Filing of Half-Year Results

November 30, 2020

ZENITH ENERGY LTD.

("Zenith" or the "Company")

Filing of Half-Year Results 

 

Zenith Energy Ltd. ("Zenith" or the "Company") (LSE: ZEN; OSE: ZENA-ME), the listed international oil & gas production company focused on pursuing African development opportunities, is pleased to announce the filing of its consolidated interim results for the six months ended September 30, 2020 (the "Interim Results") on SEDAR (www.sedar.com).

 

A copy of the Interim Results will shortly be made available for review on the Company's website (www.zenithenergy.ca).

 

Highlights:

 

·    The Company generated revenues from oil and natural gas of CAD$145k (2019 - CAD$2,651k) in the six months ended September 30, 2019.

·    During the six months ended September 30, 2020, the Company sold 8,544 mcf of natural gas from its Italian assets, as compared to 5,499 mcf of natural gas in the 2019 similar period.

 

·    On April 20, 2020, the Company announced that its newly created wholly owned subsidiary Zenith Energy Netherlands B.V. had signed a conditional sale and purchase agreement with KUFPEC (Tunisia) Limited, a subsidiary of the State of Kuwait's national oil company, for the acquisition of a working interest in, inter alia, the North Kairouan permit and the Sidi El Kilani Concession, which contains the Sidi El Kilani oilfield.

 

·    On April 22, 2020, the Company confirmed the full repayment of its largest outstanding liability.

 

·    On May 5, 2020, the Company announced the successful completion of the acquisition from AIM listed Anglo African Oil & Gas plc ("AAOG") of a 100 percent interest in its fully owned subsidiary in the   Republic of the Congo, Anglo African Oil & Gas Congo S.A.U ("AAOG Congo"), which at the time had a 56 percent majority interest in, and was the operator of, the Tilapia oilfield.

 

·    On May 28, 2020, the Company announced that the TSX Venture Exchange ("TSX-V") had confirmed that effective at the close of business Friday, May 29, 2020, the common shares of the Company would be delisted from the TSX-V at Zenith's request.

 

·    On June 11, 2020, the Company announced that it had made payment for a total of US$250,000 (approximately CAD$350k) to Kuwait Foreign Petroleum Exploration Company K.S.C.C ("KUFPEC"), a subsidiary of the State of Kuwait's national oil company, in relation to the acquisition of a 22.5% working interest in the North Kairouan permit and the Sidi El Kilani Concession, which contains the Sidi El Kilani oilfield.

 

·      On June 25, 2020, the Company announced it had completed the handover process (the "Handover") of the Contract Rehabilitation Area to SOCAR in the Republic of Azerbaijan. As a result of the Handover, Zenith has ceased all oil production operations in Azerbaijan and all field production personnel, approximately 170 employees, have been transferred to a division of SOCAR.

 

·      On June 30, 2020, the Company announced that it had fully paid the semi-annual interest in relation to the following debt instrument: "ZENITH ENERGY LTD 8% NOTES - 2021". The payment in relation to the Notes is the third such payment, with previous interest payments having taken place during the months of June 2019 and December 2019 respectively.

 

·      On August 10, 2020, the Company announced that it had incorporated Zenith Energy Congo SA ("Zenith Congo"), a fully owned subsidiary of the Company, created under the laws of the Republic of Congo. Zenith Congo was established for the purpose of submitting a comprehensive commercial and technical offer to the Ministry of Hydrocarbons of the Republic of the Congo for the award of a new 25-year licence for the Tilapia oilfield to be named "Tilapia II". 

 

·      On August 26, 2020, the Company announced that BCRA Credit Rating Agency AD ("BCRA") had assigned Zenith a "B-" with Stable Outlook long-term debt issuer credit rating.

 

·      On September 8, 2020, the Company announced that its wholly owned subsidiary, Zenith Energy Netherlands B.V. had signed a conditional sale and purchase agreement with CNPC International (Tunisia) Ltd., a 100% subsidiary of CNPCI, China National Petroleum Corporation International Ltd., for the acquisition of a working interest in, inter alia, the North Kairouan permit and the Sidi El Kilani Concession, which contains the Sidi El Kilani oilfield.

 

 

 

 

Further Information:

 

Zenith Energy Ltd
Andrea Cattaneo, Chief Executive Officer	Tel: +1 (587) 315 9031
	E-mail:[email protected]
Allenby Capital Limited - Financial Adviser & Broker
Nick Harriss Nick Athanas	Tel: + 44 (0) 203 328 5656

 

Notes to Editors: 

Zenith Energy Ltd. is an international oil and gas production company, listed on the London Stock Exchange (LSE:ZEN) and the Merkur Market of the Oslo Stock Exchange (ZENA:ME).

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CEO Statement

 

Zenith Energy Ltd. ("Zenith" or "the Group") is an international oil and gas production Group, incorporated in Canada, listed on the Main Market for listed securities of the London Stock Exchange under the ticker symbol "ZEN" and on the Merkur Market of the Oslo Børs under the ticker "ZENA:ME".  The Company has also issued two series of EMTN, that are listed on the third Vienna Stock Exchange Market.

