Kazakhstan
Acquisition of Devonian Petroleum Limited
On December 20, 2023, Zenith Energy announced the conditional acquisition of an initial 50% of the shares and voting rights in Devonian Petroleum Limited (“Devonian”) for a total investment in cash and in kind assessed at approximately 5 million USD (the “Conditional Acquisition”).
Devonian is a private UK company.
Acquisition Highlights
In 2019, Devonian was awarded the Akkudukski exploration block (the “Akkudukski Block“) of approximately 1,094 km2 in the Precaspian Basin, Kazakhstan, in a competitive bid round.
Devonian was the first UK company to be awarded a block of oilfields following a competitive government bid round, in accordance with the new code of the Republic of Kazakhstan On Subsoil and Subsoil Use (“SSU Code“), by way of its local subsidiary, DP Energy LLP (“DP Energy“) in which Devonian has a 99% interest.
Under the terms of the Conditional Acquisition, Zenith has paid Devonian an initial deposit in the amount of US$200,000 (the “Deposit“).
A second payment in the amount of US$1.8 million will be payable on the completion of a satisfactory legal and technical due diligence by Zenith 60 days from the date of signing the Conditional Acquisition (the “Exclusivity“), and the receipt of all necessary regulatory approvals in the Republic of Kazakhstan (“Completion“).
DP Energy holds a joint exploration and production contract for a term of six years from July 2019, to be followed by a production licence for a duration of 25 years subject to certain conditions being satisfied, primarily seismic reprocessing and the drilling of one new well.
Geology
Devonian has the hydrocarbon exploration rights to the basement, with the exception of the 2.9 km2 Akkuduk Jurassic oilfield, owned and operated by EmbaMinaGas, a subsidiary of KazMuniGaz, the Kazakh national oil company.
3-D seismic presently covers approximately 70% of the Akkudukski Block.
The current Akkudukski Block Competent Person’s Report (“CPR“) assigns P50 resources of 120 million barrels above the salt and 400 million barrels below the salt.[1]
The Akkudukski Block is located in the Embinsky district of the Atyrau Region in the North Caspian Basin, on the eastern coast of the Caspian Sea, about 250 kilometres southeast of Atyrau the regional oil capital.
In supra-salt reservoirs above the Kungurian Evaporate regional seal, an undeveloped Middle Triassic oilfield in sandstones underlies the Akkuduk Jurassic oilfield. This was identified in the AK-20 well, drilled in 2016, which recovered low sulphur light oil at 2,660m in an MDT test on Wireline in addition to seeing gas in the Jurassic at 1,913m. There are, additionally, at least 6 mid-Triassic seismic prospects and at least 1 more Jurassic seismic lead. Jurassic well KM-1 encountered more than 30m of oil-bearing sands in 2008 from 1,680 to 1,720m. In sub-salt reservoirs, a potential super-giant gas-condensate seismic prospect named Zholdaskali, geologically analogous to both the super-giant Tengiz oilfield operated by Chevron with approximately 25 billion barrels recoverable oil, located circa 60 km to the southwest, and to the adjoining Ansagan field, with approximately 400 million barrels of oil equivalent recoverable reserves, has been identified. The Akkudukski Block also contains potential reservoirs in 4-way closures, identified on seismic, in Lower Permian and Carboniferous sands.
The Akkuduk producing Jurassic oilfield was discovered in 1981 with production in two Callovian sandstone horizons in a fault block with 4-way closure over a Kungurian evaporite diapir. The Jurassic oilfield has produced just over 6 MM bbls light oil on primary recovery to date. The Zholdaskali lead has been mapped on seismic in 2019 with 2-D and 3D seismic covering most of the lead. Devonian has subsequently identified Jurassic and deeper Permo-carboniferous sandstone seismic prospects. A deep parametric well, AKK-1P, was drilled in Soviet times to investigate a 45×10 km seismic feature seen (in low resolution 2D seismic) in the Devonian at circa 7,000m but drilling was suspended at 6,290m because of high pressure gas being encountered and tested.
[1] This evaluation has not been performed in accordance with Canadian securities laws, specifically the COGE Handbook and National Instrument 51-101 – Standards of Disclosure for Oil and Gas Activities.
Drilling of First Well
The US$2 million to be paud upon Completion will be complemented by an additional consideration estimated in the amount of approximately US$3 million to cover the costs for the drilling and testing of a new well, to a maximum depth of 3,000 metres, in the Akkudukski Block (the “First Well“).
The First Well will target either Triassic sandstone reservoirs at Akkuduk or Jurassic sandstone reservoirs at Kamen. The selection of the drilling location for the First Well will be mutually agreed between Zenith and Devonian.
The Company has agreed to transport its drilling rig, a 1,200hp 260-ton onshore drilling rig (“ZEN-260“), to the Republic of Kazakhstan from Georgia, where it has been stored in recent years, for the purpose of drilling the First Well. Zenith will initiate the necessary importation formalities and obtain the required approvals and certifications for mobilisation of the ZEN-260 and ancillary drilling equipment to the chosen well location.
