TIDMZEN
RNS Number : 4977L
Zenith Energy Ltd
03 January 2023
January 3, 2023
ZENITH ENERGY LTD.
("Zenith" or the "Company")
Signing of SPA for acquisition of OMV Yemen
Zenith Energy Ltd. (LSE: ZEN; OSE: ZENA) , the energy company
with proven revenue generating production, exploration and
development assets in Africa and Europe , is pleased to announce
that a company in which it holds a 49% interest, Zenith Energy
Netherlands B.V. ("Zenith Netherlands") has entered into a share
purchase agreement ("SPA") with OMV Exploration and Production GmbH
("OMV" or the "Seller") to acquire 100% of the outstanding share
capital of OMV (Yemen Block S 2) Exploration GmbH, OMV Jardan Block
3 Upstream GmbH and OMV Block 70 Upstream GmbH (collectively "OMV
Yemen"), which are all companies incorporated and existing under
the laws of Austria.
About OMV Yemen
Production Assets
Block S-2
" OMV Yemen is one of the largest oil producers in the country
with a highly prospective portfolio including a balance of
immediate production, as well as a balance of short and long-term
growth opportunities.
" Block S-2 was discovered in 1992 by Oxy and declared
commercial in 2005 by OMV following its acquisition of Preussag
Energie International in 2003.
" OMV (Yemen Block S 2) Exploration GmbH operates and holds a
44% working interest, with partners including SINOPEC (37.5%
working interest), YOGC (12.5% working interest) and YRL (6%
working interest).
" OMV Yemen holds a financial interest of 57.14% in production
from Block S-2.
" Gross production during 2021 averaged approximately 7,400
barrels of oil per day ("BOPD") and the field remains in the
'primary depletion' stage with highly material unexploited
potential.
" Historical production from S-2 was maintained at approximately
15,000 BOPD through sustained drilling activity until 2015.
" No new wells have been drilled since 2015 when force majeure
was declared due to regional instability and production was
temporarily suspended.
" Production activities were resumed in 2018 at an average gross
rate of 17,500 barrels of oil per day and have declined, in view of
no new drilling activities, to a gross average of approximately
6,000 barrels of oil per day as of January 1, 2022.
" Production costs of approximately US$28 per barrel.
" Gross 1P Reserves (Proved) have been estimated as 13.15
million barrels of oil using the independent DeGolyer &
McNaughton reserves evaluation dated December 31, 2017, as
reference and subtracting confirmed oil production during the
period 2018-2021.
" Gross 2P Reserves (Proved + Probable) have been estimated as
30.74 million barrels of oil using the independent DeGolyer &
McNaughton reserves evaluation dated December 31, 2017, as
reference and subtracting confirmed oil production during the
period 2018-2021.
" Crude oil production is transported by truck 80km to Block 4,
then 200km by pipeline for export at the Al Nushaima port.
Construction of a new central processing facility ("CPF") has been
largely completed with a storage capacity of approx. 100,000
barrels of crude oil.
" Strong management team and highly competent personnel with
over 300 staff.
" A number of ready to execute near-term growth opportunities
are available, by way of an already formulated workover and a
phased infill drilling and sidetrack programme for six new wells,
to enable production to potentially return to 15,000 BOPD.
Exploration Assets
OMV Yemen holds a balanced exploration portfolio comprising
Block 3 (34% working interest) and Block 70 (19.24% working
interest).
" Prospects range from easily monetised low-risk exploration to
high-risk, high-reward exploration.
" Current exploration activities have identified significant
potential near-term development opportunities.
Block 3
" OMV Jardan Block 3 Upstream GmbH holds a financial interest of
36.17% in Block 3.
" Gross oil resources have been estimated at about 60 million
barrels unrisked by OMV.
" 1035 km2 3D and 2,100 km 2D seismic is held in respect of
Block 3.
" No remaining work commitments for Block 3.
Block 70
" OMV Block 70 Upstream GmbH holds a financial interest of
20.25% in Block 70.
" Gross oil resources have been estimated at about 70 million
barrels unrisked by OMV.
" 1,200 km 2D seismic (410 km reprocessed) is held in respect of
Block 70.
" No remaining work commitments for Block 70.
Natural Gas Production Potential
Significant associated gas volumes have been recorded with oil
production across OMV Yemen's portfolio giving evidence of
substantial natural gas production potential from S-2, Block 3, and
Block 70.
A gas discovery has been made in Block 3, representing a major
opportunity for the monetisation of OMV's Yemen natural gas
production, all of which is currently flared.
Several gas production offtake options are already under
discussion including the possibility of a connection being made to
a local power station or to Yemen LNG.