 

Zenith's strategic objective is to become a mid-tier, Africa focused hydrocarbon production and exploration Group. Specific attention is directed towards assets with proven development potential via development drilling, field rehabilitation, and low-risk exploration activities.

 

In view of the recent decline in oil prices, as well as macroeconomic developments caused by the COVID-19 pandemic, opportunities have arisen for companies such as Zenith to acquire, at commercially advantageous terms, oil and gas production and exploration assets being divested by many oil majors and leading oil and gas companies. As a leadership team, we are seeking to maximize this opportunity in order to ensure Zenith emerges from the current low oil price environment a stronger and more attractive entity with significant future development potential.

 

We are very pleased to have entered into two separate conditional transactions in relation to working interests in an onshore oil production asset in Tunisia. The first with KUFPEC, a subsidiary of Kuwait Petroleum Corporation, and the second with China National Petroleum Corporation, to acquire their respective working interests of 22.5% in the Sidi El Kilani Concession and the North Kairouan permit, which contain the producing Sidi El Kilani oilfield. It is our expectation to receive regulatory approval from the Comité Consultatif des Hydrocarbures of the Republic of Tunisia in respect of the transfer of ownership for both acquisitions in due course. 

 

Further, we are delighted to have established a presence in the Republic of the Congo following our acquisition of Anglo African Oil & Gas Congo S.A.U ("AAOG Congo"), the former Congolese subsidiary of Anglo African Oil & Gas plc (a company listed on the AIM of the London Stock Exchange) in May 2020. The decline in oil prices brought about by the COVID-19 pandemic, as well as renegotiations with the seller, enabled Zenith to acquire, at advantageous terms, an interest, albeit brief, in the now expired Tilapia I license (expired on July 18, 2020), as well as receivables, now amounting to approximately US$5.7 million dollars owed by SNPC (Société Nationale des Pétroles du Congo), the National Oil Company.

 

As publicly announced, the Company has presented a comprehensive commercial and technical offer (the "Offer") to the Ministry of Hydrocarbons of the Republic of the Congo in order to be awarded a new 25-year license for the Tilapia oilfield (to be named Tilapia II).  We are confident that we shall be successful in obtaining a new 25-year license.

 

The results for the six months ended September 30, 2020, reflect the significant changes the Group has undergone during the course of this period, specifically in result of the impairment resulting from the handover of the CRA in Azerbaijan and its associated reserves.

 

We are very excited about our countercyclical acquisition campaign in Africa in the current low oil price environment, especially the highly prospective development production potential of the Tilapia oilfield and the material daily production revenue to be obtained from completion of our acquisitions in Tunisia. Indeed, we are hopeful to conclude further acquisitions of a similar kind in due course.

 

I thank shareholders for their loyal support. As is clear, my confidence in Zenith, as well as that of the team, remains unchanged. We fully believe that our new geographic concentration in Africa, in less geologically challenging assets acquired at highly advantageous commercial terms, will enable the Group to achieve its operational objectives and deliver value to our investors.

 

We shall continue to evaluate the acquisition of additional energy production opportunities building on the momentum of our recent progress to further support the Group's expansion.

 

 

Andrea Cattaneo

President, CEO and Director

 

Brazzaville, Republic of the Congo

 

November 30, 2020

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated Statement of Comprehensive Income
					Six month ended
							September 30, 2020			September 30, 2019
Continuing operations			Note				CAD $'000			CAD $'000
Revenue							145			344
Cost of sales
Production costs							(656)			(1,158)
Depletion and depreciation			8				(198)			(203)
Gross loss							(709)			(1,017)
Administrative expenses			5				(3,548)			(1,989)
Operating loss							(4,257)			(3,006)
Finance expense			6				(284)			1,038
Loss for the period before taxation							(4,541)			(1,968)
Taxation			7				(3)			-
Gain/(loss) for the period from continuing operations attributable to owners of the parent							(4,544)			(1,968)
Profit/(loss) from discontinued operations (attributable to owners of the parent)			18				563			(5)
Loss for the period attributable to owners of the parent							(3,981)			(1,973)
Other comprehensive income
Items that may be subsequently reclassified to profit or loss:
Exchange differences on translating foreign operations, net of tax							314			(65)
Other comprehensive income for the period, net of tax							314			(65)
Total comprehensive loss for the period attributable to owners of the parent							(3,667)			(2,038)
Earnings per share			20						CAD $	CAD $
Loss for the period - basic									(0.01)	(0.01)
Loss for the period - diluted									(0.01)	(0.01)
From continuing operations - basic									(0.01)	(0.01)
From continuing operations - diluted									(0.01)	(0.01)
From discontinued operations - basic and diluted									0.001	(0.00)
Consolidated Statement of Financial Position
			Six month ended
							September 30, 2020			September 30, 2019
ASSETS		Note					CAD $'000			CAD $'000
Non-current assets
	Property, plant and equipment	8					33,230			1,080,311
	Financial assets at amortised cost	9					12			408
							33,242			1,080,719
Current assets
	Inventory	10					682			161
	Trade and other receivables	11					15,258			3,889
	Director's loan account	11					136			(50)
	Cash and cash equivalents						1,453			1,681
							17,529			5,681
TOTAL ASSETS							50,771			1,086,400
EQUITY AND LIABILITIES
Equity attributable to equity holders of the parent
	Share capital	13					45,706			33,557
	Share warrants & option reserve	14					947			1,142
	Contributed surplus						4,431			4,125
	Retained earnings						(42,361)			533,021
	Total equity						8,723			571,845
Non-current liabilities
	Loans	16					1,903			2,299
	Non-convertible bonds	17					4,456			4,759
	Deferred consideration payable	18					-			482,839
	Deferred tax liabilities	7					2,398			2,398
	Decommissioning provision	19					13,307			8,807
	Retirement provision						48			-
	Total non-current liabilities						22,112			501,102
Current Liabilities
	Trade and other payables	15					17,739			10,731
	Loans	16					1,903			1,762
	Non-convertible bonds	17					294			104
	Deferred consideration payable	18					-			857
	Total current liabilities						19,936			13,454
TOTAL EQUITY AND LIABILITIES							50,771			1,086,400

