Zenith Energy Regulatory News (ZEN)

February 11, 2020

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")

Successful Issue of Bonds & Operational Update

Zenith Energy Ltd., ("Zenith" or the "Company), (LSE: ZEN; TSX.V: ZEE; OSE: ZENA-ME), the international oil & gas production company, is pleased to provide an update on a number of financial and operational matters.

EUR 25 million EMTN Programme

As anticipated on January 20, 2020, the Company is pleased to announce that the following unsecured, multi-currency Euro Medium Term Notes at par value have now been issued (the "Notes"):

·; EURO 1,000,000 bearing an interest of 10.125 per cent per year (the "EUR-Notes"). ISIN: XS2108546735

·; GBP 1,000,000 bearing an interest of 10.50 per cent per year (the "GBP-Notes"). ISIN: XS2108546578

·; USD 1,000,000 bearing an interest of 10.375 per cent per year (the "USD-Notes"). ISIN: XS2108546651

·; CHF 1,000,000 bearing an interest of 10.00 per cent per year (the "CHF-Notes"). ISIN: XS2108546818

The distribution of the Notes is currently ongoing across a number of markets. It is expected that the USD Notes will shortly be the first fully subscribed series of Notes.

The Notes have been issued under Zenith's EUR 25,000,000 multi-currency Euro Medium Term Notes Programme, as announced by the Company on November 6, 2019, and will be due on January 27, 2024.

The Notes are governed by Austrian law and, since the Notes are not convertible into equity of Zenith, the issuance of the Notes is not subject to the approval of the TSX Venture Exchange in Canada.

The issue of the Notes is aligned with the Company's strategy of diversifying its financing towards non-equity dilutive funding to support its continued successful development.

AAOG Congo Acquisition

The Company's management has in recent weeks completed a number of visits to the Republic of the Congo to achieve completion of the SPA ("Completion"), announced on December 27, 2019, for the acquisition of an 80 percent interest in AAOG Congo ("AAOGC"), which has a 56 percent majority interest in, and is operator of, the Tilapia oilfield in the Republic of the Congo (the "License").

Management believes significant progress has been achieved during recent weeks and is pleased to report the following key highlights:

·; Zenith has met with the relevant authorities to discuss the renewal of the License for a new 25-year term, as well as developing an understanding of the required signature bonus amount.

·; The Company has also met with SNPC to present its development programme for Tilapia. Specific discussions were held in relation to geological and technical matters in relation to future planned drilling activities to produce the Mengo and Djeno horizons. Drilling operations are expected to commence during April 2020.

·; Meetings were held with SNPC with regards to seeking clarity on the repayment of the approximately US$5.3 million owed to AAOGC as a result of past work completed on the License. Zenith's confidence in obtaining repayment of the aforementioned amount, of which it will retain 80% upon Completion of the acquisition of AAOGC, has been encouraged following these meetings.

·; Zenith can confirm that it has identified two suitable drilling rigs, both of which are in the proximity of the License (thereby significantly reducing mobilisation costs), to perform drilling operations in the License. Due to known difficulties experienced by previous operators with drilling equipment, Zenith will request a rigorous third-party comprehensive inspection of both units to be provided for the purposes of its commercial and technical tendering evaluations.

Acquisition of Coro Energy Italian Assets

Zenith can confirm, as announced on December 3, 2019, that it has commenced the necessary process with the Italian Ministry for Economic Development to approve the sale of Coro Energy Plc's ("Coro") Italian natural gas production and exploration portfolio to Zenith ("Italian Acquisition").

Upon completion of the Italian Acquisition once the necessary approvals have been obtained, Zenith will be positioned as one of Italy's leading natural gas producers with an increase in Italian gross production revenue of approximately 410%, and an expected yearly gross revenue of approximately €3.6 million (equivalent to approximately £3.08 million; NOK 36.5 million or CAD$5.3 million).

The Company is pleased to note that natural gas prices in Italy have remained stable during recent months.

In addition, natural gas production from the Italian Acquisition has recently increased from an average of approximately 40,000 scm/day (approximately 235 BOE per day) to an average of approximately 50,000 scm/day (approximately 295 BOE per day)

It is therefore expected that, upon completion of the Italian Acquisition, Zenith will have a daily total cumulative production from its enlarged Italian portfolio of approximately 65,000 standard cubic meters (approximately 382 BOE per day). 

Azerbaijan Update

Exploration

As announced on December 12, 2019, the Company is currently progressing in its selection of a drilling location for exploratory drilling activities it plans to perform during 2020.

Zenith plans to finalise its geological and technical investigations, in consultation with SOCAR, by March 15, 2020.

In recent months, the Company has acquired additional drilling equipment to enhance its 1,200hp drilling rig, and enlarged its spare parts inventory in view of near-term drilling activities.

C-30

The Company is awaiting approval to commence drilling activities in well C-30, Jafarli and shall update the market once this is received. As previously announced, all necessary civil works have successfully been completed at the well location.

C-37

As previously announced, the Company intends to install a custom-built bridge plug to isolate the Upper Cretaceous formation and enhance the long-term productivity to be obtained from the Middle Eocene formation. 

To maximise cost efficiency, the Company plans to use its fully owned truck-mounted A-100 workover rig to perform this installation with mobilisation expected within the next 30 days.

Andrea Cattaneo, Chief Executive Officer, commented:

"It has been a busy start to the year for Zenith as we continue to focus on our strategy of identifying and completing low-cost acquisitions with significant untapped production potential.

We are actively seeking to enrich our portfolio with the acquisition of AAOG Congo which we believe has the potential to deliver transformational value via successful drilling activities in the Mengo and Djeno horizons. Recent progress has been very encouraging, and I look forward to updating shareholders further in due course.

This is in addition to consolidating our natural gas production portfolio in Italy with increased, consistent production revenue which has the potential to be further increased via a series of low-risk well interventions.

Zenith has also recently taken steps to strengthen our advisory team with two key appointments who we anticipate will contribute valuable knowledge and expertise to our ambitious expansion goals in Africa."

Further Information:

Notes to Editors: 

Zenith Energy Ltd. is an international oil and gas production company, listed on the TSX Venture Exchange (TSX.V:ZEE) and London Stock Exchange (LSE:ZEN). In addition, the Company's common share capital was admitted to trading on the Merkur Market of the Oslo Børs (ZENA:ME) on November 8, 2018. The Merkur Market is a multilateral trading facility owned and operated by the Oslo Børs. 

The Company was assigned a medium to long-term issuer credit rating of "B+ with Positive Outlook" on October 9, 2019 by Arc Ratings, S.A. On November 18, 2019, the Company was assigned a "B+" with Stable Outlook debt issuer credit rating by Rating-Agentur Expert RA.

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