Zenith Energy, the listed international oil & gas production company focused on pursuing African development opportunities, has entered into a loan agreement with Winance, a Dubai registered single-family office, for a total amount of EUR 2.1 million (approximately £1.8 million or approximately NOK 21.4 million).

Terms

The Loan Agreement has a duration of six months and does not attract interest.

An upfront arrangement fee, equal to 5 percent of the total drawdown amount, has been paid to the Lender in accordance with the terms of the Loan Agreement.

During each month prior to the maturity date, Zenith shall make repayments in accordance with the Loan Agreement, with the first Instalment being payable during the month of July 2021.

100,000,000 new common shares of no par value have been issued to the Lender to be held in a depositary institution designated by the Lender.

Under the terms of the Loan Agreement, Zenith may elect to pay each Instalment either by cash or by utilising the Reserve Shares, by delivering to the Lender an amount of Reserves Shares equivalent to the quotient obtained by dividing the Instalment Amount by 95 percent of the applicable VWAP (volume weighted average price) for the period of ten business days prior to the due date for each Instalment. 

Andrea Cattaneo, Chief Executive Officer of Zenith, commented:
"We are very pleased to have concluded our first financing agreement with Winance. This is fruit of the considerable effort made by Zenith's management team in developing our funding strategy with emphasis towards Arab and Middle Eastern financial markets.  

The Company will use the funds obtained from the Loan to commence its near-term operational objectives in Tunisia, as well as providing additional capital for potential acquisitions that the Company may seek to complete. We shall update the market in due course regarding our operational programme in Tunisia.

In view of the confidence of the Company's management in the value creation potential of our possible near-term progress, Zenith shall seek to minimise the use of the Reserve Shares to fulfil the obligations arising from the Loan, and instead maximise the use of the Company's financial resources generated from oil production."

Waqas Ibrahim, Director and CFO of Winance, commented:
"We are delighted to collaborate with a proficient and esteemed management team such as that of Zenith Energy. Winance, as a strategic partner, shall seek to support Zenith's growth aspirations for the foreseeable future by utilising our extensive expertise to innovate and adapt to the evolving funding requirements it may have as it delivers on its ambitious African development campaign."

OVERVIEW OF TUNISIA OPERATIONS

Sidi El Kilani Concession (SLK) and North Kairouan Permit

In June 2020, Zenith signed a conditional sale and purchase agreement to acquire a 22.5% interest in the North Kairouan permit and the Sidi El Kilani Concession, operated by Compagnie Tuniso-Koweito-Chinoise de Pétrole (CTKCP), from KUFPEC (Kuwait Foreign Petroleum Exploration Company K.S.C.C), a subsidiary of the State of Kuwait’s national oil company.

Completion of the transaction is conditional on approval being granted by the Comité Consultatif des Hydrocarbures of the Republic of Tunisia.

Key Facts

• Area: 204 square kilometres, located onshore in the Pelagian Basin, eastern Tunisia, circa 190 km south of Tunis, in the Governorate of Mahdia.
• SLK was discovered in May 1989 by KUFPEC, test production commenced in September 1991 and commercial production commenced in January 1993 with an average rate of 5,000 bopd from one well.
• The field reached a peak production exceeding 20,000 boepd in 1995.
• Sidi El Kilani is reported to be the second largest oil field discovered in Tunisia since 1989.
• The field is presently operated by CTKCP (Compagnie Tuniso – Koweito – Chinoise de Petrole) with the following participating partners: State of Tunisia National Oil Company, ETAP (55%), KUFPEC (22.5%) and CNPC (22.5%).
• Current production output, natural flow, is approximately 700 bopd.

Geology
SLK produces 39 API gravity oil from a fractured carbonate reservoir (Abiod Formation), at a depth of c. 1,600 metres. The reservoir characteristics are enhanced by natural fractures and locally by dolomitization. 

Infrastructure
SLK Facilities include a permanent Gas Oil Separation Plant (GOSP) and a Pipeline of 125 km x 8″ diameter, 22,000 bpd capacity from the field to La Skhira terminal.  Approximately 90% of the gas produced is used for on-site power generation with the rest being flared.