 

 

 

	Attributable to owners of the parent
Consolidated Statement of Changes in Equity	Share capital		Share warrants & option reserve		Contributed surplus		Retained earnings	Total
	CAD $'000		CAD $'000		CAD $'000		CAD$'000	CAD $'000
Balance as at  April 1, 2019	28,866		1,147		4,125		534,943	569,081
Loss for the period		-		-		-	(1,973)	(1,973)
Other comprehensive income		-		-		-	(65)	(65)
Total comprehensive income		-		-		-	(2,038)	(2,038)
Share issue net of costs - debt settlement		303		-		-	-	303
Share issue net of costs - private placement		4,230		-		-	-	4,230
Fair value of warrants issued		-		111		-	-	111
Options exercised		158		(116)		-	116	158
Total transactions with owners recognized directly in equity		4,691		(5)		-	116	4,802
Balance as at September 30, 2019		33,557		1,142		4,125	533,021	571,845
Balance as at April 1, 2020		40,400		1,010		4,320	(35,901)	9,829
Prior year adjustment		-		-		-	(2,793)	(2,793)
Balance as at April 1, 2020 restated		40,400		1,010		4,320	(38,694)	7,036
Loss for the period		-		-		-	(3,981)	(3,981)
Other comprehensive income		-		-		-	314	314
Total comprehensive income		-		-		-	(3,667)	(3,667)
Share issue net of costs - debt settlement		-		-		-	-	-
Share issue net of costs - private placement		5,306		-		-	-	5,306
Value of warrants issued		-		48		-	-	48
Warrants expired		-		(111)		111	-	-
Total transactions with owners recognised directly in equity		5,306		(63)		111	-	5,354
Balance as at September 30, 2020		45,706		947		4,431	(42,361)	8,723

 

 

 

 

 

 

 

 

Consolidated statement of cash flows		Six months ended
			September 30, 2020	September 30, 2019
OPERATING ACTIVITIES	Note		CAD $'000	CAD $'000
Loss for the period before taxation			(3,978)	(1,973)
Options/warrants charge	17		48	111
Foreign exchange			(3,318)	(9,660)
Depletion and depreciation	11		198	913
Reversal of impairment			(1,128)	-
Other gains and losses	8		-	(1,376)
Finance expense	9		284	372
Change in working capital	15		(4,623)	548
Net cash used in operating activities			(12,517)	(11,065)
INVESTING ACTIVITIES
Purchase of property, plant and equipment	11		(8)	(1,951)
Proceeds from disposal of property, plant and equipment	11		-	-
Net cash used in investing activities			(8)	(1,951)
FINANCING ACTIVITIES
Proceeds from issue of shares, net of transaction costs			11,739	6,617
Proceeds from exercise of options			-	333
Repayments of loans	19		(1,889)	(2,382)
Proceeds from loans	19		1,091	1,453
Proceeds from issue of bonds			1,442	3,143
Repayment of bonds	20		(86)	(385)
Proceeds from bonds in treasury	20		-	1,720
Net cash generated from financing activities			12,297	10,500
Net (decrease)/increase in cash and cash equivalents			(228)	(2,516)
Cash and cash equivalents at beginning of period			1,681	4,197
Cash and cash equivalents at end of period			1,453	1,681

 

The cash transactions from discontinued operations included above are as follows:

Operating activities			424	4,787
Investing activities			-	(1,014)
Net cash generated in discontinued operations			424	3,773

                                                                               

 

 

Notes to the condensed financial statements

 

1.      Corporate and Group information

 

The consolidated financial statements of Zenith Energy Ltd. and its subsidiaries (collectively, the "Group") have been prepared on the basis set out below. The Group is exempt from preparing separate parent company financial statements for the period ended September 30, 2020, in accordance with the Canada Business Corporations Act.

