We have now re-evaluated our Asher-Menashe, Joseph, and Jordan Valley License areas, incorporating fairly recently acquired geological and geophysical data. We do not expect to drill a new exploratory well within the first half of 2013 but we hope to drill our next exploratory well towards the end of 2013 or in 2014.
In evaluating our seismic and geologic database in other areas onshore Israel we have identified new areas of potential exploration interest outside our current license areas. One area takes in parts of the Jezreel Valley near the ancient city of Megiddo and another is contiguous with and directly abuts our existing Jordan Valley License area. We also continue to assess, taking into consideration the new licensing guidelines, whether we would apply for new license area(s) in Israel. Under any scenario, we would still need to acquire new seismic data and other geological information before we can identify and recommend the site of our next exploratory well.
After a drill site is identified, we will need to complete the permitting process and finalize arrangements for a suitable drilling rig and experienced crew to drill the well. As we have previously reported, the onshore permitting process in Israel with respect to petroleum exploration is undergoing significant modification, resulting in a lengthier permitting process.
Zion’s vision, as exemplified by its Founder and Chairman, John Brown, of finding oil and/or natural gas in Israel, is Biblically inspired. The vision is based, in part, on Biblical references alluding to the presence of oil and/or natural gas in territories within the State of Israel that were formerly within certain ancient Biblical tribal areas. While John Brown provides the broad vision and goals for our company, the actions taken by the Zion management as it actively explores for oil and gas in Israel, are based on modern science and good business practice. Zion’s oil and gas exploration activities are supported by appropriate geological, geophysical and other science-based studies and surveys typically carried out by companies engaged in oil and gas exploration activities.
Today, Zion Oil & Gas is a public company traded on NASDAQ Global Market (stock symbol: ZN).
As of March 31, 2013, we have no revenues or operating income and are considered to be a “development stage” company. We are headquartered in Dallas, Texas and have a field office in Caesarea, Israel. We hold three petroleum exploration licenses, named the “Joseph License”, the “Asher-Menashe License” and the “Jordan Valley License”, covering approximately 218,000 acres of land in onshore northern Israel.
We have continuously held the Joseph License since October 2007 and the Asher-Menashe License since June 2007.
We were awarded the Jordan Valley License in April 2011. The Joseph License is subject to extension through April 10, 2014. On April 10, 2013 we submitted an application seeking a one-year extension for our existing Joseph License through April 10, 2014 to allow for an orderly plugging and abandonment of the wells drilled to date in such license area as required by our license terms.
On May 12, 2013, the Commissioner notified us that Zion’s Joseph License was extended until October 10, 2013. The Asher-Menashe License is scheduled to expire on June 9, 2013 and is subject to extension through June 9, 2014. We plan to file a request with the Petroleum Commissioner’s office to seek a one-year extension of the Asher-Menashe License to June 9, 2014. The Jordan Valley License is scheduled to expire on April 12, 2014, subject to additional one-year extensions at the option of the Petroleum Commissioner through April 2018.
To date, we have completed drilling three exploratory wells in the Joseph License and have partly completed drilling one exploratory well in the AsherMenashe License area. We are currently in the process of identifying our next drilling prospect.
Toward that end, in April 2013, we submitted an application seeking a new petroleum exploration license in the Megiddo-Jezreel Valley area, onshore Israel, covering an area of approximately 98,000 acres. As proposed, the MegiddoJezreel Valley license area boundary is adjacent to and westward of our existing Jordan Valley License.
If granted, the new Megiddo-Jezreel Valley License would likely be for an initial three-year term, extendable at the option of the Petroleum Commissioner for four additional one-year terms, for a total of seven years. No assurance can be provided that the Petroleum Commissioner will grant our application or the time frame in which it would be granted.
The first well, the Ma’anit #1, was drilled to a depth of 15,482 feet, to Triassic-age formations, with encouraging, but inconclusive results. However, notwithstanding these results, due to the mechanical condition of the wellbore, we determined that the well was incapable of producing oil or gas in commercial quantities. As a result, in June 2007 we abandoned the well.
