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Zardab Field Operational Update

Zenith Energy Ltd., ("Zenith" or the "Company"),(LSE: ZEN; TSX.V: ZEE), the dual listed international oil & gas production company operating the largest onshore oilfield in Azerbaijan, is pleased to provide an operational update on wells Z-28 and Z-21 in the Zardab field, Azerbaijan.


High-impact workover of well Z-28

The Company confirms that it has cleaned out well Z-28 to reach the top of the slotted liner at a depth of 3574 metres. The top of the tubing can now be cleaned to total depth ("TD") at 3944 metres. As announced by Zenith on November 20, 2017, the inside of the tubing has been cleaned out to the depth of 3582, 14 metres deeper than the reported liner top (3568 metres) in the original well data. Zenith's operational team views this as a major accomplishment in the context of the well intervention, particularly as this was achieved following successful fishing operations, including the running in hole of a free point tool, enabling the tubing to be cut and jarred. Once this was carried out, Zenith's operational team ran in the production tubing to a depth of 3574 metres, set the wellhead and fully completed the rigging down process of the ZJ30 truck-mounted workover rig on December 18, 2017. The Z-28 wellsite is now clear and preparations have been completed to run a coiled tubing unit ("CTU") to TD from the top of the slotted liner.

In the post-workover inspection of the wellhead, Zenith's petroleum engineers observed a leak during a pressure test from the wellhead in the 9 5/8 inches casing seal assembly.   

To resolve this problem, the Company has contracted a UK-based, worldwide leader in oilfield leak-sealing technology, with an established presence in Azerbaijan. Zenith has been informed that various resin compounds will be required to successfully seal the wellhead following an engineering study currently underway by the aforementioned company. Zenith expects the estimated completion time of this study to be delayed by the upcoming holiday season in the United Kingdom and Azerbaijan, and to have fully completed the workover of well Z-28 by the end of January 2018.

The Company's operational team is highly committed to completing the Z-28 high-impact workover successfully and without incident. The risk of compromising the integrity of the wellhead by running the CTU to TD, specifically with the leaks from the casing on the wellhead observed, has been determined to be an imprudent risk that may have endangered the success of the Z-28 workover and resulted in a blowout.

The Company will provide an update when the wellhead leaks are fully sealed and the CTU has subsequently been mobilised and run in the hole.   


High-impact workover of well Z-21

The Company confirms that civil works on the roads to well Z-21 and at the well location have been fully completed.

The average wellhead pressure recorded has increased from 3675 psi, announced by the Company on November 20, 2017, to a current average shut-in tubing and shut-in annulus pressure reading of 4115 psi. 

Zenith's operational team is currently mobilising a workover rig to the wellsite to begin the high-impact workover of well Z-21 without delay.

The Company will provide an update when the workover of well Z-21 begins following the mobilisation of all necessary equipment.


Mike Palmer, Chief Operating Officer, Zenith Aran, the Company's Azerbaijan-based fully owned subsidiary, commented:

"I know that operations at Z-28 may appear to have taken a long time. However, from the outset there was relatively little in terms of data on this well, and we have progressively established that what data we had was incorrect. From all the work we have done we now understand this well, specifically the downhole configuration, characteristics and behaviour. Indeed, from what our team has seen in well Z-21 it is clear that there is a very strong prospective pressure in the formation that these wells produce from. We are convinced that there is a big prize to be had once we finish. We have been good stewards with the money invested in the operations so far and have accomplished a great deal in overcoming a number of difficult challenges thrown at us at significant depths.  If it wasn't for the wellhead leaks we would actually be in a very good position to complete operations at Z-28, right above the liner with tubing, ready to drill out with a coiled tubing.

It is unfortunate that the seals for the 9 5/8 casing are not holding, causing leaks that must be fixed before we can run a CTU to total depth. We are in contact with one of the top companies in the world specialised in this.  Even though the holidays are upon us, we will be working with them to come up with a design that will fix this problem early in January. We are working tirelessly to make sure we come to a positive conclusion as soon as possible, and achieve the great production result that we all believe can be achieved from well Z-28.

I am also pleased that, whilst we wait for the seals to be completed at well Z-28, we will soon be in a position to begin the workover of well Z-21.

The entire operational team is fully dedicated to achieving the best results possible in a field where we know there are extremely significant quantities of oil to be produced, but where there are also a number of unforeseen challenges presented by old, deep wells with inaccurate well data and old infrastructure that needs repairing."

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