 

Zenith Energy Ltd. ("Zenith" or the "Group") was incorporated pursuant to the provisions of the British Columbia Business Corporations Act on September 20, 2007 and is domiciled in Canada.  The address of the Group's registered office is 20^th Floor, 250 Howe Street, Vancouver, BC. VC6 3R8, Canada and its business address is 15th Floor, 850 - 2nd Street S.W., Calgary, Alberta T2P 0R8, Canada. The Group's primary business activity is the international development of oil and gas production and development assets. As publicly reported, the Group is currently in the process of seeking to complete a number of acquisitions in Africa. 

 

The Company's website is www.zenithenergy.ca.

 

Zenith is a public company listed on the Main Market of the London Stock Exchange under the ticker "ZEN", as well as being listed on the Merkur Market of the Oslo Børs under the ticker "ZENA-ME".

 

2.      Basis of preparation

 

The consolidated financial statements presented in this document have been prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB").

The financial statements have been prepared under the historical cost convention except for financial instruments which are measured at fair value through profit or loss. The financial statements are presented in Canadian Dollars (CAD$) and have been rounded to the nearest thousand (CAD$'000) except where otherwise indicated.

The Board has reviewed the accounting policies set out below, which have been applied consistently, and considers them to be the most appropriate to the Group's business activities.

Presentation and functional currency

The presentation currency of the Group is the Canadian dollar ("CAD$").

 

Functional currency is the currency of the primary economic environment in which a company operates. The functional currency of the Group's subsidiaries are; United States dollar ("US$") for the subsidiaries in Dubai, British Virgin Islands (including Azerbaijan operations) and Democratic Republic of Congo, Euros ("EUR") for the subsidiary in Italy, Sterling ("GBP") for the subsidiary in the United Kingdom, Swiss Francs ("CHF") for the subsidiary in Switzerland and Norwegian Krone ("NOK") for the subsidiary in Norway.

 

The functional currency is determined by the Directors by looking at a number of relevant factors including the currency in which Group entities usually generate and spend cash and in which business transactions are normally denominated.

 

 

 

All of the transactions that are not in the functional currency are treated as foreign and indicate currency transactions.

The factors that have determined the adoption of the CAD$ as presentation currency include:

 

·    mainly affects the prices at which the goods or services are consolidated;

·    Canada is the country whose regulations, market conditions and competitive forces mainly affect the pricing policy of the entity;

·    influences the costs and expenses of the entity;

·    the funds are usually generated in that currency; and

·    the receipts from operating activities are retained in that currency.

 

 

3.      Significant accounting policies

 

Consolidation

The following entities have been consolidated within the Group's financial statements:

Name	Country of incorporation and place of business	Proportion of ownership interest	Principal activity
Canoel Italia S.r.l. (1)	Genova, Italy	98.6%	Gas, electricity and condensate production
Ingenieria Petrolera del Rio de la Plata S.r.l.	Argentina	100%	Not trading
Zenith Aran Oil Company Limited	British Virgin Islands	100%	Oil production
Aran Oil Operating Company Limited	British Virgin Islands	80% owned subsidiary of Zenith Aran Oil Company Limited	Oil production
Zenith Energy (O&G) Ltd	United Kingdom	100%	Administrative services
Zena Drilling Limited	Incorporated in UAE	100%	Oil and gas drilling
Altasol SA	Switzerland	100%	Oil trading
Zenith Norway AS (2)	Norway	100%	Holding Company
Anglo African Oil & Gas Congo S.A.U. (3)	Republic of the Congo	100%	Oil production
Zenith Energy Netherlands BV	Netherlands	100%	Holding Company

 

(1)  Zenith Energy Ltd. has 100% control over Canoel Italia S.r.l.  The Group granted 1.4% to the Director managing the Italian subsidiary in order to limit the risk of any liability to that entity. Therefore, no non-controlling interest arises from the consolidation of this subsidiary.

 

(2)  On January 30, 2020, the Company announced the establishment of its fully owned Norwegian subsidiary, Zenith Energy AS ("Zenith Norway"), to be used as a vehicle for intended participation in future licensing bids to be organized by the Norwegian Ministry of Petroleum and Energy, as well as to actively pursue the potential acquisition of working interests in mature energy production assets across Northern Europe.

(3)  On January 13, 2020, the Company announced the passing of a resolution by the shareholders of Anglo African Oil & Gas plc to approve the share purchase agreement, signed between the parties on December 27, 2019, for the acquisition of its fully owned subsidiary in the Republic of the Congo, Anglo African Oil & Gas Congo S.A.U.

Subsidiaries are entities over which the Group has control. The Group controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The financial statements of subsidiaries are included in the consolidated financial statements from the date on which control commences until the date on which control ceases.  Adjustments are made to the results of subsidiaries to bring the accounting policies used by them, with those used by the Group.

 

Intercompany balances and transactions are eliminated on consolidation, and any unrealized income and expenses arising from intercompany transactions are eliminated in preparing the consolidated financial statements.

