January 3, 2023 ZENITH ENERGY LTD. ("Zenith" or the "Company") Signing of SPA for acquisition ofOMV YemenZenith Energy Ltd. (LSE: ZEN; OSE: ZENA), the energy company with proven revenue generating production, exploration and development assets inAfrica andEurope , 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") withOMV Exploration and Production GmbH ("OMV " or the "Seller") to acquire 100% of the outstanding share capital ofOMV (Yemen Block S 2) Exploration GmbH ,OMV Jardan Block 3Upstream GmbH andOMV Block 70Upstream GmbH (collectively "OMV Yemen"), which are all companies incorporated and existing under the laws ofAustria . AboutOMV 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 byOMV following its acquisition ofPreussag 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 ofJanuary 1, 2022 . Production costs of approximatelyUS$28 per barrel. Gross 1P Reserves (Proved) have been estimated as 13.15 million barrels of oil using the independent DeGolyer & McNaughton reserves evaluation datedDecember 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 datedDecember 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 AssetsOMV 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 3Upstream GmbH holds a financial interest of 36.17% in Block 3. Gross oil resources have been estimated at about 60 million barrels unrisked byOMV . 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 70Upstream GmbH holds a financial interest of 20.25% in Block 70. Gross oil resources have been estimated at about 70 million barrels unrisked byOMV . 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 acrossOMV 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 ofOMV 'sYemen 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 toYemen LNG. Zenith may also explore the construction of a 'Gas-to-Power'("GTP") plant, as successfully carried out inItaly , to commercialize gas production and provide additional electricity supply to the local economy. Gross total recoverable gas volumes have been estimated byOMV , across theOMV Yemen portfolio, to be approximately 571 BSCF.Andrea Cattaneo , Chief Executive of Zenith, commented: "The acquisition ofOMV Yemen represents a very significant milestone forZenith 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 thankOMV 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 inYemen to the Zenith family. Finally, we look forward with enthusiasm to establishing ourselves inYemen 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% ofOMV 's shares inOMV Yemen at completion for a total consideration ofUS$ 21,619,000 (the "Base Purchase Price").Zenith Netherlands has paid a deposit ofUS$4,323,800 which shall be credited by the Seller toZenith Netherlands as part of the Purchase Price upon completion. The obligations set out in the SPA of the Seller andZenith Netherlands to consummate the sale and purchase of the shares inOMV Yemen at completion are subject to, inter alia, the approval of the authorities inYemen , and the approval by theFederal Ministry of the Republic of Austria for Labour and Economy in respect of the transfer of shares fromOMV toZenith Netherlands ("Completion"). The SPA has a longstop date of nine months from the date of signing. A Transitional Services Agreement ("TSA ") may be signed betweenOMV andZenith Netherlands at or around completion to govern certain services to be provided byOMV or its affiliates toZenith Netherlands after completion ifOMV andZenith Netherlands determine that such agreement shall be required to optimise the handover ofOMV Yemen. AboutYemen oYemen is located on the southern end of theArabian Peninsula , sharing a border withSaudi Arabia andOman . o 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. oYemen 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. o 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. -ENDS- Further Information:Zenith Energy Ltd Andrea Cattaneo , Chief Executive Officer Tel: +1 (587) 315 9031 E: info@zenithenergy.ca BlytheRay - Financial PR/IR Tim Blythe,Megan Ray , Matt Bowld Tel: +44 207 138 3204 E: zenith@blytheray.comAlternative Resource Capital - BrokerAlex Wood Keith Dowsing Tel: +44 (0) 207 186 9004 Tel: + 44 (0) 207 186 9005 Notes to Editors:Zenith Energy Ltd. is a revenue generating, independent energy company with production, exploration and development assets inTunisia ,Italy , and theRepublic of the Congo , including electricity generation inItaly . The Company is listed on the London Stock Exchange Main Market (LSE: ZEN) and the Euronext Growth of theOslo Stock Exchange (OSE: ZENA). Zenith's strategic focus is on pursuing transformational opportunities in theMiddle East ,Africa , andEurope 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
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