Filed
pursuant to Rule 433
Registration
Statement No. 333-164563
Zion Oil
& Gas Newsletter
April 16,
2010
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Dear
Shareholder and/or Friend of Zion...
I am
happy to announce some excellent news. This past week, Zion Oil & Gas and
Aladdin Middle East Ltd (AME) signed a Memorandum of
Understanding (MoU) that I believe will not only be good for both Zion
Oil and AME, but also for the State of Israel.
The MoU
outlines our plan to establish a subsidiary, tentatively named “Zion Drilling, Inc”, for the
purpose of purchasing and operating AME’s 2,000 horsepower drilling rig
(currently located at Zion's Ma'anit-Rehoboth #2 wellsite, in
Israel).
Zion
Drilling will purchase AME's drilling rig for an initial payment of US$ 7
million and a series of US$ 1 million additional payments that are anticipated
to coincide with our drilling seven additional wells in Israel over the next few
years. As the funds for the purchase of the rig are to be provided by Zion Oil
& Gas, our plans are subject to a number of events, including due diligence,
the raising of additional capital and the establishment of Zion
Drilling.
Towards
that, I am pleased to tell you that, today, our US$ 50 million Shelf Offering
S-3 Registration Statement was declared effective by the Securities and Exchange
Commission. So, through the S-3, we now have the possibility of raising the
additional funds required to implement our plans.
The MoU
provides that Zion Drilling, Inc. will be 51% owned by Zion Oil & Gas and
49% owned by AME. However, AME will be responsible for the daily operation of
the rig.
Our goal
in establishing Zion Drilling, Inc. is to continue to drill wells in Israel
without dependence on any outside third party. By implementing this
plan, we will secure control of a drilling rig for our planned future operations
and, as a consequence, raise our exploration business to a completely new
level.
With
regard to the Ma'anit-Rehoboth #2 well, you can read below the results of the
completion work. We plan to temporarily suspend work on this well although we
may return to the well at some later stage. Although the results of the
completion work are not what we had hoped for, as we are not able to announce a
commercial discovery, we believe that we have laid an excellent foundation for
our next well, (named by us) the Ma'anit-Joseph #3 well.
We are
currently in the process of obtaining the required permits for the
Ma'anit-Joseph #3 well, targeted to reach the Permian geological formation,
lying deep beneath the surface. (Deut. 33:13-16)
To date,
we have not managed to reach the Permian geological layer, even though it has
been one of our main goals from the earliest days of the project. But we are as
determined as ever to reach that goal, hopefully, in our next well. (Jer.
29:11)
To quote
Chuck Davidson, CEO of Noble Energy, the Texas Company that found the Tamar
discovery (currently valued at > US$ 15 Billion) offshore Israel: 'There is no such thing as a sure
thing in the energy exploration business'.
Although
this was the case during the Ma'anit-Rehoboth #2 well completion, we are firmly
resolved to use all the information and experience that we gained and drill
again into the Ma'anit structure. (Psalm 135:6)
There are
a number of reasons why we are so very optimistic regarding the possibility of
finding oil & gas onshore in Israel:
(i)
During operations, we recovered some crude oil from the Ma'anit-Rehoboth #2 well
and we also noted (much more than expected amounts of) natural gas during the
drilling phase.
(ii) Last
week, the US Geological Survey (USGS) issued a report estimating that there are
1.7 Billion barrels of
recoverable oil and 122 trillion cubic feet of natural
gas in the Levant Basin
Province. The USGS defines the Levant Basin Province as an 83,000 square
kilometer area of the Eastern Mediterranean... a large proportion of which is in
Israel's economic zone (both offshore and onshore Israel). You can review the
map and read the full report here.
(iii)
This week, representatives of Russian energy giant GAZPROM met with Dr. Mimran,
Israel's National Infrastructure Ministry's petroleum commissioner, to discuss
the possible involvement of Gazprom with Israel's offshore natural gas fields.
The press also reported that: 'a number of other Russian energy giants are
showing interest in the Israeli energy and infrastructure sector.'
(iv)
Within the past two weeks, 'Globes' (one of Israel's
leading business publications) published an interview with Fred Zeidman, who has
been Chairman of the Board or a director of various Texas based oil & gas
drilling / exploration / refining companies. In 2002, President Bush appointed
him 'Chairman of the US Holocaust Memorial Council'.
Fred
Zeidman made a number of comments regarding the (very bright) future for oil
exploration in Israel, including:
1. The
prospects in Israel are 'brilliant'.
