Operational Update

RNS Number : 2345F

Zenith Energy Ltd

19 February 2018

February 19, 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.

ZENITH ENERGY LTD.

("Zenith" or the "Company")

Operational Update

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 field rehabilitation operations in Azerbaijan.

High-impact workover of well Z-21, Zardab field

The Company confirms that the coiled tubing intervention, announced on January 17, 2018, has successfully cleaned out the entirety of the tubing string in well Z-21 to the depth of 3670 meters, 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 is now preparing its A-80 workover rig to pull the tubing string from the well. Once this is completed, it will run in hole with a drill bit and clean out the casing to total depth, 3982 metres. The well will subsequently be put on production.

The Company expects to complete the workover of Z-21 in April 2018. Zenith will use its own resources, where possible, such as a complete set of well control equipment including a blow-out preventer, expected to arrive in March 2018. The use of the Company's equipment is expected to significantly decrease the time needed for the workovers, increase efficiency, and improve operational safety.

High-impact workover of well Z-28, Zardab field

The Company can confirm that the wellhead leaks, announced on December 19, 2017, have been successfully sealed. The subsequent coiled tubing intervention to clean out the well was successful, having cleaned out the well to a depth of 3583 meters. However, it has been determined that the Company will have to mill out 63 metres of tubing inside the liner and then clean out an additional 298 metres of the liner to a TD of 3944 to complete the workover.

The Company is confident that production can successfully be achieved from well Z-28 once these operations are completed and is formulating a plan, in consideration of the equipment to be required for the intervention and its likely timing, starting immediately after the completion of the Z-21 workover.

Equipment Upgrades

Zenith's A-80 workover rig, inherited from SOCAR, has recently undergone further upgrades to increase its capabilities and enable it to be utilised more extensively in the Company's workover operations. The Company is in the process of fitting hydraulic tongs to increase the pulling efficiency and speed of the rig, a new rig floor, and installing other ancillary equipment.

The aforementioned upgrades are in addition to the comprehensive modernisation Zenith's A-80 rig underwent in 2017 when field rehabilitation began in Azerbaijan.

The Company received delivery of the first consignment of oil production equipment from China in late December 2017. The order of the equipment was announced by Zenith on August 21, 2017. The equipment quickly cleared customs and is now being deployed in the field.

Zenith has been advised that the second and final consignment of Chinese oil production equipment will arrive on March 16, 2018. The shipment will include the Company's new set of blow-out preventers and drill pipe, as well as ancillary workover equipment.

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 factory where the A-100 rig is under construction is located approximately 2 hours from the Company's field locations, enabling Zenith's operational team to inspect progress twice a week. Delivery of the rig is expected in late April 2018.

Electrical Submersible Pump ("ESP") Upgrade Programme

As announced by Zenith on August 22, 2017, the Company's ESP upgrade programme involves the installation of latest-generation electrical submersible pumps across the Muradkhanli and Jafarli oilfields. The original programme had envisaged the ESP replacement across 11 wells, however, this has now been increased to include at least 13 wells. The purpose of the programme is to stabilise existing production from the selected wells and lessen the likelihood of production outages resulting from earlier generation ESP technology.

The Company confirms that to date it has successfully installed seven electrical submersible pumps. While this has resulted in an uplift in production, it has also reduced production downtime that had been observed as a recurrent problem with the previous generation ESPs. Zenith is awaiting arrival of the remaining six ESPs to complete the ESP programme. As announced previously, difficulties have been encountered in the procurement of new electrical submersible pumps from suppliers. In order to resolve these difficulties, the Company has signed a procurement contract with a third supplier, Novomet, a leading international supplier of ESP technology. It is expected that all 13 ESPs will be installed by the end of May, 2018. Zenith is continuously monitoring production and it is likely that the number of wells included in the ESP upgrade programme will be increased further.

Current Production Update & Production Target

The Company's current average production from its Azerbaijan operation is approximately 350 bopd. The Company has experienced a higher than expected natural depletion rate, in addition to the loss of wells that had been generating significant production. Zenith's workover programme has also been hampered by the loss of wellbores due to uncemented casing that has collapsed in historic wells that were primary targets of its workover programme. The Company expects that the field rehabilitation operations in progress, or due to begin in the near future, will result in significant upside in daily production levels.

Despite the delays and difficulties encountered in Zenith's field rehabilitation activities, the Company still has an initial target of 1000 bopd. The revised timeline for reaching this milestone is December 31, 2018.

Mike Palmer, Chief Operating Officer, Zenith Aran, the Company's Azerbaijan-based fully owned subsidiary, commented:

"We have learned a lot about the Zardab field in our well interventions. Almost every historical piece of information regarding the characteristics of wells Z-21 and Z-28 did not coincide with what we discovered in our operations. The unreliability of the information was suspected from the outset, but the only way of gathering information was entering each well and learning as we went ahead. We now have a significantly improved understanding of the potential of the Zardab field that will be highly valuable for when we begin drilling activities. The lack of information coupled with the fact that these wells had not been touched for the past thirty years has certainly made our operations more challenging. However, our view of the quality of the geology and the opportunity presented by these wells remains unchanged. We have the team and, increasingly, our own much better equipment to get the job done to put these wells on production. The delays incurred at Z-21 and Z-28 are a source of short-term disappointment but are of little material consequence when considering the longer term, very significant, prize at hand, and the broader picture of our profitable oil production activities in a field with vast, untapped oil reserves. The rest of 2018 is going to be extremely busy and challenging. I am confident we will succeed."

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

Beaufort Securities Limited - (Joint Broker)