Development Potential
Current production mainly comes from 2 wells: SLK-1 and SLK-4. Well stimulation, optimisation and infill drilling have maintained production levels.

SLK has significantly outperformed production forecasts, sustaining production well beyond original expectations.

There are indications of oil present in the unexploited Bireno formation with plans proposed for the testing of its potential upside production potential.

Acquisitions

In September 2020, Zenith Energy signed a conditional sale and purchase agreement ("SPA") with CNPC International (Tunisia) Ltd., a 100% subsidiary of CNPCI, CNPC International Ltd., for the acquisition of a working interest in, inter alia, the North Kairouan permit and the Sidi El Kilani Concession, which contains the Sidi El Kilani oilfield ("SLK").

The Seller holds an undivided 22.5% interest in the Tunisian Acquisition, together with 25 Class B shares in Compagnie Tuniso-Koweito-Chinoise de Pétrole (CTKCP), the operator, representing 25% of the issued share capital of the company.

Upon Completion of the Tunisian Acquisition, the Company's working interest in SLK will equate to a daily production of approximately 300 barrels of oil per day.

In March 2021, Zenith Energy announced that Zenith Energy Africa Limited ("ZEAL"), its newly incorporated fully owned subsidiary, entered into a share purchase agreement with Candax Energy for the acquisition of a 100 percent interest in Candax's fully owned subsidiary in Barbados, Ecumed Petroleum Zarzis Ltd ("EPZ"), which holds a 45% interest in the Ezzaouia Concession.

Acquisition Highlights

• Ezzaouia is located in onshore Tunisia on the Zarzis peninsula, south of the island of Djerba in the southern Gulf of Gabes.  
• First discovered by Marathon Petroleum Corporation in 1986, with production activities starting in 1990 with a peak production being achieved of 35,000 barrels of oil per day in 1991.  
• Ezzaouia produces an average of 40 API gravity oil from the Zebbag (Lower Cretaceous) and Mrabatine (Upper Jurassic) formations.  
• It is operated by MARETAP, a joint operating company owned in partnership with the national oil company of Tunisia, ETAP (Entreprise Tunisienne d'Activités Pétrolières) on a 50:50 basis, which holds a 55 percent interest in Ezzaouia.
• Currently produces at a rate of approximately of 465 bopd (approximately 210 bopd net to Zenith).  
• Approximately 25,000 barrels of oil are currently held in storage with a commercial value of approximately US$1,250,000.  
• Zenith will shortly commission a new Competent Person's Report in compliance with Canadian securities laws, specifically the COGE Handbook and National Instrument 51-101 - Standards of Disclosure for Oil and Gas Activities, in order to obtain an updated reserves evaluation for the Acquisition.  
• Planned field production optimisation and workover activities are expected to increase Ezzaouia gross production to 1,000 bopd (potentially resulting in a production of 450 bopd net to Zenith).  
• The Acquisition has certain development obligations during the course of the new 20-year concession including the drilling of a side-track, the drilling of a replacement well and that of a development well.  
• On April 19, 2019, the Tunisian State represented by the Ministry of Industry and Small & Medium Enterprises informed ETAP and EPZ that the Comité Consultatif des Hydrocarbures ("CCH") had provided a favourable opinion to the application submitted by ETAP and EPZ for a new 20-year concession to be called "Ezzaouia" (the "New Concession").  
• A Convention for the New Concession (the agreed work programme between ETAP and EPZ) has been signed by both parties.  
• The New Concession is currently awaiting parliamentary approval.   
• Ezzaouia has modern oil treatment and storage facilities with a total field storage capacity of approximately 20,000 barrels of oil.  
• MARETAP, the joint operating company, operates an oil storage terminal, connected to Ezzaouia by way of two pipelines (one for gas and one for oil respectively), at the port of Zarzis, with a storage capacity of approximately 200,000 barrels of oil, from which all oil production from Ezzaouia is exported to the international markets.