2. The
(Tamar etc.) offshore findings were amazing and it is hard to believe that there are
no hydrocarbons onshore.
3. It
could be that the onshore deposits will be found 'much deeper'. (This comment
was no surprise to us, of course.)
4.
Royalties in Israel of 12.5% are reasonable.
His
advice to investors is that investment
in oil and gas can be wonderful, but you need 'patience'. However, the
reward, once successful, is enormous.
We are
certainly unhappy that we were not able to declare a commercial discovery as a
result of the recent completion operations. But our team remain convinced that
our license areas and our permit area will ultimately deliver to us their deeply
hidden treasure... in G-d's good time.
We have
both the patience and the firm resolve... and now, we expect to soon have the
right tool to finish the job - a 2,000 Horsepower drilling rig in Israel on a
permanent basis.
...............................................................
The
Drilling Rig on April 15, 2010
Here is
this week's operations update:
The Ma'anit-Rehoboth #2
Well
As of the
last report, we had completed the production testing of our first (of several)
‘zones of interest’ without detecting any clear evidence of
hydrocarbons. Following this first test, we conducted two additional
tests, one in the open hole section of the well and one in the shallower, cased
hole section of the well.
The open
hole test was conducted first and was performed in the deepest geologic zone of
interest. Following the conclusion of this test, we moved uphole and
performed a third test on a separate interval, this time in a cased hole section
of the well. In each case, the test procedure consisted of two
separate flow and shut-in periods in which the geologic interval was evaluated
for productivity and reservoir pressure. We again used Schlumberger
Oilfield Services equipment and personnel for this testing work.
Currently,
we are performing a ‘swabbing’ operation on this latest test interval as a final
means to gauge hydrocarbon potential. Swabbing is an operation by
which the heavier fluid column from the wellbore is manually withdrawn from the
well. This has the effect of lowering the hydrostatic pressure in the
well and allowing potentially lighter fluid (hydrocarbons) from the rock to be
produced through natural flow.
While we
continue to evaluate the potential from the last production test interval,
indications for this and the previous test interval suggest that commercial
quantities of hydrocarbons are not present.
In light
of this apparent outcome from what was considered to be the zones of greatest
potential, we have decided to forego further production testing and have begun
plans to temporarily
suspend this well. It is our expectation that this well may
have further utility as a potential offset well to the next well drilled which
will target a completely different geologic formation in Permian aged
rocks. Preliminary planning of this next well is
underway.
Operations at the Elijah #3
Well
The
Elijah #3 well was drilled to a depth of approximately 10,938 feet (3,334
meters) when the drill string became stuck within the Asher Volcanics section of
the hole. After recovering a significant portion of the stuck drill pipe,
progress in recovering the remainder of the pipe slowed and the decision was
made to temporarily suspend drilling operations pending further analysis of the
situation.
We have
now decided to acquire some additional field seismic data (prior to acquiring
seismic for Zion's Issachar-Zebulun Permit area) that will help us to resolve
certain questions regarding the geology of the area surrounding the Elijah #3
well. The timing for this work is scheduled to take place in
mid-summer 2010
The Issachar-Zebulun Permit
Area
As
reported previously, Zion and the Geophysical Institute of Israel (GII) have
signed an Agreement for GII, on behalf of Zion, to acquire approximately 30
kilometers of seismic data in Zion's Issachar-Zebulun Permit area. The timing
for the field work is scheduled to immediately follow completion of the seismic
work planned for the Elijah #3 project area.
Zion Board
Appointment
On April
12, 2010 we announced that William L. Ottaviani was appointed to our Board of
directors. Bill has been serving as Zion's President and Chief Operating Officer
since January 31, 2010 and will continue to serve in these positions. Bill is a
petroleum engineer by training and his 25+ years at Chevron certainly add
tremendous oil & gas experience to our Board. You can read the press release
here.
"In
your good pleasure, make Zion prosper..."
Psalm
51:18
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, geophysical and geological data and
interpretation, anticipated attributes of geological strata being drilled,
drilling efforts and locations, the presence or recoverability of hydrocarbons,
the sufficiency of cash reserves, ability to raise additional capital, the
successful establishment of the drilling subsidiary and the negotiation and
execution of definitive agreements with AME with respect thereto, 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
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More
information about Zion is available at www.zionoil.com or by contacting Michael
Williams at Zion Oil & Gas, Inc., 6510 Abrams Rd., Suite 300, Dallas, TX
75231; telephone 1-214-221-4610; email: dallas@zionoil.com