Zenith Energy signs MOU to acquire oil and gas lease in Texas

LONDON, UK: Zenith Energy Ltd. (LSE: ZEN; OSE: ZENA), the international energy production and development company, has announced that it has signed a binding memorandum of understanding (MOU) with Jala Capital Investments, LLC, a company incorporated in the State of Texas, to acquire a 90% interest in an oil and gas lease in Crockett County, Texas.

The lease covers approximately 320 acres of land from surface down to a depth of about 800 metres, located in the southern section of the Midland Basin, a subbasin of the Permian Basin. The lease gives Zenith the opportunity to develop production from the San Andres formation, a prolific carbonate formation in the Permian Basin in Texas and New Mexico.

The lease is situated in the southern section of the Farmer Field, which has produced over 34 million barrels of oil since 1950 from about 1,000 wells drilled in leases adjoining the property. Nine wells have historically been drilled in the property, with neighbouring properties recording sustained material production.

Zenith has confirmed its intention to operate the property and conduct oil and gas extraction and exploration activities. The consideration for the MOU is US$50,000, which includes the sale of oil surface equipment such as a battery of oil tanks and oil separation equipment.

The seller will retain a carried 10% interest in respect of all drilling and completion work necessary for the first two wells to be drilled. The seller has agreed to pay its proportionate share of all subsequent drilling and completion work to be performed, as well as its share of ongoing operating costs, including workovers.

Zenith intends to use a highly experienced third-party local drilling contractor to conduct drilling activities. The drilling and completion of each well is expected to require a total budget of approximately US$500,000, with an estimated potential production output of about 60 barrels of oil per day for each well.

Zenith will commission a Competent Person’s Report in compliance with Canadian securities laws, specifically the COGE Handbook and National Instrument 51-101 – Standards of Disclosure for Oil and Gas Activities – to obtain an updated reserves evaluation for the property.

The first well is planned to be drilled by the end of 2023. Drilling and cementing activities are expected to take less than seven days, with subsequent potential stimulation and testing work to be performed, as well as the installation of any required infrastructure to manage potential production from the wellsite.

Andrea Cattaneo, Chief Executive Officer of Zenith Energy, commented: “We are pleased to be gaining increasing momentum in our USA acquisition campaign. The goal is to complete acquisitions with significant production upside potential, having performed a comprehensive due diligence exercise, to maximise our development as a successful revenue generating energy production business. The USA is proving a highly attractive jurisdiction for Zenith in view of the lack of bureaucracy and other factors that have historically delayed our progress elsewhere. The acquisition of the property in Texas should enable Zenith to achieve material additional production revenues.”

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