TIDMZEN
RNS Number : 5737X
Zenith Energy Ltd
13 August 2018
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.
August 13, 2018
ZENITH ENERGY LTD.
("Zenith" or the "Company")
Azerbaijan Operational Update
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 provide an update on its operations in Azerbaijan.
Completion of Geological Studies
Zenith can confirm that it has completed two comprehensive
geological studies to optimise the selection of potential drilling
locations and workover opportunities across the Muradkhanli,
Jafarli and Zardab oilfields.
Geological Study of the Muradkhanli and Jafarli oilfields
The geological study of the Muradkhanli and Jafarli oilfields
has entailed the acquisition and revision of all existing well
data. The integration of the old 2D seismic with the new 3D
seismic, carried out by SOCAR in 2008 and 2011, has enabled a new,
more detailed structural interpretation to be performed.
The primary achievement of the study has been the identification
of a new, previously unexplored, Mesozoic carbonate prospect
running across the two fields beginning from the south-western
flank of the Muradkhanli oilfield. Three distinct structures have
been highlighted at the level of the Upper Cretaceous, from West to
East, whose structural highs are considered strong candidates for
possible exploratory wells.
The study has also enabled the Company to better understand the
challenges presented by its existing production reservoirs,
specifically the causes of the high watercut in many of Zenith's
production wells.
In addition, the study has also provided a modern re-evaluation
of the Eocene age reservoir levels comprised of sandstones, marly
limestones and volcanic facies. The revised interpretations have
enabled Zenith to begin the selection of new drilling locations, as
well as determining the choice of wells to be included in the
Company's well workover programme in the Muradkhanli and Jafarli
oilfields.
The primary workover opportunity in the Muradkhanli field has
been determined to be the MOC-1 well and its sidetrack well MOC1-Z,
drilled during the year 2000 by the Muradkhanli Operating Company
("MOC"). MOC-1 was the first onshore well to be drilled under a
Production Sharing Agreement in Azerbaijan and is the only modern
well in Zenith's 642.4 km(2) field area. The geological study has
concluded that the total depth of MOC-1Z, 4,615 metres, should be
increased by approximately 100-150 metres to ascertain the fluid
content of the Upper Cretaceous formation. In the eventuality that
the presence of hydrocarbons in this formation is not confirmed,
the study recommends that the re-perforation of the Eocene Zone,
previously perforated by MOC between the depth of 4,447.5-4,483.5
metres, should be carried out. This section had shown strong oil
presence, but limited production due to factors including the poor
permeability of the formation and the potential damage caused by
the heavy mud weight used during drilling operations.
The study was performed by a team of Italian geologists,
comprised of Zenith's consultant geologist, Dr. Augusto Rossato
(subsurface geologist), and Dr. Piero Casero (structural
geologist). Both geologists have proven track-records of
operational success during extensive careers with oil majors
including Elf, Total, Eni, Enterprise, OMV, and Esso.
Geological Study of the Zardab oilfield
Zenith is pleased to announce that it has completed a second
geological study to improve its understanding of the hydrocarbon
production potential of the mostly undeveloped Zardab oilfield.
This was considered a priority as the Company's independent
Competent Person's Report, most recently updated on March 31, 2018,
does not include an assessment of the recoverable reserves from the
field.
The Zardab geological study includes an identification of the
main producing target reservoirs, seal and source rocks, a
comprehensive analysis of all well test results, digitalisation of
all well logs, the creation of stratigraphic logs and structural
logs, as well as several structural maps.
The study was performed by a team of American geologists led by
Eldar Hasanov, a highly experienced geologist with many years of
operational activity in onshore Azerbaijan, Kazakhstan, Russia,
Middle East and United States.
The study has confirmed the Company's belief in the significant
untapped potential of the Zardab field, enabling the identification
of several high-value drilling and workover opportunities.
Specifically, it has drawn the following key conclusions:
1.) Comparative analysis of the time structure maps for the
Zardab, Muradkhanli and Jafarli oilfields indicates that all three
oilfields form part of a larger, unified system with faulted
anticline, which suggests the possibility of a single oil-water
contact for all three fields within the Upper Cretaceous/ Lower
Eocene formations.
2.) Very few wells drilled in the Zardab field have penetrated
the Upper Cretaceous formation. The majority of historical
production from wells in the Zardab field has derived from the
Maykop, Miocene and Chokrak formations of Oligocene-Miocene
age.
3.) Several potential target intervals were identified during
screening of structural and seismic data. Some of these were
observed in both the Pliocene Productive Series, (main producer
within Kura Valley), and within the Upper Miocene formation as sand
bodies and clinoforms.
4.) The Maykop and Chokrak zones of the Oligocene/Miocene
formations consist of interlaminations of sandstones, siltstones
and shales, (the Maykop is a regional source rock), and could be
considered as a main target for lateral drilling with hydraulic
fracturing.
5.) The best well by production tested from Lower Eocene/Upper
Cretaceous zones was obtained from well Z-3. This well was drilled
to a total depth of 4,300 metres and recorded an initial production
rate of 420 m(3) tons/day (3550 bopd). Z-3 was drilled on a wedge
of high amplitude reflector of Lower Eocene/Upper Cretaceous age in
an isolated fault block.
6.) All other wells drilled in the Zardab field were drilled to
target the Lower Eocene/Upper Cretaceous off high amplitude, which
might explain poor production from these intervals. The time
structure map of the top of the Upper Cretaceous formation
indicates that most of these wells did not target the crest of the
structure but were instead drilled on the flanks.
