2nd Mar 2020 09:46
(Alliance News) - Zenith Energy Ltd on Monday announced an exclusivity pact for buying working interest in an undisclosed oil asset in Tunisia and said it would handover the contract rehabilitation area in Muradkhanli-Jafarli-Zardab block of oil fields in Azerbaijan to state oil firm SOCAR.
Shares in the Canadian oil & gas company were 14% higher at 1.03 pence in London.
Zenith said the Tunisian asset produces at a rate of 700 barrels of oil per day, generating gross annual revenue of USD15 million. The company is in advanced negotiations with an unnamed international oil major for the signing of an offtake agreement for the asset's future production, in order to fund the acquisition.
Zenith said it has no plans to issue any equity to fund the Tunisian acquisition, and expects the deal to be completed by the end of March, should due diligence activities be completed.
In a separate statement, the company said the contract rehabilitation area in Azerbaijan is part of the rehabilitation, exploration, development and production sharing agreement signed over the Muradkhanli-Jafarli-Zardab block, and features areas where existing production needs to be improved.
Zenith will continue to operate the CRA and maintain oil production activities in Azerbaijan until the handover is completed. Afterwards, the company expects to achieve a near total reduction in operating expenses from the country.
In addition, Zenith is owed USD700,000 from sales of produced oil through a local subsidiary, which it is expected to collect in the near future.
The CRA's current production stands at around 180 barrels of oil per day.
Looking ahead, Zenith said once the CRA handover is completed, its sole operational focus in Azerbaijan will be to perform exploration activities.
"The transformational development oil production and revenue generation opportunities we are currently completing in Africa require a strategic review of our focus to optimise the deployment of our financial resources and management attention," said Chief Executive Officer Andrea Cattaneo.
"Zenith has deployed significant financial and technical resources since the beginning of the Azerbaijan project in order to achieve material increases in oil production. Results have underwhelmed management and market expectations for a number of reasons including the complexity of the geological formations and oil reservoirs, the poor condition of many existing wells, as well the inaccuracy of historical well records," Cattaneo added.
By Dayo Laniyan; [email protected]
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