Shares and the Subscription Shares.

Cautionary statements

This announcement has been issued by and is the sole responsibility of Zenith. The information contained in this announcement is for background purposes only and does not purport to be full or complete. No reliance may or should be placed by any person for any purpose whatsoever on the information contained in this announcement or on its accuracy or completeness. The information in this announcement is subject to change. 

Copies of the Prospectus will be available from the Company's UK offices, Thomas House, 84 Eccleston Square, London SW1V 1PX and on Zenith's website at www.zenithenergy.ca. Neither the content of the Company's website nor any website accessible by hyperlinks on the Company's website is incorporated in, or forms part of, this announcement.

The distribution of this announcement and the Prospectus into jurisdictions other than the United Kingdom may be restricted by law, and, therefore, persons into whose possession this announcement and the Prospectus and/or any accompanying documents comes should inform themselves about and observe any such restrictions. Any failure to comply with any such restrictions may constitute a violation of the securities laws of such jurisdiction. In particular, subject to certain exceptions, this announcement and the Prospectus should not be distributed, forwarded to or transmitted in or into the United States or any other Excluded Territory.

Recipients of this announcement and/or the Prospectus should conduct their own investigation, evaluation and analysis of the business described in this announcement and/or the Prospectus. This announcement does not constitute a recommendation concerning an investment in the common shares of Zenith. The contents of this announcement are not to be construed as legal, business, financial or tax advice. Each shareholder or prospective investor should consult his, her or its own legal adviser, business adviser, financial adviser or tax adviser for legal, financial, business or tax advice.

This announcement includes "forward-looking statements". All statements other than statements of historical facts included in this announcement, including, without limitation, those regarding the Company's investment strategy, plans and objectives are forward-looking statements. Forward-looking statements are subject to risks and uncertainties and accordingly the Company's actual future financial results and operational performance may differ materially from the results and performance expressed in, or implied by, the statements. These factors include but are not limited to those described in the Prospectus. These forward-looking statements speak only as at the date of this announcement. The Company expressly disclaims any obligation or undertaking to update or revise any forward-looking statements contained herein to reflect actual results or any change in the assumptions, conditions or circumstances on which any such statements are based unless required to do so by applicable law, the Prospectus Rules, the Listing Rules, the Market Abuse Regulation or the Disclosure Guidance and Transparency Rules of the FCA.

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