7.) The study suggests that the Upper Cretaceous/ Lower Eocene
formation is a primary drilling target because Upper Cretaceous
carbonates and volcanics are mostly fractured reservoirs within an
erosional surface suggesting lengthy exposure and erosion. This
resulted in increased porosity due to leaching and the formation of
large voids and similar dissolution features. The seismic attribute
maps and inversions would be critical for evaluation of the
potential within this zone. An appraisal well drilled in the Zardab
field will be situated in the area of stacked targets to evaluate
all penetrated horizons. It will be a priority to acquire as much
data as possible during the drilling and completion of the well to
further understand the geology of the field. This will include:
electronic monitoring of the drilling (Pason), high resolution
mudlogging, full suite of wireline logging, and possible rotary
coring amongst other items.
As announced on May 8, 2018, the Company's geological
investigations also concentrated on a number of existing wells in
the Zardab field, specifically wells Z-21, Z-28, Z-3, Z-14 and
Z-4.
The objective of these targeted geological investigations has
been to better ascertain the potential, and possible challenges,
presented by workover and drilling activities in the aforementioned
wells. The Company considers the study as particularly beneficial
in light of the numerous discrepancies which had previously been
identified between historical well data and the actual
characteristics and condition of the wells today.
Line Pipe Replacement Programme
As part of Zenith's field rehabilitation programme, the Company
has decided to replace 4,000 metres of line pipe across its field
area in Azerbaijan by the close of 2018. Delivery of the first
batch of line pipe is expected to take place within the next 14
days. The line pipe replacement programme will begin immediately
upon delivery of the materials.
The installation of new line pipe is expected to yield the
following benefits: minimising oil loss during transportation from
the well to Zenith's field oil processing and storage facility;
reducing restrictions to oil flow from active production wells, a
lowering of line pipe pressure.
Oil Storage Tank Reconstruction Programme
As part of its ongoing field rehabilitation and infrastructure
modernisation activities, the Company plans to begin the
reconstruction of a 2000m(3) oil storage tanks during the month of
September. It is expected that further storage tanks will undergo
reconstruction work later in the year.
Azerbaijan Oil Production Revenue
The Company is pleased to announce that the Company's subsidiary
in Azerbaijan generated revenue, gross of commissions and
transportation expenses, of approximately US$490,000 for its oil
production during the month of July 2018.
Update on BD-260 Drilling Rig
The Company has been advised by B Robotics W S.r.l.,
("Robotics"), that the preparation of the BD-260 drilling rig,
following the signing of a rental agreement announced on June 6,
2018, is progressing successfully. The Company will provide an
update once Robotics confirms the finalisation of the preparatory
work and shipping of the rig to Azerbaijan.
Work Programme
The Company is currently in the process of revising its work
programme with its new operational management. Once this is
defined, Zenith will provide shareholders with a clear summary
regarding its operational strategy for the rest of the year
2018.
Electrical Submersible Pump Upgrade Programme (the "ESP Upgrade
Programme")
The ESP Upgrade Programme has to date resulted in the
installation of new electrical submersible pumps in 11 wells
located across the Muradkhanli and Jafarli oilfields.
The benefits of the ESP Upgrade Programme include the
following:
-New technology has enabled some of the 11 new electrical
submersible pumps to be installed at a depth of approximately 2,500
meters. All of the previous electrical submersible pumps installed
in Zenith's field had a maximum setting depth of approximately
1,500 meters.
-Significant reduction of the production decline rate,
approximately 12% per annum, and minor production increase (57
bopd) across these 11 wells.
-Stabilisation of production achieved through the increased
reliability offered by new ESP technology. Previous ESP technology
often failed causing production downtime.
On May 18, 2018, Zenith had announced that it had planned to
increase the number of new electrical pumps installed in the
Muradkhanli and Jafarli oilfields to 12. However, the Company's
field team has since pulled one of its newly installed electrical
submersible pumps on account of poor performance that rendered the
installation uneconomical.
The Company has identified a further 2 wells to be included in
its ESP Upgrade Programme and will provide an update as
appropriate. Any previous production objectives announced by the
Company in relation to its ESP Upgrade Programme no longer reflect
the outlook of Zenith's new operational management.
Equipment Upgrades
On January 25, 2018, the Company announced the signing of a
purchase agreement for an A-100 truck-mounted workover rig (the
"A-100") to be manufactured in Azerbaijan. The Company can confirm
that construction of the A-100's mast and substructure has been
completed. Following close discussions with the local manufacturer
of the A-100, Zenith has decided to increase the A-100's engine
capacity to 375hp in order to enhance its workover capabilities in
deeper wells.
As previously announced, a number of other modifications had
previously been requested and implemented. This further upgrade,
amongst other benefits, will increase the maximum hook load
capacity of the rig to 120 tons. The A-100 manufacturer has
informed Zenith that it is currently awaiting delivery of the
carrier to finalise construction of the rig. The Company will
provide an update once the A-100 is delivered to its field
locations.
Andrea Cattaneo, Chief Executive Officer, commented:
"Considerable progress has been made in many areas to ensure
that we now return to the Zardab field with the full capability to
achieve the results that have eluded us thus far. The geological
work performed during recent months has significantly enriched our
understanding of the field's geology, and further substantiated our
confidence in the transformational potential of our Azerbaijan
asset.
The arrival of new operational management in September, as well
as some of the most powerful drilling equipment the field has seen
in the last twenty years, means we shall be positioned to fully
execute our work programme.
The months ahead are set to be hugely exciting for Zenith, and I
hope shareholders will soon be fittingly rewarded for the loyalty
and confidence they have shown in the project since the Company's
listing on the London Stock Exchange."
For further information please contact:
Zenith Energy Ltd.
Andrea Cattaneo
Chief Executive Officer
E-mail: info@zenithenergy.ca
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
Nikhil Varghese- 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.
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END
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