Zenith may also explore the construction of a
'Gas-to-Power'("GTP") plant, as successfully carried out in Italy,
to commercialize gas production and provide additional electricity
supply to the local economy.
Gross total recoverable gas volumes have been estimated by OMV,
across the OMV Yemen portfolio, to be approximately 571 BSCF.
Andrea Cattaneo, Chief Executive of Zenith, commented:
"The acquisition of OMV Yemen represents a very significant
milestone for Zenith Energy.
The existing production from the asset and, more importantly,
the near-term future oil and natural gas production indicated by
the size of the reserves, position Zenith on an extremely exciting
organic growth trajectory.
I take the chance to thank OMV and its management for its
cooperation in this transaction. Our technical teams shall continue
to work closely together as we enter the handover phase and welcome
our new colleagues in Yemen to the Zenith family.
Finally, we look forward with enthusiasm to establishing
ourselves in Yemen and contributing to the prosperity of the local
economy. It is our belief that the country has extraordinary
economic potential, especially in respect of its oil and gas
industry, and we shall seek to maximise our relationship with the
local authorities to achieve our development objectives."
Terms of the SPA
Under the terms of the SPA, Zenith Netherlands will, subject to
the conditions set forth in the SPA, acquire 100% of OMV's shares
in OMV Yemen at completion for a total consideration of US$
21,619,000 (the "Base Purchase Price ").
Zenith Netherlands has paid a deposit of US$4,323,800 which
shall be credited by the Seller to Zenith Netherlands as part of
the Purchase Price upon completion.
The obligations set out in the SPA of the Seller and Zenith
Netherlands to consummate the sale and purchase of the shares in
OMV Yemen at completion are subject to, inter alia, the approval of
the authorities in Yemen, and the approval by the Federal Ministry
of the Republic of Austria for Labour and Economy in respect of the
transfer of shares from OMV to Zenith Netherlands ("Completion").
The SPA has a longstop date of nine months from the date of
signing.
A Transitional Services Agreement ("TSA") may be signed between
OMV and Zenith Netherlands at or around completion to govern
certain services to be provided by OMV or its affiliates to Zenith
Netherlands after completion if OMV and Zenith Netherlands
determine that such agreement shall be required to optimise the
handover of OMV Yemen.
About Yemen
-- Yemen is located on the southern end of the Arabian
Peninsula, sharing a border with Saudi Arabia and Oman.
-- The country has significant oil and natural gas reserves
sufficient for both domestic demand and international exports,
however, it is not currently a major hydrocarbon producer relative
to several other Middle Eastern countries.
-- Yemen sits on proved hydrocarbon reserves of c. 3 billion
barrels of crude oil and 17 trillion cubic feet of gas (US Energy
Information Administration). Its main crude export grade is light
sweet Masila, with an API gravity of 34.10.
-- Until 2009, Yemen reinjected most of its gas production to
aid in oil recovery, but has since become an LNG exporter, with the
government aiming to increase the use of natural gas in many
sectors, including in electricity generation.
-S-
Further Information:
Zenith Energy Ltd
Tel: +1 (587) 315 9031
Andrea Cattaneo, Chief Executive E: info@zenithenergy.ca
Officer
BlytheRay - Financial PR/IR Tel: +44 207 138 3204
Tim Blythe, Megan Ray , Matt Bowld E: zenith@blytheray.com
Alternative Resource Capital -
Broker Tel: +44 (0) 207 186 9004
Tel: + 44 (0) 207 186 9005
Alex Wood
Keith Dowsing
Notes to Editors :
Zenith Energy Ltd. is a revenue generating, independent energy
company with production, exploration and development assets in
Tunisia, Italy, and the Republic of the Congo, including
electricity generation in Italy. The Company is listed on the
London Stock Exchange Main Market (LSE: ZEN) and the Euronext
Growth of the Oslo Stock Exchange (OSE: ZENA).
Zenith's strategic focus is on pursuing transformational
opportunities in the Middle East, Africa, and Europe through the
development of proven revenue generating oil, gas, and electricity
production assets, as well as low-risk exploration activities in
assets with existing production.
For more information, please visit: www.zenithenergy.ca
Twitter: @zenithenergyltd
LinkedIn: https://bit.ly/3A5PRJb
Market Abuse Regulation (MAR) Disclosure
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the Company to constitute inside information as stipulated under
the Market Abuse Regulations (EU) No. 596/2014 as it forms part of
UK domestic law by virtue of the European Union (Withdrawal) Act
2018 ("MAR"). Upon the publication of this announcement via a
Regulatory Information Service ("RIS"), this inside information is
now considered to be in the public domain.
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END
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