Zenith Energy Ltd. (“Zenith”) is a dual listed LSE & TSX Venture Exchange oil & gas development and production company. In 2016 the company vastly expanded its oil and gas portfolio via a substantial acquisition in Azerbaijan. Now, the team has bagged a cracking deal in Indonesia which should help to propel Zenith towards gaining a mid-cap oil company valuation.

• Sumatran oil project adds 1,050 bopd rising to 2,000 bopd in 15 months

  Indonesia represents a mature oil producer with high quality oilfield services available in the capital Jakarta. Zenith looks set to acquire 2 producing oil fields with good growth opportunities. These structures are shallow & with easy geology which complements the deep and complicated environment seen in Azerbaijan & where complex workovers have tested investors’ patience.

• Funds to really unlock the value in Azerbaijan with workovers and drilling

  It has not been plain sailing at the huge 642.4km2 Muradhkanli Block. Funds being raised will allow substantial value to be properly unlocked in a highly systematic fashion at the largest onshore oil/gas concession in Azerbaijan. Production of 1,000 bopd is expected in 12 months, but the potential here is far greater as previously 15,000 bopd was achieved with old Soviet technology.

• Attractive discount to E&P universe on compelling peer comparisons

  Zenith shares trade on an EV/2P ratio of just 30p (US$0.40) per barrel against a peer median of £2.11 (US$2.78). This starkly illustrates the stock’s potential upside once there is further evidence of successful oil development in Azerbaijan from drilling in early 2019 and as further details emerge from the Indonesian assets over coming months.

• Heavily risked DCF analysis suggests 739% upside

  Valuing the Azerbaijan, Italian and now Indonesian assets using a conservative DCF model gives a new sum-of-the-parts valuation of 34.4p per share. We remain buyers with a reiterated Conviction Buy stance.

• RISK WARNING & DISCLAIMER

  Zenith Energy is a research client of Align Research. Align Research & a Director of Align Research hold interests in the shares of ZEN. For full disclaimer information please refer to the last page of the full document. This investment may not be suitable for your personal circumstances. If you are in any doubt as to its suitability you should seek professional advice. This note does not constitute advice and your capital is at risk. This is a marketing communication and cannot be considered independent research.

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