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Operational Update and Record Oil Production Revenue

Zenith Energy Ltd., ("Zenith" or the "Company"), (LSE: ZENTSX.VZEE), the international oil & gas production company operating the largest onshore oilfield in Azerbaijan, is pleased to provide an update on its operational progress in the Zardab field.


Z-21 workover

As announced on May 8, 2018, Zenith has pulled out a mixed string, comprised of 2 3/8" and 2 7/8" tubing, totalling 3,504 metres, as well as all of the 4 5" tubing, totalling 1,500 metres, using its A-80 workover rig.  In addition, in the period since the aforementioned update, 111 metres of tubing from 3,504-3,615 metres has been successfully cleaned out. Zenith has been unable to run wash pipe beyond the depth of 3,615 metres to fish the remaining 166 metres of 2 3/8" tubing in the wellbore due to an unforeseen change in the tubing diameter. The change in tubing diameter was undocumented in any Z-21 well data.

The Company now intends to pull the entire tubing string out of the well. It has been determined that a more powerful rig will be required to perform the task. Once this is completed, Zenith's field personnel plans to run in hole with a drill bit and clean out the casing to the well's total depth, 3,982 metres, and subsequently perform a production test.  

The larger rig will also have the capacity to deepen well Z-21 beyond the Maykop formation into the Eocene formation by drilling an additional 300 metres, extending the well's total depth to approximately 4,270-4,300 metres. As announced on May 8, 2018, the final decision on the deepening of Z-21 will depend on the outcomes of the production tests to be performed once the casing has been cleaned out to the well's current total depth. The Company will not perform any drilling operations in Z-21 if a satisfactory rate of production were to be achieved from the Maykop formation.

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.

Zenith confirms that it is currently in negotiations for the contracting of a ZJ-30 150-ton workover rig to complete the Z-21 workover. An update will be provided when the rig has been mobilised to the well location.  

The Company also intends to use this rig for the workover of Z-3, where historical records indicate 775 metres of tubing has been left in the well, and for the completion of the Z-28 workover, where 69 metres of tubing require milling out before the well is cleaned out to total depth, 3,944 metres.


Electrical Submersible Pump Upgrade Programme (the "Upgrade Programme")

As announced by Zenith on August 22, 2017, the Upgrade Programme involves the installation of new electrical submersible pumps in wells located in the Muradkhanli and Jafarli oilfields. The purpose of the Upgrade Programme is to stabilise existing production from the selected wells and lessen the likelihood of production outages often resulting from older ESP technology. In addition, the Company is also setting the pumps at an average depth of 2,500 meters to achieve greater production from the wells. The previous ESP technology limited the setting depths to 1,500 meters.

The Company confirms that its A-80 workover rig has left the Z-21 well location to resume field rehabilitation activities in the Muradkhanli and Jafarli fields. These operations include electrical submersible pump maintenance work and the installation of a new electrical submersible pump. Following this installation, the total number of new electrical submersible pumps installed in the Muradkhanli and Jafarli fields will be 12Zenith's field team is routinely monitoring production and it is expected that the number of wells included in the upgrade programme will be increased further.


Record Oil Production Revenue

The Company is pleased to confirm that its gross oil production revenue has reached a new all-time record high since Zenith began operations in Azerbaijan. The Company's subsidiary generated revenue, gross of commissions and transportation expenses, of approximately US$505,000 for its oil production during the month of April 2018.


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

"We have achieved a number of key milestones using our own equipment. This has allowed us to greatly reduce our operational expenditure, and this is all the more positive when set against the backdrop of the Company achieving record oil production revenue in Azerbaijan.  

The 150-ton workover rig we are looking to contract is significantly more advanced and powerful than our A-80 rig. It will enable us to increase our work rate, pull the entire tubing string, and clean out the wellbore to TD in Z-21.


The ongoing geological study of Zardab has encouraged us to greatly increase our efforts in this field and, accordingly, we have decided to maximise the use of our resources in the area. The new rig will play a key part in exploiting the big opportunities we have at hand." 


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