Zion’s Elijah #3 is a No-Go

Zion Oil & Gas announced yesterday in a newsletter to shareholders and friends that results from their second re-entry into the Elijah #3 well failed to give enough evidence of hydrocarbons to continue developing the well. Read more

Very, Very, Good News From Zion Oil … we think

Zion Oil & Gas sent out a Press Release late Wednesday entitled “Zion Oil & Gas Announces Successful Re-entry Operations at its Elijah #3 Well in Northern Israel.”

The language of the Press Release was couched in a lawyer/geologist kind of mumbo-jumbo, but I highlighted what I thought I understood as significant. Here is the Press Release in its entirety (without Zion’s Contact information)  - my highlights are in red:

Zion Oil & Gas Announces Successful Re-Entry Operations at its Elijah #3 Well in Northern Israel

Dallas, Texas and Caesarea, Israel – August 8, 2012 – Zion Oil & Gas, Inc. (NASDAQ GM: ZN) announced the successful end of field operations at its Elijah #3 wellsite within its 78,824 acre Asher-Menashe License in northern Israel.

In July 2012, Zion re-entered the existing wellbore of its temporarily suspended Elijah #3 well and acquired an electric wireline log suite that had not been acquired when the well was originally drilled in 2010. A Formation Evaluation Log (an advanced petrophysical evaluation analysis) was then derived from the newly acquired log suite and Zion subsequently obtained approximately 48 sidewall core samples from key zones in the previously drilled wellbore. During the re-entry operations, Zion also obtained vertical seismic profile (VSP) data.  Zion was assisted in this project by Baker Hughes, the Geophysical Institute of Israel, NuTech Energy Alliance (“NuTech”), Core Labs, and Bedrock Petroleum Consultants.

A preliminary review of the NuTech Formation Evaluation Log indicates the presence of a series of carbonates over two thousand feet thick, with the possibility of interspersed zones of developed fair to good porosity and permeability with oil shows (up to a combined several hundred feet thick) at depths shallower than 9,350 feet. When the sidewall core samples were retrieved, dark brown hydrocarbon stains were noted on some sidewall core samples. The core samples have been sent to Houston, Texas for further analysis and both Baker Hughes and the Geophysical Institute of Israel are processing the VSP data. Zion estimates that the analysis of the core samples and the VSP processing and analysis will take at least one month.

Zion’s Chief Executive Officer, Richard Rinberg, said, “After successfully completing this exploratory work, initial indications are positive; however, much analysis needs to be carried out during the coming weeks and months.”

Zion’s President and Chief Operating Officer, Victor G. Carrillo, said: “We are excited about the potential of this relatively shallow, stacked carbonate with a possible Jurassic oil column in our Elijah #3 wellbore.  The combination of old data and newly acquired geophysical and geological data represents the most extensive dataset Zion has ever had, as the Company has never previously obtained VSP or sidewall core data. I believe this combination of data will give us a better subsurface image of the hydrocarbon potential in proximity to this wellbore.”

The primary purpose of the re-entry operation was to obtain additional geologic and geophysical data and to better understand the hydrocarbon potential of a zone through which Zion drilled while drilling the Elijah #3 well in late 2009 and early 2010. The Elijah #3 well, originally planned to drill to below 17,000 feet, to test both Triassic and Permian-aged geological formations, was temporarily suspended in 2010 after encountering technical issues at a total depth of approximately 11,000 feet. In the recently completed field operations, the rig arrived at the Elijah #3 wellsite on July 15, 2012, and was released by the Company on August 8, 2012.

Zion Oil & Gas, a Delaware corporation, explores for oil and gas in Israel in areas located onshore between Haifa and Tel Aviv. It currently holds three petroleum exploration licenses: the Joseph License (on approximately 83,272 acres) and the Asher-Menashe License (on approximately 78,824 acres) between Netanya, in the south, and Haifa, in the north, and the Jordan Valley License (on approximately 55,845 acres), just south of the Sea of Galilee. The total license area amounts to approximately 218,000 acres.

FORWARD LOOKING STATEMENTS: Statements in this communication that are not historical fact, including statements regarding Zion’s planned operations, geophysical and geological data and interpretation, anticipated time frame of the completion of testing and analysis, anticipated attributes of geological strata being drilled, drilling efforts and locations, the presence or recoverability of hydrocarbons, sufficiency of cash reserves, 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. 

