Zion Oil & Gas Inc (ZNOG)

[KyOil]

Porgie, see the Oct 12, 2017 press release...

https://www.zionoil.com/updates/press-release-zion-oil-gas-israel-drilling-update-and-new-offering-launch/

Carrillo further emphasized, “Based on a variety of factors, including increased total gas and heavy gas component indications (“shows”) an order of magnitude higher than what we’ve previously seen, we believe we’re on the verge of penetrating a key zone of interest, the Triassic Mohilla Formation

Heavy gas is an industry term that refers to gas types like Propane (C3H8) and Butane (C4H10) that have more molecules than Methane (CH4) which is commonly called natural gas. The presence of these heavy gases is an indication that the reservoir has oil, or a "show" in oil patch speak. Pure natural gas reservoirs usually do not have Propane and Butane in a significant quantity.

It is easier to say "10x" than "order of magnitude" in a post, so I abbreviated. They mean nearly the same thing, but order of magnitude could be larger than 10x. "Previously seen" means the upper Jurassic or Cretaceous, above the cap rock.

The context of the Oct 12, 2017 PR is that they were encouraged after penetrating through a cap rock in the lower Jurassic at 3307 meters and encountered increased gas from a fractured carbonate reservoir below the cap rock. Interestingly in the PR, Carrillo thought they had just penetrated the Triassic Mohilla because the Mohilla was where they expected to find such positive shows. Yet they were still in the lower Jurassic as further drilling and logs would show. Dustin elaborated the same sentiment:

Dustin Guinn, Zion’s President & COO, announced, “At a depth of 3,270 meters we saw a significant lithological change that is what we have been anxiously awaiting. While no assurance can be provided that we will ultimately establish commercial production, I am cautiously optimistic about the deeper geologic horizon to which Victor alludes.”

They were awaiting the Triassic and thought they were there, even though 3300 meters was shallower than they expected it to be. But, the shows were strong and they thought the Mohilla would have strong shows, so they thought they were there. It's easy to be tricked reading cuttings when first penetrating a new formation. Further drilling and logs told them they had not reached the Mohilla and had to go deeper.

The next PR was 11/2/2017 when they announced drilling had to stop in order to upgrade well control including BOP. At the time of the 11/2/2017 PR the depth was 3342 meters, so they only went another 35 meters from the Oct 12 PR into the lower Jurassic fractured carbonate reservoir before the high pressure caused drilling to pause for 42 days to upgrade well control including BOP.

So, we have high pressure gas with heavy gas components in the lower Jurassic, which is being tested now. This is why I'm optimistic. The lower Jurassic had the best shows during drilling, so it has the highest probability for a commercial reservoir. Test results should be coming in a window of time from late Nov to mid Jan, with the most likely by YE.


We have a sincere difference of opinion on the amount of info they have shared. I've never seen the detailed info they have provided from any other E&P company on any well. They have provided enough info to make an educated judgement as an investor. Actually, as an oil field participant, I'm amazed they have provided as much info as they have. I would assume on future wells they will provide much less info in accordance with industry norms.

Even they will not know for sure whether the lower Jurassic is a commercial reservoir until testing is complete. Drilling shows and logs are encouraging, but they really don't know until testing is complete, so they have nothing more to tell us until then. And we don't know when testing will be complete as problems do arise causing schedules to move out in time. Even if the lower Jurassic has been tested and is known to be commercial, they are under no obligation to report this publicly until the well is completely tested.

The "weeks not months" statement was in regard to testing the 3 primary zones of interest at the time, which were all in the Triassic. They reported the Triassic was essentially dry. Now they are testing other zones. The weeks not months statement no longer applies. They said they would start testing the higher zones by Oct 15, and they did on Oct 14. They said it would take from 6 to 9 weeks from Oct 14, which is from late Nov to late Dec. Also they said mechanical problems could cause delays.
We are still well within the reporting timeframes they have given. If no report by 9 weeks from Oct 15, I would agree info is overdue.