September 5, 2018 - 9:00 AM EDT
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Purchase of Drilling Rig and Completion of Financing

(via TheNewswire)

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulation (EU) No. 596/2014 ("MAR"). Upon publication of this announcement via a regulatory information service ("RIS"), the inside information contained in this document is now considered to be in the public domain.

Calgary, AB / TheNewswire / September 5, 2018 - 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 announce that it has signed a convertible unsecured loan facility (the "Facility") for an aggregate amount of US$1,500,000 to provide additional funding for the Company's field development operations in Azerbaijan and to pursue potential new acquisitions.

Purchase of BD-260 Drilling Rig

Zenith is pleased to announce that its oilfield service company subsidiary, Zena Drilling Limited, ("Zena") has signed a purchase agreement for the acquisition of a BD-260 drilling rig assembled by B Robotics W S.r.l., ("Robotics") for a total consideration of EUR2,250,200. The aforementioned agreement supersedes the six-month rental agreement Zena had signed with Robotics for the BD-260 drilling rig (the "BD-260") announced by the Company on June 6, 2018. In addition, Robotics has confirmed it will provide its highly experienced drilling personnel for a minimum of 6 months as part of the aforementioned agreement.

Zena has purchased the BD-260 in order to complete the Company's planned workover and drilling activities in the Muradkhanli, Jafarli and Zardab fields for the next 18 months. As announced by Zenith on August 13, 2018, the Company has completed two comprehensive geological studies that have provided a significantly enhanced understanding of the hydrocarbon production of the Company's operations in Azerbaijan which will have a direct influence in shaping the Company's operational activities going forward.

Robotics has advised the Company that it is in the process of sending the first shipment of material in relation to the BD-260 to Azerbaijan. The Company will provide an update once the BD-260 is fully assembled on location.

Initiating of Tender Process for Leasing of 180-ton Workover Rig

The Company is pleased to announce that it is formalising a tender process in Azerbaijan for the leasing of a 180-ton truck-mounted workover and drilling rig for a period of four months. Zenith has received preliminary indications that a rig of this specification will be available to start work on October 20, 2018. The Company will provide an update once the tender process is concluded.

It is expected that the BD-260 and the 180-ton truck-mounted workover and drilling rig, to be leased from a local drilling company following the completion of a formal tender process, will be in operation concurrently across the Company's field operations in Azerbaijan.

Convertible Loan Facility

The Company has entered into a US$1,500,000 unsecured convertible loan facility (the "Facility") with a consortium of lenders (the "Lenders"). The Facility has a term of 18 months starting from August 30, 2018 and the Company shall pay interest on the outstanding amount of the Facility at the rate of 0% per annum (the "Interest Rate"). The Facility includes an initial immediate advance of US$1,300,000 and a further advance of US$200,000, to be provided at a later time and only at the discretion of the Lenders. The Facility is repayable as follows:

- US$50,000 on October 16, 2018;

- US$100,000 on November 16, 2018; and

- The remaining balance to be paid 18 months after each such advance

Under the terms of the Facility the Company has issued the Lenders with 6,977,988 share purchase warrants (the "Warrants") to subscribe for the equivalent number of common shares of no par value in the share capital of Zenith ("Common Shares") at a price of ?0.0505 per Common Share on subscription at any time from December 30, 2018 to February 28, 2020 subject to the articles of the Company and the terms and conditions of the Facility.

The Facility is wholly or partly convertible into Common Shares at the lower of ?0.0505 per Common Share and 90% of the lowest daily volume weighted average price on the London Stock Exchange of the Common Shares during the 10 trading days immediately prior to the request for conversion, subject to maximum total shareholding restrictions from each Lender of 9.99% ("Conversion"). The Lenders have the right to request Conversion between December 30, 2018 and the expiry of the Facility.

An application will be made for any Common Shares issued and allotted on exercise of the Warrants or Conversion to be admitted to the standard segment of the Financial Conduct Authority UK Official List and to trading on the Main Market for listed securities of the London Stock Exchange (the "Admission"). The new Common Shares will rank pari passu in all respects with the existing common shares of the Company. An application will also be made for the new Common Shares to be listed on the TSX Venture Exchange.

The Facility agreement includes normal warranties and default clauses.

Andrea Cattaneo, Chief Executive Officer, commented:

"The financing Zenith has secured provides additional capital that will be invested directly into our operations.

The purchase of the BD-260 reflects Zenith's strategy of owning the key equipment required for the long-term development of its asset portfolio. We have been working closely with Robotics to ensure that the BD-260 is tailored to our operational requirements in the Zardab and Muradkhanli fields. Ownership of the rig will significantly reduce operational expenditure and, at the same time, give us the flexibility to determine our work programme on the basis of the many opportunities across the field area to achieve increased oil production.

Furthermore, we shall also be able to deploy the BD-260 in other locations across our present portfolio, specifically Italy, where some of the Company's natural gas concessions have significant untapped value, as well as new assets that may be added to our portfolio in the near-term.

We are initiating a formal tender process to lease a 180-ton workover and drilling rig to avoid delaying our operational activities in Azerbaijan. Our primary focus is to resume activities in the Zardab field and thereby regain momentum. The new equipment we are expecting, combined with our enhanced geological understanding and the new operational personnel who have joined us, will enable us to achieve this."

Neither the TSX Venture Exchange nor its Regulation Services Provider (as such term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

The transaction is subject to final approval by the TSX Venture Exchange.

For further information please contact:

Zenith Energy Ltd.

Andrea Cattaneo, Chief Executive Officer

E-mail: [email protected]

Tel: +1 (587) 315 9031

Vigo Communications - PR Adviser

Patrick d'Ancona

Chris McMahon

Kate Rogucheva

Tel: +44 (0) 20 7830 9700

Daniel Stewart & Company Plc - (Joint Broker)

Robert Emmet- Corporate Broking

Joel Bayley- Corporate Finance

Tel: + 44 (0) 207 776 6550

Optiva Securities - (Joint Broker)

Christian Dennis

Tel: + 44 (0) 203 137 1903

Allenby Capital Limited - (Financial Adviser)

Nick Harriss

Nick Athanas

Tel: + 44 (0) 203 328 5656

Notes to Editors:

Zenith Energy Ltd. is an international oil and gas production company, dual listed on the TSX Venture Exchange and London Stock Exchange.

The Company operates the largest onshore oilfield in Azerbaijan following the signing of a 25-year REDPSA, (Rehabilitation, Exploration, Development and Production Sharing Agreement), with SOCAR, State Oil Company of the Azerbaijan Republic, in 2016.

The Company's primary focus is the development of its Azerbaijan operations by leveraging its technical expertise and financial resources to maximise low-cost oil production via a systematic field rehabilitation programme intended to achieve significantly increased revenue. Zenith also operates, or has working interests in, a number of natural gas production concessions in Italy. The Company's Italian operations produce natural gas, natural gas condensate and electricity.

Zenith's development strategy is to identify and rapidly seize value-accretive hydrocarbon production opportunities in the onshore oil & gas sector. The Company's Board of Directors and senior management team have the experience and technical expertise to develop the Company successfully.

Copyright (c) 2018 TheNewswire - All rights reserved.


Source: TheNewsWire (September 5, 2018 - 9:00 AM EDT)

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