Robbana and El Bibane

In April 2021, Zenith announced that Compagnie Du Desert Ltd ("CDD"), its recently incorporated fully owned subsidiary, entered into a share purchase agreement ("SPA") with Candax Energy for the acquisition of a 100 percent interest in Candax's fully owned subsidiary in Barbados, Ecumed Petroleum Tunisia Ltd ("EPT"), which holds a 100% interest in the El Bibane and Robbana concessions in Tunisia.

El Bibane Highlights

• The El Bibane concession is located 16 kilometres offshore from the port of Zarzis in the Gulf of Gabes, covering an area of approximately 228 square kilometres and in approximately 7-8 meters water depth. The field was discovered by Marathon Oil Corporation in 1982. However, it was not developed until 1998. Upon initial development, a peak production of 4,500 bopd was achieved. The reservoir is located in the cretaceous Zebbag fractured dolomite formation at approximately 2,150 metres below surface.
• Zenith has acquired a 100% working interest in El Bibane.
• A total of three wells remain active within El Bibane: EBB-5, EBB-4 and EBB-3RE2.  A total of 6 wells plus 4 sidetracks have been drilled.
• EBB-5 currently produces approximately 80-100 barrels of condensate per day (API 49/50) with 5.5-6 MMSCF of natural gas from well EBB-5, which is re-injected into the formation via well EBB-4.
• It is expected that, by utilising new technologies, well EBB-4 may achieve commercial production of natural gas in addition to its current use as an injector well.
• EBB-3 suffered string damage and has been temporarily shut-in, having previously produced at a rate of between approximately 500-600 barrels of oil per day (35 API) prior to production being suspended. The low oil price environment during 2020 and the material investment required to restore production from this well have prevented the necessary repair work from being implemented.  
• Zenith has already obtained market quotations for the well intervention required to restore production from well EBB-3 for an amount of approximately US$3.5 million.   
• In the event of a successful well intervention in EBB-3, the Company expects to produce approximately 500 barrels of oil equivalent per day from El Bibane.
• Candax commissioned an independent reserves evaluation, as of December 31, 2019, for the contingent reserves (1C) of El Bibane which evaluated remaining oil in place as 25.7 MMSTBO and 6.5 BCF of natural gas.
• Zenith has commissioned a new Competent Person's Report, in compliance with Canadian securities laws, specifically the COGE Handbook and National Instrument 51-101 - Standards of Disclosure for Oil and Gas Activities, in order to obtain an updated reserves evaluation for the El Bibane concession. 
• El Bibane expires on December 31, 2033.

Robbana Highlights

• The Robbana concession, covering 48 square kilometres and located onshore in the island of Djerba in the southern Gulf of Gabes, was discovered in 1988, achieving a peak production of 500 bopd in 1994. The ROB-1 well encountered two hydrocarbon-bearing reservoirs in the Cretaceous Upper Meloussi Sandstone formation. Only two wells have been drilled in Robbana since discovery, ROB-1 which is still in production and ROB-2 which is temporarily abandoned.
• Robbana currently produces approximately 25 barrels of oil per day from ROB-1, having previously produced approximately 50 barrels of oil per day prior to an unsuccessful well intervention.
• Studies have suggested that an infill well, to be drilled in the proximity of well ROB-1, is expected to produce approximately 200 barrels of oil per day.
• Candax commissioned an independent reserves evaluation, as of December 31, 2019, for the contingent reserves (1C) of Robbana which evaluated remaining oil in place as 10.99 MMSTBO.  The study noted specifically noted that the "Middle Triassic sandstones of the Ras Hamra formation present a very significant 'high-risk/high reward' exploration objective."
• Zenith has commissioned a new Competent Person's Report, in compliance with Canadian securities laws, specifically the COGE Handbook and National Instrument 51-101 - Standards of Disclosure for Oil and Gas Activities, in order to obtain an updated reserves evaluation for Robbana. 
• Robbana expires on November 4, 2034.

KeyFacts Energy: Zenith Energy Tunisia country profile