In May 2009, the Company commenced drilling the second well, the Ma’anit-Rehoboth #2 well to a depth of approximately 17,913 feet, utilizing a 2,000 horsepower drilling rig. The Company completed drilling and logging the well in September 2009. During the drilling of this well, we reported that we had positive indications that the well contained hydrocarbon-bearing zones and we identified several such ‘zones of interest’.
In December 2009, using a workover rig, swabbing and preliminary completion testing took place. During the preliminary completion testing, small quantities of crude oil were produced, but further testing established that commercial quantities of hydrocarbons were not present in the Ma’anit-Rehoboth #2 well and we suspended drilling operations.
On October 20, 2009, Zion commenced drilling the third well, the Elijah #3 well, on the Asher-Menashe License, drilling toward the Triassic-age formation and planning to continue drilling to Permian-age formations, down to a proposed total depth below 17,000 feet.
As of January 15, 2010, we had drilled the Elijah #3 well to a depth of 10,938 feet. In early February 2010, we temporarily suspended drilling operations in the well, following unsuccessful efforts to retrieve a stuck pipe. We later acquired approximately 15 miles of new seismic data to help resolve certain questions regarding the geology of the area surrounding the Elijah #3 well.
By the end of 2010, the new seismic line was processed and interpreted. Analysis of the newly acquired data helped us to redefine the geologic model of the area and indicated that the Asher volcanics section in which the well was stuck was greater (i.e. thicker and deeper) than originally predicted. Further engineering work is needed to determine if the Elijah #3 well can be successfully re-drilled through this thick volcanic section.
In late August, 2010, Zion commenced drilling of the Ma’anit-Joseph #3 well to a proposed depth of approximately 19,300 feet on the Joseph License.
In early November 2012, we re-entered our Elijah #3 well for a second time to acquire new geological information (reservoir pressure and formation fluids data) to better evaluate the hydrocarbon potential of a shallower zone through which Zion penetrated while drilling the well in 2009/2010. We believed that this would help us decide our future course of action for the Elijah #3 well. We also sought third party analyses of the acquired data to add to our understanding of the exploration potential in this area.
On January 9, 2013, a group gathered in our Dallas headquarters to discuss the technical results of the re-entry operations. Included in the meeting were John Brown (CEO), Victor Carrillo (President & COO), Forrest Garb (Board Director and Technical Committee Co-Chair), Bill Avery (General Counsel), Martin Van Brauman (Secretary/Treasurer), Dr. Lee Russell (Geoscience Consultant), Glen Perry (Engineering Consultant), John Vittitow (Engineering Consultant), and John Byars (NuTech Energy Alliance representative).
Upon analysis and interpretation of all of the data, it was decided that while there were oil shows and other indications of hydrocarbon potential observed in the shallower portion of the well, we will not pursue additional exploration activities at the Elijah #3 well. However, we are still evaluating the strategic value of continuing to explore other parts of our Asher-Menashe License.
Future Exploration Plans
We are in the process of re-evaluating our exploration strategy going forward. We have now re-evaluated our Asher-Menashe, Joseph, and Jordan Valley License areas, incorporating fairly recently acquired geological and geophysical data. We do not expect to drill a new exploratory well within the first half of 2013 but we hope to drill our next exploratory well towards the end of 2013 or in 2014.
Proposed Megiddo-Jezreel License
On April 16, 2013, Zion submitted to Israel’s Petroleum Commissioner and other Ministry officials an application seeking a Petroleum Exploration License in the Megiddo-Jezreel Valley area, onshore Israel, covering an area of approximately 98,000 acres. As proposed, the Megiddo-Jezreel Valley license area boundary is adjacent to and westward of Zion’s existing Jordan Valley License No. 393, which covers approximately 56,000 acres. If granted, the new Megiddo-Jezreel License would likely be for an initial three-year term with options to extend the license annually up to seven years total.