 

The following entities have not been consolidated within the Group's financial statements because they are considered to be immaterial to the Group:

 

Name	Country of incorporation and place of business	Proportion of ownership interest	Principal activity
Leonardo Energy Consulting S.r.l.	Genova, Italy	48%	Dormant

 

 

 

5.    Administrative expenses

 

During the six months ended September 30, 2020, the Group incurred CAD$ 3,548k (2019 - CAD$ 1,989k) of administrative expenses.  Furthermore, during the same period the Group incurred CAD$ 703k (2019 - CAD$ 345k) of non-recurring expenses which relate to the cost of raising funds, negotiation costs for the potential acquisition of producing assets and share based payments costs, which is a non-cash item.

 

	Six months ended September 30,
	2020	2019
	CAD$'000	CAD$'000
Auditors remuneration - audit fees Group	-	-
Accounting and bookkeeping	19	16
Legal	39	28
Other professional fees	320	269
Office	365	222
Administrative expenses	178	43
Foreign exchange loss	645	274
Other administrative expenses	271	59
Salaries	669	579
Travel	339	154
General and administrative expenses	2,845	1,644
Non-recurring expenses
Listing costs	524	182
Negotiation costs for acquisitions	131	50
Transaction Costs	-	2
Share based payments	48	111
Total non-recurring expenses	703	345
Total general and administrative expenses	3,548	1,989

 

 

 

6.      Finance expense

                                                                                                                                 Six months ended September 30,

		2020	2019
		CAD $'000	CAD $'000
Debt reduction on settlement of loan		-	643
Interest reduction on settlement of loan		-	733
Effective interest on financial liabilities held at amortised cost		(284)	(316)
Interest expense		-	(22)
Net finance (expense)/income		(284)	1,038

 

7.      Taxation

                                                           Six months ended September 30,

		2020	2019
		CAD $'000	CAD $'000
Current tax		3	-
Deferred tax		-	-
Total tax charge for the period		3	-

 

 

8.         Property, plant and equipment

	D&P Assets
	CAD$'000
Carrying amount at April 1, 2019	1,079,639
Additions	1,951
Disposals	-
Depletion and depreciation	(913)
Compensatory oil delivered	(159)
Foreign exchange differences	(207)
Carrying amount at September 30, 2019	1,080,311
Carrying amount at April 1, 2020	34,305
Additions	8
Depletion and depreciation	(198)
Foreign exchange differences	(885)
Carrying amount at September 30, 2020	33,230

 

 

9.      Non-current financial assets held at amortised cost

	September 30, 2020		September 30, 2019
		CAD $'000		CAD $'000
Italian prepaid insurance		-		408
Other assets		12		-
		12		408

 

 

10.   Inventory

 

As of September 30, 2020, inventory consists of CAD $nil (2019 - CAD $nil) of crude oil that has been produced but not yet sold, and CAD $682k of materials (2019 - CAD $161k) .  The amount of inventory recognised in the statement of comprehensive income is CAD $nil (2019 - CAD $8k).

 

	September 30, 2020		September 30, 2020
		CAD $'000		CAD $'000
Congo - materials		674		-
Azerbaijan - materials		-		155
Italy - materials		8		6
		682		161

 

 

11.  Trade and other receivables

		September 30, 2020	September 30, 2019
		CAD $'000	CAD $'000
Trade receivables		1,255	1,512
Other receivables		14,003	2,377
Directors loan account		136	(50)
Total trade and other receivables		15,394	3,839

12.  Change in working capital

		September 30, 2020	September 30, 2019
		CAD $'000	CAD $'000
Trade and other receivables		11,595	623
Inventory		520	(2)
Prepaid expenses		(40)	(14)
Prepaid property and equipment insurance		(396)	(8)
Trade and other payables		(7,056)	(1,147)
Total change in working capital		4,623	(548)

 

 

13.  Share Capital

 

Zenith is authorised to issue an unlimited number of Common Shares, of which 465,000,000 were issued at no par value and fully paid during the six months ended September 30, 2020 (2019 - 107,695,043).

Following the issue of the new Ordinary Shares, the Company had 1,042,072,921 common shares in issue and admitted to trading on the Mekur Market of the Oslo Bors, as of September 30, 2020.  As of the same date, Zenith had 313,400,824 common shares in issue and admitted to trading on the Main Market of the London Stock Exchange.

