(TheNewswire)
February 19, 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 ")
Operational Update
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 provide an update on its field rehabilitation operations in
Azerbaijan.
High-impact workover of well Z-21, Zardab field
The Company confirms that the coiled tubing intervention, announced on January 17, 2018, has
successfully cleaned out the entirety of the tubing string in well Z-21 to the depth of 3670 meters, circulating and drilling out
mud and debris that had accumulated since the well was last produced in 1988.
In addition, the coiled tubing intervention also cleaned out 18 metres of casing from 3670 metres to
3688 metres. However, due to the small coiled tubing bit (1.875 inches) and the restricted diameter of the tubing, the casing could
not be cleaned out further.
The Company is now preparing its A-80 workover rig to pull the tubing string from the well. Once
this is completed, it will run in hole with a drill bit and clean out the casing to total depth, 3982 metres. The well will
subsequently be put on production.
The Company expects to complete the workover of Z-21 in April 2018. Zenith will use its own
resources, where possible, such as a complete set of well control equipment including a blow-out preventer, expected to arrive in
March 2018. The use of the Company's equipment is expected to significantly decrease the time needed for the workovers, increase
efficiency, and improve operational safety.
High-impact workover of well Z-28, Zardab field
The Company can confirm that the wellhead leaks, announced on December 19, 2017, have been
successfully sealed. The subsequent coiled tubing intervention to clean out the well was successful, having cleaned out the well to
a depth of 3583 meters. However, it has been determined that the Company will have to mill out 63 metres of tubing inside the liner
and then clean out an additional 298 metres of the liner to a TD of 3944 to complete the workover.
The Company is confident that production can successfully be achieved from well Z-28 once these
operations are completed and is formulating a plan, in consideration of the equipment to be required for the intervention and its
likely timing, starting immediately after the completion of the Z-21 workover.
Equipment Upgrades
Zenith's A-80 workover rig, inherited from SOCAR, has recently undergone further upgrades to
increase its capabilities and enable it to be utilised more extensively in the Company's workover operations. The Company is in the
process of fitting hydraulic tongs to increase the pulling efficiency and speed of the rig, a new rig floor, and installing other
ancillary equipment.
The aforementioned upgrades are in addition to the comprehensive modernisation Zenith's A-80 rig
underwent in 2017 when field rehabilitation began in Azerbaijan.
The Company received delivery of the first consignment of oil production equipment from China in
late December 2017. The order of the equipment was announced by Zenith on August 21, 2017. The equipment
quickly cleared customs and is now being deployed in the field.
Zenith has been advised that the second and final consignment of Chinese oil production equipment
will arrive on March 16, 2018. The shipment will include the Company's new set of blow-out preventers and drill pipe, as well as
ancillary workover equipment.
As was announced on January 25, 2018, the Company has signed a purchase agreement for an A-100
truck-mounted workover rig. This was purchased using the funds raised from Zenith's UK placing announced on January 24,
2018. The factory where the A-100 rig is under construction is located approximately 2 hours from the Company's field
locations, enabling Zenith's operational team to inspect progress twice a week. Delivery of the rig is expected in late April 2018.
Electrical Submersible Pump ("ESP") Upgrade Programme
As announced by Zenith on August 22, 2017, the Company's ESP upgrade programme involves the
installation of latest-generation electrical submersible pumps across the Muradkhanli and Jafarli oilfields. The original programme
had envisaged the ESP replacement across 11 wells, however, this has now been increased to include at least 13 wells. The purpose
of the programme is to stabilise existing production from the selected wells and lessen the likelihood of production outages
resulting from earlier generation ESP technology.
The Company confirms that to date it has successfully installed seven electrical submersible pumps.
While this has resulted in an uplift in production, it has also reduced production downtime that had been observed as a recurrent
problem with the previous generation ESPs. Zenith is awaiting arrival of the remaining six ESPs to complete the ESP programme. As
announced previously, difficulties have been encountered in the procurement of new electrical submersible pumps from suppliers. In
order to resolve these difficulties, the Company has signed a procurement contract with a third supplier, Novomet, a leading
international supplier of ESP technology. It is expected that all 13 ESPswill be installed by the end of May, 2018. Zenith is
continuously monitoring production and it is likely that the number of wells included in the ESP upgrade programme will be
increased further.
