Zenith Energy Regulatory News (ZEN)

March 28, 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 Exclusivity and Option Agreement to purchase an oil production asset in Indonesia

Zenith Energy Ltd., ("Zenith" or the "Company"), (LSE: ZEN; TSX.V: ZEE), the international oil & gas production company operating the largest onshore oilfield in Azerbaijan, is pleased to announce that it has entered into a binding exclusivity and an option to purchase agreement (the "Agreement") for the possible acquisition of an oil production asset located in Indonesia (the "Proposed Acquisition").

Highlights 

· The Proposed Acquisition envisages Zenith acquiring a 100% working interest in an oil production licence comprising two onshore blocks, with a combined total acreage covering approximately 65 sq. kilometres.

· Existing production in excess of 1,000 barrels of oil per day transported by pipeline directly into the national oil sales system with a reported all-in average production cost of US$18 per barrel.

· The oilfields are located in a prolific oil and gas basin with a proven petroleum system. At present, only one of the two oilfields is producing. The second oilfield is expected to be capable of significant production by drilling new wells and performing workovers on existing wells.  

· Drilling activities can be performed at relatively low-cost and without significant delay. The average total depth of production wells in the licence area of the Proposed Acquisition is between 350 to 750 metres.

· The approved development programme for the licence area, involving the drilling of new wells and the introduction of new oil production technology, is expected to double current production from the Proposed Acquisition by 2020. 

· 2D seismic dataset covering key oil production locations. 

Agreement Summary 

The Agreement includes the following key elements:

· The Company has until April 30, 2018 to undertake its due diligence on the ProposedAcquisition (the "Due Diligence").  

· After completing the Due Diligence, the Company has a period of 15 days to choose to exercise an option to complete the Proposed Acquisition (the "Option") for a total consideration of US$6,600,000 (the "Consideration"). The Consideration shall be payable as to 50 per cent., (US$3,300,000), within 7 working days of exercising the Option (the "First Payment"), and the balance, (US$3,300,000), payable within 3 months of the First Payment.

· The Company has exclusive rights to complete the Proposed Acquisition for a period of 90 days from March 23, 2018, whether or not it decides to exercise the Option to allow for the terms of the Proposed Acquisition to be renegotiated following the Due Diligence.

· Andrea Cattaneo, the Chief Executive Officer and President of the Company, has agreed to make a down payment of US$100,000 by April 15, 2018 (the "Deposit"). If the Company exercises the Option, then the Deposit will be offset against the First Payment and the Company will reimburse Mr Cattaneo the US$100,000. In the event that the during the Due Diligence the Company finds negative discrepancies greater than 5% of the book values stated in the Proposed Acquisition's financial statements dated February 28, 2018 (the "Discrepancies"), then the Deposit shall be refunded to Mr Cattaneo. If the Company decides not to exercise the Option for any other reason during the Due Diligence, then Mr Cattaneo will forfeit the Deposit.

The Due Diligence encompasses the legal, accounting, petroleum and fiscal aspects of the Proposed Acquisition.

The Company will provide an update regarding the progress of the Proposed Acquisition once the Due Diligence has been completed. The Proposed Acquisition remains at an early stage and there can be no guarantee that it will be successfully completed. Completion of the Proposed Acquisition remains conditional on, inter alia, satisfactory completion of the Due-Diligence, the entering into a share purchase agreement and financing of the Consideration. 

Zenith is considering a number of funding options for the Consideration including debt and equity. The Company has commenced work on a prospectus with a view to undertaking an issue of new common shares of no par value ("Common Shares"). This process remains at an early stage and the amount to be raised, use of proceeds and the price at which any Common Shares may be issued is not concluded at this stage.

Completion of the Proposed Acquisition may be subject to regulatory approval from the TSXV.

Andrea Cattaneo, Chief Executive Officer of Zenith, commented:

"The Company has clearly stated its intention to identify value accretive acquisitions that will enable Zenith to enrich its portfolio and rapidly accelerate its development. Like our existing asset in Azerbaijan, the proposed acquisition has very strong growth potential and generates profit from its sizeable existing low-cost oil production. In addition, the geology is less challenging, and the average well depth is much reduced compared to what we have in other assets, meaning that our operational expenditure for workovers and drilling new wells will be significantly smaller. The Proposed Acquisition will complement our long-term field development programme underway in Azerbaijan, where our large reserves will require more time and investment to be produced, and which remains our primary operational focus.

I look forward to updating the market on our progress with this exciting opportunity."

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 Toronto Stock 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