 

Issued	Number of	Amount
Description	common shares	CAD $'000
Balance - 30 September 2019	368,122,107	33,557
Settlement of debts	11,421,402	445
Non-brokered unit private placement	37,000,000	1,857
Finder's fee		-                    97
Non-brokered unit private placement	35,000,000	1,124
Balance - 31 December 2019	451,543,509	36,886
Non-brokered unit private placement	55,529,412	1,610
Non-brokered unit private placement	9,000,000	232
Equity sharing agreement (vi)	50,000,000	1,389
Non-brokered unit private placement	11,000,000	283
Balance - 31 March 2020	577,072,921	40,400
Non-brokered unit private placement	75,000,000	907
Finder's fee		(4)
Non-brokered unit private placement	60,000,000	900
Non-brokered unit private placement	80,000,000	1,339
Balance - 30 June 2020	792,072,921	43,542
Non-brokered unit private placement	60,000,000	467
Non-brokered unit private placement	90,000,000	1,060
Non-brokered unit private placement	100,000,000	637
Balance - 30 September 2020	1,042,072,921	45,706

 

 

 

 

 

14.   Warrants and options

 

		Number of options		Number of warrants	Weighted average exercise price		Amount CAD$'000
Balance - April 1, 2019		11,100,000		19,796,378	0.12		1,147
Option exercised		(1,311,204)			0.12		(116)
Warrants issued		-		47,812,500	0.10		111
Balance - September 30, 2019	9,788,796		67,608,878			0.12		1,142
Balance - April 1, 2020	9,085,225		55,663,984			0.12		1,010
Warrants issued	-		45,000,000			0.10		(111)
Warrants expired	-		(47,812,500)			0.02		48
Balance - September 30, 2020	9,085,225		52,851,484			0.03		947

 

 

Options

 

Grant Date	September 30, 2020		September 30, 2019		Expiry Date
	Number of options	Exercise price per unit CAD$	Number of options	Exercise price per unit CAD$
November 2016	1,100,000	0.10	1,100,000	0.10	November 2021
November 2017	500,000	0.18	500,000	0.18	November 2022
April 2018	7,485,225	0.12	8,188,796	0.12	April 2023
	9,085,225	0.12	9,788,796	0.12

 

 

Warrants

Type	Grant Date	Number of Warrants	Price per unit CAD$	Expiry Date
Warrants	January-18	180,000	0.16	January-20
Warrants	April-18	93,750	0.40	May-21
Warrants	June-18	1,280,000	0.07	June-21
Warrants	Septeber-18	6,977,988	0.10	February-20
Warrants	February-19	10,364,640	0.10	February-20
Warrants	February 19	900,000	0.10	February 20
Warrants	August 19	47,812,500	0.10	August 20
	Total warrants at 30 September 2019	67,608,878
Warrants	April-18	93,750	0.40	May-21
Warrants	June-19	1,280,000	0.07	June-21
Warrants	October-19	6,477,734	0.06	October-22
Warrants	August 20	45,000,000	0.022	August 21
	Total warrants at 30 September 2020	52,851,484

 

 

15.   Trade and other payables

		September 30, 2020	September 30, 2019
		CAD $'000	CAD $'000
Trade payables		16,458	10,174
Other payables		1,281	557
Total trade and other payables		17,739	10,731

 

 

16.   Loans

 

                                                                                                                                                     Six months ended September 30

		2020	2019
		CAD$'000	CAD$'000
Loan payable - current		1,903	1,762
Loan payable - non-current		1,903	2,299
Total		3,806	4,061

 

Loans - current		2020	2019
		CAD $'000	CAD $'000
As at 1 April		2,210	3,776
Transfer from non-current		73	1,246
Repayments		(408)	(2,298)
Debt reduction on settlement of loan		-	(643)
Interest		-	7
Foreign exchange		28	(326)
As at September 30		1,903	1,762
Loans - non current		2020	2019
		CAD $'000	CAD $'000
As at 1 April		2,260	3,417
Loan receipt		(252)	177
Conersion into shares		(19)	-
Transfer to current		(73)	(1,246)
Foreign exchange		(13)	(49)
As at September 30		1,903	2,299

 

 

17.          Non-convertible bonds

 

Non-convertible bonds		September 30, 2020	September 30, 2019
		CAD $'000	CAD $'000
Current		294	104
Non-current		4,456	4,759
Total		4,750	4,863

 

 

Non-convertible bonds

		CAD $'000
Balance - April 1, 2019		4,958
Interest		63
Repayment of bonds		(158)
Balance - September 30, 2019		4,863
Balance - April 1, 2020		4,359
Issue of bonds		477
Payment of interest		(86)
Balance - September 30, 2020		4,750

 

 

18.   Loss from discontinued operations

 

The Group has re-focused the geographic area of its activities. On March 2, 2020, the Company announced that, in view of Zenith's strategic focus on pursuing large-scale oil production and development opportunities in Africa, it would return the Contract Rehabilitation Area to SOCAR.

 

As a result of this decision, the results of the subsidiary in Azerbaijan have been included in the loss from discontinued operations in the statement of comprehensive income and they are comprised as follows:

	September 30, 2020 CAD$'000	September 30, 2019 CAD$000
Revenue	-	2,325
Operating expenses	(579)	(1,078)
Depletion and depreciation	(68)	(710)
Administrative expenses	(97)	(508)
Reversal of impairment from previous period	1,326	-
Finance expenses	(19)	(34)
Profit/(loss) from operations in the period	563	(5)

 

 

19.   Decommissioning provision

 

The following table presents the reconciliation of the carrying amount of the obligation associated with the reclamation and abandonment of the Group's oil and gas properties:

		September 30, 2020	September 30, 2019
		CAD $'000	CAD $'000
Balance - April 1		13,543	9,089
Accretion		41	(31)
Foreign currency translation		(277)	(251)
Balance - September 30		13,307	8,807

 

The provision has been made by estimating the decommissioning cost at current prices using existing technology.