Current Production Update & Production Target
The Company's current average production from its Azerbaijan operation is approximately 350
bopd. The Company has experienced a higher than expected natural depletion rate, in addition to the loss of wells that had
been generating significant production. Zenith's workover programme has also been hampered by the loss of wellbores due to
uncemented casing that has collapsed in historic wells that were primary targets of its workover programme. The Company expects
that the field rehabilitation operations in progress, or due to begin in the near future, will result in significant upside in
daily production levels.
Despite the delays and difficulties encountered in Zenith's field rehabilitation activities, the
Company still has an initial target of 1000 bopd. The revised timeline for reaching this milestone is December 31,
2018.
Mike Palmer, Chief Operating Officer, Zenith Aran, the Company's Azerbaijan-based fully owned
subsidiary, commented:
"We have learned a lot about the Zardab field in our well interventions. Almost every historical
piece of information regarding the characteristics of wells Z-21 and Z-28 did not coincide with what we discovered in our
operations. The unreliability of the information was suspected from the outset, but the only way of gathering information was
entering each well and learning as we went ahead. We now have a significantly improved understanding of the potential of the Zardab
field that will be highly valuable for when we begin drilling activities. The lack of information coupled with the fact that these
wells had not been touched for the past thirty years has certainly made our operations more challenging. However, our view of the
quality of the geology and the opportunity presented by these wells remains unchanged. We have the team and, increasingly,
our own much better equipment to get the job done to put these wells on production. The delays incurred at Z-21 and Z-28 are a
source of short-term disappointment but are of little material consequence when considering the longer term, very significant,
prize at hand, and the broader picture of our profitable oil production activities in a field with vast, untapped oil reserves. The
rest of 2018 is going to be extremely busy and challenging. I am confident we will succeed."
Neither the TSX Venture Exchange nor its Regulation Services Provider (as such term is defined in
the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
F orward-looking statements
This news release contains forward-looking statements and forward-looking information within the
meaning of applicable securities laws. The use of any of the words "expect", "anticipate", "continue", "estimate", "objective",
"ongoing", "may", "will", "project", "should", "believe", "plans", "intends" and similar expressions are intended to identify
forward-looking information or statements. More particularly and without limitation, this press release contains forward-looking
statements and information concerning the current and future production potential of the Company's
assets. The forward-looking statements and information are based on certain key expectations and assumptions made by Zenith,
including the ability to execute its strategy and realise its growth opportunities including its ability to finance and execute its
plans. Although Zenith believes that the expectations and assumptions on which such forward-looking statements and information are
based are reasonable, undue reliance should not be placed on the forward-looking statements and information because the
Company can give no assurance that they will prove to be correct. All
timing given in this announcement, unless stated otherwise is indicative and while the Company endeavours to provide accurate
timing to the market, it cautions that due to the nature of its operations and reliance on third parties this is subject to change
often at little or no notice. By its nature, such forward-looking information is subject to certain risks and uncertainties (both
general and specific) that could cause actual events or outcomes to differ materially from those
anticipated or implied by such forward-looking statements. These risks and uncertainties, include, but
are not limited to, Zenith being unable to finance or realise growth opportunities. Readers are cautioned not to place undue
reliance on this forward-looking information, which is given as of the date hereof, and to not use such forward-looking information
for anything other than its intended purpose. Zenith undertakes no obligation to update publicly or revise any forward-looking
information, whether as a result of new information, future events or otherwise, except as required by
law. The forward-looking information contained herein is expressly qualified by this cautionary
statement.
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
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Beaufort Securities Limited - (Joint Broker)
Jon Belliss
Telephone: +44 (0) 207 382 8300
Daniel Stewart & Company Plc - (Joint Broker)
Robert Emmet- Corporate Broking
Nikhil Varghese- Corporate Finance
Telephone: + 44 (0) 207 776 6550
Optiva Securities - (Joint Broker)
Christian Dennis
Telephone: + 44 (0) 203 137 1903
Allenby Capital Limited - (Financial
Adviser)
Nick Harriss
Nick Athanas
Telephone: + 44 (0) 203 328 5656
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