Last checked at 1 Nov 2017 07:00
November 1, 2017
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").
ZENITH ENERGY LTD.
("Zenith" or the "Company")
Commitment letter signed for new generation, automated hydraulic drilling rig, and Announcement of Total Voting Rights
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 it has 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 Quarter 4, 2017, with delivery anticipated in the second half of 2018.
Andrea Cattaneo, Chief Executive Officer of Zenith, commented:
"I am very excited about our new partnership with B Robotics W. The BQ500 Genesis rig is an extremely impressive piece of machinery, offering a unique mix of technological innovation, reliability and efficiency.
Zenith is strategically committed to operational independence and strong profitability, even in a low oil price environment. Our development drilling campaign, which we expect to begin in 2018, will play a transformational role in Zenith's journey towards achieving its objective of mid-tier market capitalisation. Indeed, the recent strengthening in oil prices will, if sustained, further maximise the profitability of our systematic field development activities. It should also be noted that the ever-present risk of third-party delays negatively impacting our operations will be greatly mitigated by operating our own rig.
We know that our field in Azerbaijan has very significant quantities of oil, with independently assessed 2P reserves of 32.1 million barrels of oil, and our intention is to produce as much oil as possible in full safety. The advanced automated features of the BQ500, as well as its energy efficiency, will not only reduce our drilling expenses, but also make our operations faster and, at the same time, safer, by significantly reducing the margin for human error.
Direct collaboration with the manufacturer, especially in the design phase before the rig is produced, will allow Zenith's operational team to provide detailed input regarding our technical requirements, ensuring that the rig is designed to our specifications.
I look forward to updating the market when construction of the rig begins."
Walter Bagassi, Chief Executive Officer of B Robotics W, and Director, Olieum Services WLL, commented:
"We are very pleased to have the opportunity to work with Zenith Energy. In today's marketplace, increasing productivity is the key to success. Our fully automated drilling rigs provide many safety and cost-saving advantages over traditional rigs, to increase a company's competitiveness and its bottom line. Incredibly, no significant technological advances have happened since 1923, when drilling moved from percussion to rotary - the development in drilling rig manufacturing has been static for 94 years."
Abdulaziz Alshammary, Director, Olieum Services WLL, commented:
"Our integrated oilfield services and equipment value chain allows us to easily integrate with the needs of national and international oil companies, operators and contractors. We packaged a bespoke equipment and financial arrangement with Zenith, suited to their particular requirements in Azerbaijan. We look forward to exploring synergies with Zenith to create further value for all stakeholders."
Total Voting Rights ("TVR")
The Company wishes to announce, in accordance with the Financial Conduct Authority's Disclosure Guidance and Transparency Rules, the following information as at November 1, 2017. The issued ordinary share capital of the Company at the date of this announcement consists of 133,787,977 common shares in issue and admitted to trading on the Main Market of the London Stock Exchange.
The above figure may be used by shareholders in the Company as the denominator for the calculations by which they will determine if they are required to notify their interest in, or change to their interest in, the share capital of the Company under the Financial Conduct Authority's Disclosure Guidance and Transparency Rules.
For further information, please contact:
Zenith Energy Ltd.
Andrea Cattaneo
Chief Executive Officer
Email: info@zenithenergy.ca
Telephone: +1 (587) 315 9031
Telefax: +1 (403) 775 4474
Optiva Securities - (Joint Broker)
Christian Dennis
Telephone: + 44 (0) 203 137 1903
Beaufort Securities Limited - (Joint Broker)
Jon Belliss
Telephone: +44 207 382 8300
Allenby Capital Limited - (Financial Adviser)
Nick Harriss
Nick Athanas
Telephone: + 44 (0) 203 328 5656
Yellow Jersey (Financial PR/IR)
Tim Thompson
Telephone: +44 (0) 203 735 8825