 

20.   Earnings per share

		2020 CAD $'000		2019 CAD $'000
Net loss for the period		(3,981)		(1,973)
Net loss from continuing operations		(4,544)		(1,968)
Net profit/(loss) from discontinued operations		563		(5)
Basic weighted average number of shares		519,319		296,866
Potential dilutive effect on shares issuable under warrants		n/a		n/a
Potential diluted weighted average number of shares		n/a		n/a
Net earnings per share - basic and diluted (1)	$	(0.01)	$	(0.01)
From continuing operations - basic and diluted	$	(0.01)	$	(0.01)
From discontinued operations - basic and diluted	$	0.001	$	(0.00)

 

(1)      The Group did not have any in-the-money convertible notes, warrants and stock options during the six months ended September 30, 2020 and 2019.

 

 

21.   Commitments and contingencies

 

 Asset Purchase commitments

 

The Company acquired the Congolese asset for a consideration of GBP 200,000, that was fully paid in May 2020.

 

On April 20, 2020, and on September 8, 2020, Zenith entered into two separate conditional acquisitions in Tunisia from KUFPEC and CNPC, two world-renowned oil companies, for their respective working interests in the Sidi El Kilani Concession. Upon completion, conditional upon regulatory approval being granted by the Comité Consultatif des Hydrocarbures ("CCH") of the Republic of Tunisia, it is expected that Zenith will have a daily production ranging between 250-300 barrels of oil per day.

 

The acquisition from KUFPEC was agreed for a consideration of US$500,000, of which US$250,000 was paid in June 2020, as per the terms of the conditional share purchase agreement in relation to this transaction. The balance of the purchase price is due upon completion of the acquisition, which is expected to be obtained within December 31, 2020.

 

The acquisition from CNPC was agreed for a consideration of US$300,000, as per the terms of the conditional share purchase agreement in relation to this transaction. The payment of the purchase price is due upon completion of the acquisition.

 

 

 

22.   Financial risk management and financial instruments

		September 30, 2020	September 30, 2019
Financial assets at amortised cost		CAD $'000	CAD $'000
Non-current financial assets at amortised cost		12	408
Trade and other receivables		15,258	3,839
Director's loan account		136	-
Cash and cash equivalents		1,453	1,681
Total financial assets		16,859	5,928

 

 

	September 30, 2020	September 30, 2019
Financial liabilities at amortised cost	CAD $'000	CAD $'000
Trade and other payables	17,739	10,731
Loans	3,806	4,061
Non-convertible bond and notes	4,750	4,863
Deferred consideration	-	483,696
Total financial liabilities	26,295	503,351

 

Zenith's main financial risks are foreign currency risk, liquidity risk, interest rate risk, commodity price risk and credit risks. Set out below are policies that are used to manage such risks:

 

a)  Credit risk

 

Credit risk is the risk of an unexpected loss if a customer or counter party to a financial instrument fails to meet its commercial obligations. The Group's maximum credit risk exposure is limited to the carrying amount cash of CAD$1,453k (2019 - CAD$1,681k) and trade and other receivables of CAD$15,258k (2019 - CAD$3,839k).

 

Deposits are, as a general rule, placed with banks and financial institutions that have credit rating of not less than AA or equivalent which are verified before placing the deposits.

 

The composition of trade and other receivables is summarized in the following table:

		September 30, 2020	September 30, 2019
		CAD $'000	CAD $'000
Oil and natural gas sales		1,255	1,512
Other		14,003	2,327
		15,258	3,839

 

 

 The Group's receivables are aged as follows:

		September 30, 2020	September 30, 2019
		CAD $'000	CAD $'000
Current		15,258	3,839
90 + days		-	-
		15,258	3,839

 

b)  Liquidity risk

 

As of September 30, 2020, the contractual cash flows, including estimated future interest, of current and non-current financial assets mature as follows:

	Carrying Amount	Contractual cash flow	Due on or before 30 September  2021	Due on or before 30 September 2022	Due after 30 September 2022
	CAD $'000	CAD $'000	CAD $'000	CAD $'000	CAD $'000
Non-current financial assets at amortised cost	12	12	12	-	-
Trade and other receivables	15,258	15,258	15,258	-	-
Director's loan account	136	136	136
Cash and cash equivalents	1,453	1,453	1,453
	16,859	16,859	16,859	-	-

 

 

As of September 30, 2020, the contractual cash flows, including estimated future interest, of current and non-current financial liabilities mature as follows:

	Carrying Amount	Contractual cash flow	Due on or before 30 September  2021	Due on or before 30 September 2022	Due after 30 September 2022
	CAD $'000	CAD $'000	CAD $'000	CAD $'000	CAD $'000
Trade and other payables	17,739	17,739	17,739	-	-
Loans	3,806	3,887	3,036	851	-
Non-convertible bond	4,750	4,750	294	3,099	357
	26,295	26,376	21,069	3,950	357