Let’s define, or give significance to a few terms:

successful: “accomplishing an aim or purpose” (Oxford Dictionary)

carbonates: “It is estimated that more than 60% of the world’s oil and 40% of the world’s gas reserves are held in carbonate reservoirs. The Middle East, for example, is dominated by carbonate fields, with around 70% of oil and 90% of gas reserves held within these reservoirs.” (Schlumberger)

porosity and permeability:  “Porosity and permeability are related properties of any rock or loose sediment… Porosity of a rock is a measure of its ability to hold a fluid…. The permeability of a rock is a measure of the resistance to the flow of a fluid through a rock.”  (Introduction to Petroleum Geology)

oil column: “The difference in elevation between the highest and lowest portions of various producing zones of an oil-producing formation.” (McGraw-Hill Dictionary of Scientific & Technical Terms)

oil show: “Hydrocarbons occur in the subsurface in four modes: (1) continuous phase oil or gas, (2) isolated droplets of oil or gas, (3) dissolved hydrocarbons, and (4) associated with kerogenous rocks. All of these modes of occurrence can result in what is described as a subsurface hydrocarbon “show.” (Interpretation of Subsurface Hydrocarbon Shows)

So what do I understand from the Press Press Release?

“The primary purpose of the re-entry operation was to obtain additional geologic and geophysical data and to better understand the hydrocarbon potential.” … and … Zion reported a “successful end of field operations.” Zion is happy enough with what they found that  they’re considering the re-rentry “successful.”

What did they find? “ …the presence of a series of carbonates over two thousand feet thick, with the possibility of interspersed zones of developed fair to good porosity and permeability with oil shows (up to a combined several hundred feet thick) … and … “dark brown hydrocarbon stains were noted on some sidewall core samples” … and … “a possible Jurassic oil column.”

Words of warning:

Here are a few more important terms from the Press Release we can’t ignore: “preliminary review”; “core samples have been sent to Houston, Texas for further analysis“; “analysis of the core samples and the VSP processing and analysis will take at least one month“; “much analysis needs to be carried out during the coming weeks and months.” 

And here’s the biggee: Statements in this communication that are not historical fact, including statements regarding Zion’s planned operations, geophysical and geological data and interpretation, anticipated time frame of the completion of testing and analysis, anticipated attributes of geological strata being drilled, drilling efforts and locations, the presence or recoverability of hydrocarbons, sufficiency of cash reserves, 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.

Bottom line? From what I understand of the Press Release, Zion found signs of oil in the Elijah #3 well and the rock formations necessary for oil to reside and flow. They also completed the testing necessary to determine their next move regarding this discovery. The results of the testing will take “at least one month.”

I’ll put it on my calendar ….

Zion Oil Re-enters Elijah #3 Well

Zion Oil & Gas began re-entry operations this week at their Elijah #3 well in Northern Israel. Israeli drilling company, Lapidoth, erected it’s drilling rig and prepared the site. Zion is scheduled to begin its vertical seismic profile operation in the well early next week after completing wireline logging.

Zion Oil Releases 2012 ‘Joseph Project’ Video

Zion Oil & Gas debuted it’s 2012 Corporate video, “The Joseph Project”, during last week’s National Religious Broadcasters Convention in Nashville, Tennessee. In the video Zion Founder John Brown reviews the company’s mission and vision for Israel. Zion CEO Richard Rinberg and COO Victor Carrillo share their thoughts on the recent and future exploration activities.

Zion Oil & Gas is dedicated to finding and producing oil and gas in Israel.

Flash Mob Jerusalem

On November, 11, 2011 (11/11/11) a flash mob of 200 dancers suprised tourists and locals alike a spectacular show of Israeli Dance. The dance was choreographed Adi Gordon Rawlings, wife of David Rawlings, True Potential Media’s Jerusalem Media Manager.

The site was Jerusalem’s impressive Alrov Mamilla Avenue Shopping District. It’s events like this that bring surprise and joy to every lover of Israel and proof to the world that good things grow in Israeli Jerusalem.

Enjoy!

Zion’s next well planned for the Jordan Valley

In his October 7 Newsletter, Zion Oil & Gas CEO Richard Rinberg wrote. “Our schedules may change, but today, we believe that it is most likely that Zion’s next well will be drilled in our Jordan Valley License in 2012.”

Earlier this month Zion signed a seismic acquisition agreement with the Geophysical Institute of Israel (GII) to conduct a 2D field seismic survey in its Jordan Valley License area that is scheduled to commence in late 2011 or early in 2012.

Is Zion Oil on the Rocks?

I received a comment from a reader (Bill) yesterday; he was worried, as a lot of folks are, about the recent fall Zion’s stock price. Here’s the comment:

“The price today at $1.50. What’s the process at this end. Does the company fall off the board if it hits below a dollar say? Is there limits? Is there continued values to these stocks if the price falls to say .50 cents or less than a dollar, or less than a quarter? I’m not a stock guy, so if you have this type of information, please post it.
Thanks!”

I’m not a genie or a guru and, like Bill, I’m “not a stock guy.” I do have my own opinion of the situation, but before I share it, let me tell you a story.

