Signing of Rental Agreement for BD260 Drilling Rig

June 6, 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 Rental Agreement for BD-260 Drilling Rig

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 its oilfield service company subsidiary, Zena Drilling Limited, ("Zena"), has signed a six-month rental agreement with B Robotics W S.r.l., ("Robotics"), a leading Italian drilling rig manufacturer, for a BD-260 type Robotics drilling rig.

Technical Overview of BD-260 Type Drilling Rig

The BD-260 has the following key technical specifications:

- 1200 HP drilling rig

- Static hook load capacity of 260 metric tons

- Mast height of 41 metres

- Drilling depth capacity of up to 4,600 metres

- Two diesel driven 1000 HP NOV triplex mud pumps

- Three mud tank systems with mud treatment

BD-260 Operational Objectives

Zena has contracted the BD-260 drilling rig in order to complete the Company's planned workover and drilling activities in the Zardab and Muradkhanli fields during the six-month period. As announced on May 8, 2018, the Company's ongoing in-depth geological study has led to the identification of several highly attractive near-term drilling opportunities. Zenith intends to fully maximise the exploitation of these opportunities in light of the significant increases in the market price of oil.

The BD-260 rig will complete the workover of Z-21 by pulling out the entire tubing string from the well, cleaning out the casing to the well's total depth, 3,982 metres, and subsequently performing a number of production tests. In the event that a satisfactory rate of production was not to be achieved from Z-21 following these operations, the Company would proceed with deepening well Z-21 beyond the Maykop formation into the Eocene and Upper Cretaceous formations by drilling an additional 300 metres, extending the well's total depth to approximately 4,270-4,300 metres. The primary reason for the evaluation of this possibility is the proximity of Z-21 to well Z-3, spud in 1979 and drilled to a total depth of 4,300 metres into the Eocene and Upper Cretaceous formations. Z-3 tested approximately 2,900 barrels of mixed hydrocarbons per day before the wellbore collapsed.

Following the completion of operations in well Z-21, the Company will move the BD-260 rig to Z-28, where 69 metres of tubing require milling out before the well is cleaned out to its total depth, 3,944 metres. Zenith will perform a number of production tests once the well has been cleaned out to total depth.

After the completion of operations in well Z-28, the Company intends to use the BD-260 rig for the workover of Z-3, where historical records indicate that 775 metres of tubing has been left in the well, and for the workover of MOC-1 in the Muradkhanli field. Zenith will further update the market in greater detail regarding these planned operations once the workovers of Z-21 and Z-28 have been completed.

Transportation of the BD-260 rig from one operation to the next in the Zardab field is expected to be relatively fast on account of the proximity of the Z-21, Z-28 and Z-3 well locations.

Delivery of BD-260

Robotics has advised the Company that the BD-260 will be delivered to its field operations in Azerbaijan within 90 days. Under the rental agreement signed with Zena, Robotics has agreed to provide its highly experienced drilling personnel for the first month of operations to assist Zenith's field team.

Update on negotiations to contract a ZJ-30 150-ton workover rig

After the signing of the aforementioned rental agreement for the BD-260 drilling rig, the Company has ended negotiations for the contracting of a ZJ-30 150-ton workover rig, announced to the market on May 18, 2018.

Update on Genesis BQ500 Hydraulic Drilling Rig

On November 1, 2017, Zenith announced that it had signed a commitment letter for a BQ500 automated hydraulic drilling rig to be manufactured by Robotics. As announced, delivery of the rig is anticipated in the second half of 2018. Zenith is currently in the process of finalising the lease arrangement for the BQ500 drilling rig and will update the market once this is defined.

Andrea Cattaneo, Chief Executive Officer of Zenith, commented:

"Zardab is the least developed and most interesting field in Zenith's REDPSA area. We have known this since we began operations in Azerbaijan and our ongoing in-depth geological study has given new impetus and substance to this belief.

Success in our Zardab operations would enable the Company to further increase the record high oil production revenue it has achieved in recent months and clearly underline the very significant potential of this asset.

The BD-260 drilling rig contracted by Zena from B Robotics W, with whom Zenith has an established technical partnership, will enable the Company to begin its first drilling activities in Azerbaijan in the short-term by deepening some of its most promising wells in Zardab.

I look forward to reporting on the arrival of the BD-260 rig in due course."

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 7390 0230

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