logo

Zenith Energy - Capital Network: Encouraging Progress in Azerbaijan

Written by Lionel Therond

Encouraging Progress in Azerbaijan

Zenith Energy (LON:ZEN) provided an update on the redevelopment project in Azerbaijan. The update included the results of the successful perforation of unexploited pay zones in well C-21 in the Jafarli field, as well as the start of the workover on well Z-28 in the Zardab field. We are encouraged by the outcome of the work undertaken on C-21 where the application of new technology to identify new pay zones enabled the company to raise production by 35 bbl/d, in excess of the target of 15 bbl/d per well over the scope of the project. Although it has no impact on our 41p valuation of Zenith (LON:ZEN), continuing to demonstrate successful progress will be essential to secure the necessary financing to ramp up operations in the near future, as per the development plan.

Zenith (LON:ZEN) is current redeveloping the Muradkhnali, Jafarli and Zardab oil fields, which form the largest onshore oilfield of Azerbaijan. The fields were discovered and brought to production in the 1970s; Zenith intends to apply new technology to recover some 33 MMbbl of additional oil reserves potential (Figure 1)

On C-21, which was previously a non-producing well in the Jafarli field, the technical team used an innovative quad neutron logging technology, a technology that had never been employed previously in its Azerbaijan operations. The data enabled the identification of previously unexploited pay zones and two sets of new perforations were carried out, 7.1m within a gross 3706-3871m interval and another 7.8m within a gross 3429-3638m interval. The first set of new perforations increased flow rates to 15 bbl/d, whilst the second one brought it up to 35 bbl/d which is in excess of the target of 15 bbl/d per well over the scope of the project and, as such, is a very successful outcome.

Zenith now intends to install an electric submersible pump (ESP) to draw down the formation pressure with the objective of further increasing oil production from well C21.

Well Z-28 is located on the Zardab dormant field. The workover started on 7/10/17 and is expected to be completed by mid-November 2017.

Our valuation of 41p remains unchanged. However, we do believe that demonstrating continuing successful progress will be essential to secure the necessary financing to ramp up operations in the near future, as per the development plan. We identified a financing gap of $35M from the cash flow projections in the CPR, which will need to be financed, most likely through a mix of equity and debt. We reckon that such success enable both existing and potential investors in Zenith to gain increased confidence in the ability of the Company to manage what is a significant undertaking.

 

 

LEGAL NOTICE – IMPORTANT – PLEASE READ:

Proactive Research is a trading name of Proactive Investors Limited which is regulated and authorised by the Financial Conduct Authority (FCA) under firm registration number 559082. This document is published by Proactive Research and its contents have not been approved as a financial promotion by Proactive Investors Limited or any other FCA authorised person. This communication is made on the basis of the 'journalist exemption' provide for in Article 20 of The Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 and having regard to the FCA Rules, and in particular PERG 8.12.

This communication has been commissioned and paid for by Zenith Energy and prepared and issued by Proactive Research for publication. All information used in the preparation of this communication has been compiled from publicly available sources that we believe to be reliable, however, we cannot, and do not, guarantee the accuracy or completeness of this communication.

The information and opinions expressed in this communication were produced by Proactive Research as at the date of writing and are subject to change without notice. This communication is intended for information purposes only and does not constitute an offer, recommendation, solicitation, inducement or an invitation by, or on behalf of, Proactive Research to make any investments whatsoever. Opinions of and commentary by the authors reflect their current views, but not necessarily of other affiliates of Proactive Research or any other third party. Services and/or products mentioned in this communication may not be suitable for all recipients and may not be available in all countries.

This communication has been prepared without taking account of the objectives, financial situation or needs of any particular investor. Before entering into any transaction, investors should consider the suitability of the transaction to their individual circumstance and objectives. Any investment or other decision should only be made by an investor after a thorough reading of the relevant product term sheet, subscription agreement, information memorandum, prospectus or other offering document relating to the issue of securities or other financial instruments.

Nothing in this communication constitutes investment, legal accounting or tax advice, or a representation that any investment or strategy is suitable or appropriate for individual circumstances or otherwise constitutes a personal recommendation for any specific investor. Proactive Research recommends that investors independently assess with an appropriately qualified professional adviser, the specific financial risks as well as legal, regulatory, credit, tax and accounting consequences.

Past performance is not a reliable indicator of future results. Performance forecasts are not a reliable indicator of future performance. The investor may not get back the amount invested or may be required to pay more.

Although the information and date in this communication are obtained from sources believed to be reliable, no representation is made that such information is accurate or complete. Proactive Research, its affiliates and subsidiaries do not accept liability for loss arising from the use of this communication. This communication is not directed to any person in any jurisdiction where, by reason of that person's nationality, residence or otherwise, such communications are prohibited.

This communication may contain information obtained from third parties, including ratings from rating agencies such as Standard & Poor's, Moody's, Fitch and other similar rating agencies. Reproduction and distribution of third-party content in any form is prohibited except with the prior written consent of the related third-party. Credit ratings are statements of opinion and are not statements of fact or recommendations to purchase, hold or sell securities. Such credit ratings do not address the market value of securities or the suitability of securities for investment purposes, and should not be relied upon as investment advice.

Persons dealing with Proactive Research or members of the Proactive Investors Limited group outside the UK are not covered by the rules and regulations made for the protection of investors in the UK.

Notwithstanding the foregoing, where this communication constitutes a financial promotion issued in the UK that is not exempt under the Financial Services and Markets Act 2000 or the Orders made thereunder or the rules of the FCA, it is issued or approved for distribution in the UK by Proactive Investors Limited.

Latest Research