LONDON (ShareCast) - (Sharecast News) - Africa-focussed oil and gas development and production company Zenith Energy has entered into a joint venture agreement with a local energy player in the Republic of the Congo, it announced on Tuesday.
The London-listed firm said the primary objective was the potential acquisition of an onshore oil production licence, which last produced at a rate of about 300 barrels per day from the regionally-proven Mengo formation, as recently as 2019.

Production was currently suspended, pending the assignment of a new licence.

The board said the potential acquisition is located in the Kouilou region of the Republic of the Congo, in proximity to Pointe-Noire - the country's second largest city.

It noted that it is also in the vicinity of Tilapia, Zenith's recently-acquired oil production asset, with what the directors described as "transformational" production potential.

Under the terms of the agreement, the company and its local partner would jointly submit an application to authorities, including the Ministry of Hydrocarbons, for the award of a new licence in relation to the potential acquisition.

Additionally, the agreement stipulated that Zenith would have the role of joint operator and majority partner, if a new licence is successfully obtained.

Following preliminary technical analysis as part of its due diligence, Zenith said it was confident that profitable oil production operations could be achieved following the reactivation of the potential acquisition, and the performance of targeted, low-intensity workover activities.

The board said the acquisition would be in line with the company's strategy of identifying near-term production and development assets in Africa which had material, near-term production potential.

"As is known by shareholders, the company's senior management is currently in the Republic of the Congo conducting negotiations with the relevant authorities for the attribution of a new 25-year licence in relation to the highly prospective Tilapia asset," said chief executive officer Andrea Cattaneo.

"Our presence in the cities of Pointe-Noire and Brazzaville, the capital of the Republic of the Congo, has facilitated access to a number of compelling domestic opportunities, which have become even more commercially attractive in view of the recent decline in oil prices.

"The potential acquisition has two key qualities that render it highly compatible for our portfolio - near-term profitable production potential and significant development potential to progressively maximise production on account of the potentially highly significant oil reserves in place which will require independent evaluation under Canadian National Instrument 51-101."

At 1112 BST, shares in Zenith Energy were down 11.65% at 0.75p.

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