 

 

c)   Foreign currency risk

 

Foreign currency exchange risk is the risk that the fair value of future cash flows will fluctuate as a result of changes in foreign exchange rates. Foreign exchange rates to Canadian dollars for the noted dates and periods are as follows:

	Closing rate			Average rate
		2020	2019		2020	2019
US dollars		1.3363	1.3240		1.3592	1.3200
Euro		1.5667	1.4453		1.5413	1.4674
Swiss Franc		1.4505	1.3306		1.4429	1.3391
British Pound		1.7199	1.6282		1.7199	1.6269
Norwegian Crown		0.1420	-		0.1421	-

 

 

d)  Commodity price risk

 

Commodity price risk is the risk that the fair value of future cash flows will fluctuate as a result of changes in commodity prices.

 

As of September 30, 2020, a 5% change in the price of natural gas produced in Italy would represent a change in net loss for the six-month ended September 30, 2020 of approximately CAD $ nil (2019 - CAD $2k) and a 5% change in the price of electricity produced in Italy would represent a change in net loss for the six month ended September 30, 2020 of approximately CAD $nil (2019 - CAD $15k).

 

e)  Interest rate risk

 

Interest rate risk is the risk that future cash flows will fluctuate as a result of changes in market interest rates. The Group has fixed interest on notes payable, loans payable and convertible notes and therefore is not currently exposed to interest rate risk.

 

23.   Capital management

 

The Group's objective when managing capital is to safeguard the Group's ability to continue as a going concern, so that it can continue to explore and develop its projects to provide returns for shareholders and benefits for other stakeholders. The Group manages its working capital deficiency, long‐term debt, and shareholders' equity as capital.

 

		September 30, 2020	September 30,  2019
		CAD $'000	CAD $'000
Working capital		(2,407)	(7,772)
Long‐term debt		1,903	2,299
Shareholders' equity		8,723	571,845

 

 

24.   Operating segments

 

The Group's operations are conducted in one business sector, the oil and natural gas industry. Geographical areas are used to identify Group's reportable segments. A geographic segment is considered a reportable segment once its activities are regularly reviewed by the Board of the Directors.

 

The Group has three reportable segments which are as follows:

 

·    Italy, which commenced gas operations following the acquisition of assets in June 2013

·    The Republic of the Congo, which was acquired during the 2020 FY

·    Other, which includes corporate assets and the operations in the Canadian, Swiss, Argentinian and Norwegian entities.

Azerbaijan, which was acquired during the FY 2017 and divested during FY 2020, is mentioned only for comparative purposes with the past financial year. The results for Azerbaijan as of September 30, 2019 are included in the "Discontinued Operations" (note 18).

 

PERIOD 2019	Azerbaijan	Italy	Other	Total
	CAD $000	CAD $000	CAD $000	CAD $000
Property and equipment	1,065,259	8,101	6,951	1,080,311
Other assets	1,139	1,072	3,879	6,090
Total liabilities	492,575	8,187	13,794	514,556
Capital Expenditures	1,014	60	877	1,951
Revenue	-	344	-	344
Operating and transportation	-	(182)	(976)	(1,158)
General and Administrative	-	(122)	(1,867)	(1,989)
Depletion and depreciation	-	(38)	(165)	(203)
Loss on discontinued operations	(5)	-	-	(5)
Finance and other expenses	-	(4)	1,042	1,038
Taxation	-	-	-	-
Segment loss	(5)	(2)	(1,966)	(1,973)

 

 

PERIOD 2020	Azerbaijan	Congo	Italy	Other	Total
	CAD $000	CAD $000	CAD $000	CAD $000	CAD $000
Property and equipment	-	19,023	8,093	6,114	33,230
Other assets	275	10,172	898	6,195	17,540
Total liabilities	4,580	11,146	12,093	14,228	42,047
Capital Expenditures	-	-	8	-	8
Revenue		144	1	-	145
Operating and transportation		(93)	(200)	(363)	(656)
General and Administrative		(525)	(55)	(2,968)	(3,548)
Depletion and depreciation		-	-	(198)	(198)
Loss on discontinued operations	563				563
Finance and other expenses			8	(292)	(284)
Taxation		(3)		-	(3)
Segment loss	563	(477)	(246)	(3,821)	(3,981)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Further Information:

 

Zenith Energy Ltd
Andrea Cattaneo, Chief Executive Officer	Tel: +1 (587) 315 9031
	E-mail:[email protected]
Allenby Capital Limited - Financial Adviser & Broker
Nick Harriss Nick Athanas	Tel: + 44 (0) 203 328 5656

 

Notes to Editors: 

 

Zenith Energy Ltd. is an international oil and gas production company, listed on the London Stock Exchange (LSE:ZEN) and the Merkur Market of the Oslo Stock Exchange (ZENA:ME).

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