Zion Oil & Gas Newsletter – 24 January 2013

Zion Oil & Gas Newsletter
Wednesday, January 24, 2013

Dear Shareholder and/or Friend of Zion…

This is an update of significant events that have occurred since our last newsletter. Going forward, we will issue updates as company events or developments require. In between updates, you should consult all of our SEC filings, press releases, and website to keep up with company developments.

Operations

Elijah #3 re-entry well (Asher-Menashe License area)

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.

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.

Upcoming Israel Trip

In February, John Brown, Dr. Lee Russell, and I plan to travel to Israel to meet with the Israeli Petroleum Commissioner, Alexander Varshavsky, and other Ministry of Energy and Water Resources officials, regarding a variety of strategically important company issues. Joining us at the meeting will be Dr. Yehezkel “Charlie” Druckman (Board Director and Technical Committee Co-Chair), Glen Perry, and Jeffrey Moskowitz (Israeli outside counsel).

We plan to discuss applying to revise the boundaries of our existing license areas to take in new areas of exploration interest and/or to apply for a brand new license area. We also plan to follow-up on the November 13, 2012 letter (see below) that John Brown sent to Israel’s Energy Minister Uzi Landau and Petroleum Commissioner Alexander Varshavsky raising Zion’s concerns over the government’s proposed financial requirements for existing and new licensees.

Management Additions

We would like to announce the following three recent senior level additions:

• Mr. Kent Siegel joined the Board of Directors effective January 1, 2013. We welcome Kent back to the Zion family where he was previously our Chief Financial Officer and a Director from 2003-2011. Kent has over 28 years of legal and accounting experience and is President and Chief Operating Officer of his own accounting and law firm. Kent graduated with a bachelor’s degree in Accounting from Michigan State University and an Electrical Engineering degree from Lawrence Technological University. He also has a law degree from Wayne State University. He is a member of the American Association of Attorney-Certified Public Accountants.

• Mr. Gene Scammahorn joined the Board of Directors effective October 29, 2012. Gene has over 30 years of business experience including having worked for two “big four” public accounting firms, major oil and gas companies, as well as in banking and consulting. He graduated with a bachelor’s degree in Accounting from the University of Tulsa and is a Texas certified public accountant as well as a Certified Financial Planner.

• Mr. William “Bill” Avery was designated General Counsel effective December 1, 2012. Bill previously worked for Zion on various administrative, financial, and legal matters from 2001-2007 and then joined Zion’s Board of Directors from 2007-2009. Bill has continued to serve Of Counsel to Zion since leaving the Board. He graduated with a bachelor’s degree in Finance and Economics from Southern Methodist University and a law degree from Duke University and is a Texas licensed attorney.

Publicly Traded Warrants

In late October 2012, the Company announced the reduction of the exercise price to $1.75 of both series of its outstanding publicly traded warrants quoted under the symbols “ZNWAW” and “ZNWAZ” until December 31, 2012, their scheduled expiration date. All warrants properly exercised prior to the expiration date were accepted by Zion at the reduced exercise price and one share of registered common stock per warrant will be issued to the exercising warrant holder. The program period has now ended and the final numbers were 429,282 warrants exercised yielding $751,243. As of now, Zion has no outstanding publicly traded warrants.

“And I will bless them that bless thee…”
Genesis 12:2-3

Victor G. Carrillo
President and COO
Zion Oil & Gas

FORWARD LOOKING STATEMENTS: Statements in this communication that are not historical fact, including statements regarding Zion’s planned operations, the presence or recoverability of hydrocarbons in our license areas, plans to apply for new exploration licenses and the likelihood of being awarded these licenses, the anticipated timeframe for drilling the next exploratory well, the sufficiency of cash reserves, ability to raise additional capital, timing and potential results thereof and plans contingent thereon are forward-looking statements as defined in the “Safe Harbor” provisions of the Private Securities Litigation Reform Act of 1995. These forward looking statements are based on assumptions that are subject to significant known and unknown risks, uncertainties and other unpredictable factors, many of which are described in Zion’s periodic reports filed with the SEC and are beyond Zion’s control. These risks could cause Zion’s actual performance to differ materially from the results predicted by these forward-looking statements. Zion can give no assurance that the expectations reflected in these statements will prove to be correct and assumes no responsibility to update these statements.

Contact Information:
Website: www.zionoil.com
Brittany Russell (dallas@zionoil.com)
Zion Oil & Gas, Inc.
6510 Abrams Rd., Suite 300
Dallas, TX 75231
Tel: 1-214-221-4610 or 1-888-891-9466