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| 8-K - ZION OIL & GAS INC | v212002_8k.htm |
Zion Oil
& Gas Newsletter
February
18, 2011
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Dear
Shareholder and/or Friend of Zion...
Since my
previous update to you, only two weeks ago, much has happened.
On a
positive note, this past week, we submitted applications to Israel's Oil &
Gas Commissioner for two new petroleum
Licenses and one new preliminary
petroleum Permit.
Zion's
"Issachar-Zebulun" preliminary petroleum permit is due to expire towards the end
of February 2011 and we are optimistic regarding the potential for this area to
contain oil & gas, so we have submitted applications for a License named by
us the "Jordan Valley License" and an application for a Permit named by us the
"Zebulun Permit". Taken together, the new Jordan Valley License and the new
Zebulun Permit cover most of the Issachar-Zebulun Permit area.
As we
have carried out our entire agreed work program in the Issachar-Zebulun Permit
area, we believe that we have a priority with regard to our Jordan Valley
License application, so we are optimistic that we will be granted the Jordan
Valley License at the Oil & Gas Commissioner's (special) meeting scheduled
to take place in March 2011. We understand from our meeting at the
Commissioner's office in Jerusalem that the other license application that we
submitted this week will be considered at the Oil & Gas Commissioner's
meeting scheduled for mid-Summer 2011.
At this
time, it would not be prudent to identify the precise location of the area
requested in the other new petroleum license application, but suffice it to say
that it is onshore Israel and in the general area of the Dead Sea.
On a
less-positive note, shortly after we distributed the previous news update to
you, the drill string became stuck in the wellbore of the Ma'anit-Joseph #3
well. As you can read below, we had little option but to temporarily suspend
drilling, perform remedial work and, in order to move forward, sidetrack the
well (meaning that we will drill down, directionally, at a slight angle to the
vertical).
Normally,
we would have been able to source equipment needed to support directional
drilling operations from Egypt and import the items across the Egypt/Israel
border. However, as you know, there has been a noisy revolution in Egypt and we
had to import some of the items we needed from Italy. Instead of transporting
via truck, we had to load the items onto a ship. We considered air freight, but
due to the weight of the items, the air freight cost would have been
prohibitive. Unfortunately, the delay for a ship was approximately one
week.
In any
event, we plan to resume actual drilling again next week, on or about Wednesday,
February 23, 2011. To quote Mr. Winston Churchill, "Sure I am of
this, that you have only
to endure to conquer." We have lost some time (and money) but we will
endure... we have gone where few have gone before and I believe that we will
conquer...
To repeat
a comment from the previous update, the Ma'anit-Joseph #3 well is already one of
the deepest wells ever drilled onshore Israel. Almost certainly,
stratigraphically (i.e. with regard to the age of the sedimentary rocks in the
rock strata), in Northern Israel, no-one has ever drilled as deep as our current
well has already been drilled.
Our
current projection indicates that we should reach the Ma'anit-Joseph #3 well's
target depth towards the end of March 2011.
Turning
to financial matters, on January 3, 2011, we issued a press release concerning
our ZNWAW warrants. To read the full press release, please click
here.
If you
hold ZNWAW warrants, you should carefully review both the press release and my
comments below.
Here is
this week's operational update:
The
Ma'anit-Joseph #3 Wellsite
Drilling
Operations at the Ma'anit-Joseph #3 Wellsite
On August
26, 2010, drilling operations began on the Ma'anit-Joseph #3 well, in our Joseph
License area, onshore Northern Israel.
Further
to our last update, drilling of the 6-1/8” hole continued uneventfully to a
depth of 5,023 meters (16,480 feet) when it became necessary to perform a
routine bit change.
In
keeping with oilfield "best practice" and as done periodically during the course
of drilling this well, prior to the bit change, an inclination survey was
conducted in order to determine the angle from which the bit has deviated from
the vertical during drilling. However, after the inclination survey was
completed, we were unable to retrieve the drill pipe from the hole.