Not quite 2,000 years ago there was a guy – his parents named him ‘Saul’, but he went by ‘Paul’. After a dramatic meet up with G-d on the road to Damascus, Saul/Paul literally ‘saw the light’ and became the world’s most famous Jewish missionary. This did not please the Jews at the time, at least those who held the community’s political and religious power. They were always accusing him of ‘crimes against G-d and against Rome’ (whatever that meant) and as a result, Paul spent a lot of time in court or in jail. Things began to get dicey; there were death threats and plots, and there was a pretty good chance that if Paul let the locals have their way he would meet an ‘accidental’ death on the way to court. Paul played his trump card – even though he was a Jew, he was also a Roman citizen, and as such he had a right to be tried for his ‘crimes’ in Rome, far away from the locals who had promised that Paul would be dead before he made his court date.

The Roman authorities put Paul on a boat to Rome (really it was just a connector boat, but it did get him to the real boat to Rome). While he was sailing on the real boat to Rome a storm came up – a big storm. The crew did all they could but everyone on the ship knew this storm would be the end of them. Everyone but Paul. In the night an angel visited Paul and said (paraphrased), “Look, you’ve got to tell Caesar your story, you’re definitely going to Rome. Don’t worry about your life or the lives of those on the boat, not one person will be injured or die from this storm … but, the ship will run aground on some island.” Paul would fulfill his mission of standing before Caesar; the storm wasn’t a catastrophe, just a detour.

Nice story, but what does it have to do with Zion Oil?

Zion Oil isn’t the only stock in the cellar right now, have you looked at the Dow averages? We won’t even talk about European economies. It ain’t pretty. How about Israel and all this talk at the UN about Palestinian Statehood? That can’t be good. And there sure is a lot of sabre rattling by Israel’s neighbors to the north about offshore drilling. Things are tense, they don’t look good, there’s a storm a-brewing!

The sailors on Paul’s boat threw everything overboard and tried to escape in the lifeboat. Good thing they didn’t, they would have been killed.

When you’re in the middle of a storm the natural thing to do is panic, toss stuff overboard and go for the lifeboats. That’s the natural thing … sometimes the natural thing is the wrong thing. It’s tough to keep the goal in mind when waves are coming into the boat, but storms come, and then they go, and the goal remains.

John Brown was given a vision and a mission thirty years ago; before there ever was a Zion Oil & Gas, before there were any stock prices to worry about, before anyone knew there actually was oil and gas in Israel. In thirty years there’s been a lot of foul weather and a lot of fair weather, but the goal hasn’t changed. I don’t know if Paul’s angel ever visited John Brown in the night, but I do know that there’s oil and gas in Israel and that Zion is committed to finding their share of it. It’s not easy to ignore the storm and keep your focus on the goal. The easy thing to do is cut and run for the lifeboats … it’s just not the right thing to do.

So Bill, I’m not a ‘stock guy’. I’m just a guy on the boat; I know that storms don’t last forever and, eventually, we’ll get to where we’re going. Until then, I’ll look for daylight.

New layer of gas discovered at Tamar field off coast of Haifa

Haaretz, ‘The Marker’ July 22, 2011

Amount of natural gas and economic implications of discovery at Mediterranean Sea site yet to be determined.

A deeper layer of natural gas has been discovered at the Tamar field, off the coast of Haifa, according to a report published on Thursday by Delek Drilling and Avner Oil Exploration.

The impact of the newly discovered reserve has not yet been analyzed nor released in full. The significance of the newly discovered structure will depend on the amount of natural gas at Tamar and on the estimations of additional layers in other areas of the Mediterranean Sea that have not yet been discovered.

The new reserve, ‘Layer D’, was discovered beneath ‘Tamar 3′, and is said to be up to 25 meters wide.

According to the report, Noble Energy – the American partner leading the consortium – is gathering data on Layer D and analyzing the implications of the extent of the reserves at Tamar. It is currently not possible to determine the size and economic implications of the newly discovered reserve.

Noble owns 36% of Tamar, while Isramco Negev owns 28.75% and Delek Group, controlled by Yitzhak Tshuva, has a 31% percent stake through two units with equal shares of 15.6% each, Avner Oil Exploration and Delek Drilling.

The Tamar site is the largest natural gas discovery in Israel and plans on selling natural gas to Israel in 2013.

The Lebanese proposal of its maritime border with Israel that is currently under dispute does not include the Tamar and Leviathan gas prospects.

 

 

Zion Oil & Gas Obtains License Extension

DALLAS and CAESAREA, Israel, July 11, 2011 (GLOBE NEWSWIRE) — Zion Oil & Gas, Inc. (Nasdaq:ZN) reported today that the Israeli Petroleum Commissioner has awarded the company a one-year extension on its Asher-Menashe petroleum exploration license in Northern Israel.

