Operational Update and Record Oil Production Revenues

(TheNewswire)

Calgary, AB / TheNewswire / April 10, 2018 - Zenith Energy Ltd., ("Zenith" or the "Company"), (LSE: ZEN; TSX.V: ZEE), the international oil & gas production company operating the largest onshore oilfield in Azerbaijan, is pleased to provide an update on its Azerbaijan operations.

Workover of well Z-21, Zardab Field

The Company confirms that the final phase of the Z-21 well workover in the Zardab field commenced on April 9, 2018. Zenith's recently upgraded A-80 workover rig, operated by the Company's field personnel and directed by the Company's international workover specialists, is fully-rigged up and all ancillary equipment has been mobilised to the well location. For the first time, all of the equipment in use is owned by the Zenith Energy group. This equipment is new and has recently been delivered to the Company from China, North America and Azerbaijan.

As announced on February 19, 2018, a coiled tubing intervention, performed in January 2018, had successfully cleaned out the entirety of the tubing string in the well to a depth of 3,670 metres, circulating and drilling out mud and debris that had accumulated since the well was last produced in 1988. In addition, the coiled tubing intervention also cleaned out 18 metres of casing from 3670 metres to 3688 metres. However, due to the small coiled tubing bit (1.875 inches) and the restricted diameter of the tubing, the casing could not be cleaned out further.

The Company intends to pull the entirety of tubing string from the well and cut the tubing at the relevant depth if any obstruction is encountered. Once this is completed, it will run in hole with a drill bit and clean out the casing to the well's total depth, 3,982 metres. The well will subsequently be put on production. The use of the Company's equipment is expected to significantly decrease the time needed for the workovers, increase efficiency, decrease the cost, and improve operational safety. The Company will provide an update once the workover of Z-21 is completed.

Record oil production revenues generated in Azerbaijan

The Company is pleased to confirm that its gross revenues have reached an all-time record high since Zenith began operations in Azerbaijan. The Company's Azerbaijan subsidiary generated revenues, gross of commissions and transportation expenses, of approximately US$490,000 for its oil production during the month of March 2018, with an Urals sales price per barrel of approximately US$67.

Production Update

The Company's focus remains maximising the profitability of its assets on behalf of shareholders. Accordingly, the Company's operational team has taken the decision to shut-in 31 production wells in the Muradhkhanli and Jafarli oilfields that were performing uneconomically with an average water cut of 99 per cent.

As a result, the Company currently has a total of 34 active production wells producing an average daily production of approximately 300 barrels. The decision was taken after an extensive cost analysis evaluation. This determined that it was contrary to the financial interests of the Company to continue producing the aforementioned 31 wells. In total, the Company, as previously announced to the market, has 75 wells capable of production.

Going forward, the Company will systematically review each of the shut-in wells as part of its work programme, with the intention of seeking to increase production, either by recompleting to different zones, or by shutting off the excess water production.

Electrical Submersible Pump Upgrade Programme (the "Upgrade Programme")

As announced by Zenith on August 22, 2017, the Company's Upgrade Programme involves the installation of new electrical submersible pumps in wells located in the Muradkhanli and Jafarli oilfields. The purpose of the Upgrade Programme is to stabilise existing production from the selected wells and lessen the likelihood of production outages often resulting from older ESP technology. In addition, the Company is also setting the pumps at an average depth of 2500 meters to achieve greater production from the wells. The previous ESP technology limited the setting depths to 1500 meters.

The Company can today confirm that to date it has installed 11 new ESPs since the last ESP Upgrade Programme update on February 19, 2018. It is expected that an additional two ESPs will be installed by the end of May 2018. Zenith's field team is routinely monitoring production and it is likely that the number of wells included in the ESP upgrade programme will be increased further.

Commissioning of Geological Study

The Company can confirm that it has commissioned a geological study in view of its plans to begin development drilling activities in 2018. The ongoing study, through the structural re-interpretation of the various seismic acquisitions and well data from numerous wells drilled in the field area, has already enabled the identification of a new previously unexplored Mesozoic carbonate prospect. The study is also expected to assist in the Company's field rehabilitation activities by providing a modern revaluation of the Eocene age reservoir levels comprised of sandstones, marly limestones and volcanic facies. The revised interpretations will enable Zenith to optimize the selection of new drilling locations and the areas where it will be directing its workover efforts.

Field Teams Update

The Company can confirm that all non-Zenith operational teams have now been stood down and in-house personnel have now assumed control of all operational activities. This is in keeping with the Company's stated intention to use its own internal resources to the fullest extent, enabling a significant reduction in operational expenditure as well as both maintaining operational continuity and enhancing the application of in-field experience. Azerbaijan's long history as an oil producing nation enables the Company to call upon the significant in-country expertise and supply infrastructure should operational activities require third-party support or additional equipment in future.

Equipment Upgrades

As was announced on January 25, 2018, the Company has signed a purchase agreement for an A-100 truck-mounted workover rig. This was purchased using the funds raised from Zenith's UK placing, announced on January 24, 2018. The Company can confirm that the construction of the rig's mast and substructure is ongoing at a factory located approximately 2 hours from the Company's field locations, whilst awaiting delivery of the carrier which has already been manufactured. Zenith's engineers have decided to reconfigure some of the technical features of the rig structure to bring it in line with Western standards. As a result, delivery is now expected in June 2018.

Zenith Chief Executive Officer, Andrea Cattaneo, commented:

"As stated previously, our confidence in the Azerbaijan asset remains unchanged. We know that to date the workover programme has not proceeded as originally anticipated and has failed to deliver the production increases that we had expected to achieve. However, as our record oil production revenue clearly suggests, our production activities generate considerable valuable and maximising their economic benefits must be our focus.

The decision to shut-in a number of uneconomical production wells, whilst seemingly disappointing, reflects this focus and is in fact beneficial to our financial position. The cost of producing these wells, primarily because of their very high water cut, meant production from each well was loss-making.

Our understanding of the field's geology has progressively increased, and we have made a number of targeted investments in new equipment that significantly reduces our operational expenditure, whilst allowing us to increase the speed and efficiency of our operations.

Strategically, our attention will now gradually broaden towards drilling new wells that will enable us to produce our very large reserves. Success in the Zardab field will be a fitting prelude to our planned development drilling activities scheduled to begin later this year."

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

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

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 Toronto Stock 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.

To find out more, visit www.zenithenergy.ca or follow Zenith on Twitter @zenithenergyltd

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Operational Update and Record Oil Production Revenues