A
“free-point” tool was run in the hole and we determined that the pipe was stuck
at a depth of about 4,770 meters (15,650 feet), at a point approximately 230
meters (755 feet) above the drill bit. The drill string was
“backed-off” at this point allowing us to recover all but the approximately 230
meters (755 feet) of pipe which remained stuck in the hole.
The
back-off operation was accomplished by applying reverse torque on the drill pipe
and detonating a small explosive charge inside a selected threaded connection
(at its “free” point). The force of the explosion together with the
reverse torque typically results in an instantaneous uncoupling of the threaded
connection.
With a
long section of ‘fish’ remaining in a small diameter (6-1/8”) hole at great
depth, conventional fishing options are extremely problematic. After
careful consideration, it was determined that the best course of action was to
forego the fish remaining in the hole and sidetrack the well.
Sidetracking
a well means to use directional drilling tools to start a new wellbore section
from a point in an existing well. It will enable us to bypass the
'problem' in our well i.e. the uncased portion of 8-1/2” hole that was drilled
but operationally could not be cased. So, we will start a new 6-1/8”
sidetrack hole at a point just below the last section of cased hole, at
approximately 4,000 meters (13,120 feet).
We plan
to redrill approximately 1,000 meters (3,280 feet), however, as we will be
drilling through what are now ‘known’ rock layers, the rate of redrilling this
section should be much improved as compared to the rate in which this section
was drilled in the original hole.
As of
Friday, February 18, we have already set the cement plug in the existing hole
and are waiting for it to harden prior to restarting drilling. We are waiting
for directional drilling equipment to arrive (via sea) from Italy and expect to
resume drilling operations next week.
Opportunity regarding Zion
Warrants with the trading symbol: ZNWAW
In
January 2009, Zion completed a follow-on offering and issued approximately
666,000 warrants with a $7.00 exercise price.
In order
to raise significant additional working capital for Zion's exploration and
development activity in Israel and simplify our capital structure, we have
temporarily reduced the exercise price of the warrants trading under the symbol
ZNWAW to $4.00 (from the $7.00 exercise price provided by the original terms of
the Warrants).
The
reduced exercise price applies to all of Zion's currently outstanding Warrants
that trade under the symbol ZNWAW.
The $4.00
exercise price on ZNWAW warrants will be available until 5:00 p.m. Eastern Time
on March 7, 2011, but please note that after March 7, 2011 and through January
31, 2012, the scheduled expiration date of the ZNWAW warrants, the ZNWAW
warrants will be exercisable at the original exercise price of $7.00 per
warrant, after which date they will expire with no value.
You can
find details regarding the offer on Zion's website. Please click
here.
If you
hold the ZNWAW warrants, please consider this opportunity.
"In your good pleasure, make Zion
prosper..."
Psalm
51:18
If you
are a U.S. Citizen, I wish you and your family a happy Presidents Day,
for Monday.
Thank you
for your support of Zion and Shalom from Israel
Richard
Rinberg
CEO of
Zion Oil & Gas, Inc.
www.zionoil.com
FORWARD LOOKING STATEMENTS: Statements
in this communication that are not historical fact, including statements
regarding Zion's planned operations, anticipated attributes of geological strata
being drilled, the presence or recoverability of hydrocarbons, 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.
NOTICE:
Zion Oil & Gas, Inc. has filed a registration statement (including a
prospectus) with the SEC for the offering to which this communication relates.
Before you invest, you should read the prospectus in that registration statement
and other documents the issuer has filed with the SEC for more complete
information about Zion Oil & Gas and its offering. You may get these
documents for free by visiting EDGAR on the SEC website at www.sec.gov.
Alternatively, Zion Oil & Gas will send you the prospectus if you request it
by calling toll free 1-888-TX1-ZION 1-888-891-9466.
Contact
Information
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
More
information about Zion is available at www.zionoil.com
or by
contacting Mike Williams at:
Zion Oil
& Gas, Inc.
6510
Abrams Rd., Suite 300, Dallas, TX 75231
telephone
1-214-221-4610
email:
dallas@zionoil.com