Zion’s Asher-Menashe license covers an area of approximately 78,824 acres located on the Israeli coastal plain and the Mount Carmel range between Caesarea in the south and Haifa in the north. The Asher-Menashe License had an initial three-year term, from June 10, 2007 to June 9, 2010 and, in May 2010, the License term was extended by one year, until June 9, 2011. On July 11, 2011, Zion received notification from the Israeli Petroleum Commissioner extending the term of the Asher-Menashe License by a further year, until June 9, 2012.

Richard Rinberg, Zion’s Chief Executive Officer, commented that, “In recent months, we submitted applications to the Israeli Petroleum Commissioner for three further exploration areas: the Dead Sea License Application (covering an area of approximately 74,925 acres), the Asher-Joseph Permit Application (covering an area of approximately 80,000 acres) and the Zebulun Permit Application (covering an area of approximately 157,480 acres). If all of our applications are granted, the total petroleum exploration area under Zion’s control would be approximately 530,346 acres.

The Asher-Menashe License extension carries a commitment to acquire additional seismic data and to begin drilling a well in the License Area no later than June 1, 2012.

The Jordan Valley License carries a commitment to acquire additional seismic data and to drill a well in the License Area no later than April 13, 2013.

We remain excited about the possibility of recovering hydrocarbons on our license and permit areas, onshore Israel, especially due to the U.S. Geological Survey report, published in April 2010, containing their assessment that there may be 1.7 billion barrels of recoverable undiscovered oil and 122 trillion cubic feet of recoverable gas in the Levant Basin, as all of Zion’s exploration rights fall within the area of the Levant Basin.”

Zion’s common stock trades on the NASDAQ Global Market under the symbol “ZN” and Zion’s warrants trade under the symbol “ZNWAW and ZNWAZ”.

Zion Oil & Gas, a Delaware corporation, explores for oil and gas in Israel in areas located onshore between Haifa and Tel Aviv. It currently holds three petroleum exploration licenses, the Joseph License (on approximately 83,272 acres) and the Asher-Menashe License (on approximately 78,824 acres) between Netanya, in the south, and Haifa, in the north and the Jordan Valley License (on approximately 55,845 acres), just south of the Sea of Galilee. The total license area amounts to approximately 217,941 acres.

 

Zion Testing Ma’anit Well

In his July 1 letter to shareholders, Zion Oil & Gas CEO Richard Rinberg wrote that Zion was planning to test the Ma’anit-Joseph #3 well in spite of disappointing wire-log reports. Based on the wire log data, Rinberg reported, “there is little chance that the Ma’anit-Joseph #3 well contains hydrocarbons in commercial quantities.”
The reason Zion decided to move forward with physically testing the well is that during drilling they experienced “significant natural gas shows.” The gas, according to Rinberg, pushed past the heavy drilling mud, indicating that it,”appears to be under relatively high pressure at depth.” Testing the well will determine exactly where the natural gas is coming from and whether there’s enough of it to make the Ma-anit-Joseph #3 a commercial well. Testing the well will also give Zion greater insight into the geology of their surrounding license area and may help them determine where to drill next.

When I first read Rinberg’s letter I was tempted to be a bit dis-heartened by the phrase describing the wire-log interpretation, “there is little chance” of a commercial discovery. But then I remembered another letter, one written to the Hebrew people about 2,000 years ago; it listed the heroes of old and the faith that allowed them to persevere in spite of the current technology telling them. “there is little chance.”

• There was ‘little chance’ that a worldwide flood would destroy every living thing that wasn’t packed in Noah’s boat.
• There was ‘little chance’ that Abraham, at 100 years old, and Sarah, at 90, would have a child.
• There was ‘little chance’ that Isaac’s life would be spared by an angel and a ram caught by his horns in a thicket.
• There was ‘little chance’ that a slave child with a death warrant on his head would be spared, raised in Pharaoh’s household, and exiled to the desert 40 years would lead his people out of slavery and into a Promised Land.
• There was ‘little chance’ that a rag-tag group of pilgrims marching around Jericho could make the city’s walls fall down.
• There was little chance that Gideon’s 300 men could rout an army of hundreds of thousand Midianites.
• There was little chance a skinny 17 year-old kid could kill a fully armored Philistine warrior giant with a sling shot.

I could go on … Hebrew history is full of heroes who were given ‘little chance’. What was the one thing they had in common that far outweighed ‘little chance’ of success? Faith.

“Now faith is being sure of what we hope for and certain of what we do not see. This is what the ancients were commended for.” (Hebrews 11:1)

Faith doesn’t come from wire-log data; it comes from the One Who does what He promises. I’m looking forward to test results.

 

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