Zion Oil & Gas Confirms Active Petroleum System in Megiddo-Jezreel #1 Well In Israel

DALLAS and CAESAREA, Israel, Aug. 16, 2018 /PRNewswire/ -- Zion Oil & Gas, Inc. (NASDAQ: ZN) announces that it is completing the initial testing program of its primary zones located within the Triassic-age Mohilla Formation of the Megiddo-Jezreel #1 (MJ #1) well.

Zion's President and Chief Operations Officer, Dustin Guinn, makes the following statement concerning the MJ #1 well:

Zion has a sincere desire to be transparent in the details of our operations with our shareholders, for a number of reasons. Most of our shareholders share a passionate alignment with the vision of Zion that extends beyond financial success. We view our shareholders as partners in this journey, which has been difficult to say the least. As a result, this operations update will be longer and more detailed than most and will be subdivided to try to answer some of the most common questions.

Did We Find Oil?

    1. We encountered oil at a depth of between 16,415 ft and 16,500 ft during
       drilling operations, when we circulated bottoms up. The oil was separated
       and tested internally and externally through our mudlogging company's
       chromatograph, indicating "Light Oil" based on the chemical composition
       of the analyzed stream.
    2. Third party petrophysical analysis of our open hole logs continues to
       suggest that oil is located in this zone as well as other zones of
       interest.
    3. While testing the zone between 16,415 ft and 16,500 ft, we perforated the
       casing and performed a small acid stimulation job.  Upon circulation of
       the acid out of the wellbore, minor amounts of oil were observed while
       taking small samples of the fluid being circulated out of the wellbore.
    4. Following the circulation of the fluid after the stimulation job, we ran
       back in the hole and began to swab the well to attempt to see if the well
       would flow.  As of the writing of this update, when swabbing, the data
       confirms the well artificially flows at a rate of approximately 90-110
       barrels of fluid per day in the zone between 16,415 and 16,500 ft.  We
       are still swabbing completion fluid as of this writing and the results of
       the well are inconclusive at this point as to whether the well will
       establish natural flow and what the volumetric contribution of oil and
       water will be.
    5. We remain hopeful but do not yet know if there is producible oil in
       commercial quantities within our deep primary zones, and there are still
       many questions yet to be answered.  However, we can say with reasonable
       confidence that the formation is tight with low permeability and has few
       natural fractures.  This is not uncommon, and often times requires
       advanced stimulation techniques to help determine the well's commercial
       potential.

Is the MJ #1 a Successful Well?

This is a question that can be answered in a number of ways:

    1. In considering the success rate of wildcat wells, with little to no
       offset data, in our opinion the MJ #1 could be considered a geologic
       success as follows:
        a. A very favorable Thermal Gradient has been shown to exist;
        b. The MJ #1 has successfully demonstrated the existence of an active
           petroleum system. Oil has been encountered which we believe confirms
           that mature source rocks have expelled hydrocarbons that have
           migrated into a trap which was drilled by MJ #1; and

        c. There are multiple identifiable targets and objectives that have been
           observed based on drilling, testing and petrophysical analysis, which
           we have yet to test.
    2. Is the well commercially successful with the information that we
       currently have, as of the writing of this update, during the testing of
       the deepest zones of interest?  The answer is no.  The drilling and
       testing on this well was much more costly than we expected, and as of
       today cannot be considered commercially successful.

What Caused Delayed Testing Results?

Testing of the MJ #1 well has taken longer than anticipated for a number of reasons, some of which we wish to outline:

    1. We made the decision to test this well only during daylight hours.  Given
       that it was a wildcat well, we decided to only operate during daylight
       hours and emphasize safe operations over time and cost.
    2. We continued to observe Shabbat, which limited testing operations from
       7:00 am Sunday morning through 7:00 pm Friday evening.
    3. In our opinion, the most impactful operational delay resulted from what
       appears to have been ineffective casing guns and charges, sourced locally
       in Israel and initially used to perforate all the zones.  We purchased
       additional casing guns and charges from the United States at the
       commencement of testing, which fortunately, allowed us to re-perforate
       all the zones of interest to achieve injectivity and properly stimulate
       the well.
    4. The primary zones we have been testing are all located at depths greater
       than 16,000 feet.  Every time we had to run in the hole and out of the
       hole took, on average, four days.
    5. Every time we wanted to isolate a particular zone to test, we had to
       install an isolation tool called a packer, which contains rubber
       elements.  Due to the very high well temperature, these packers would
       only last, on average, approximately five days.  When they failed, we had
       to pull the pipe out of the hole and replace the packer, which added, on
       average, four days.

What are the Future Plans?

    1. We have gained a tremendous amount of geological knowledge, but there are
       still a lot of unresolved questions that need further evaluation:
        a. Have we swabbed enough completion fluid and formation fluid from
           zones 16,415-16,500 ft and 16,080 - 16,215 ft to effectively allow
           for the formation to naturally flow, and will the encouragement of
           that natural flow, if established, allow for commercial amounts of
           oil to flow?
        b. Drilling analysis and petrophysical analysis suggest that there may
           be more potential oil-bearing zones above the Triassic boundary,
           which was internally picked at approximately 15,175 ft.  Zion chose
           to focus on the Triassic because of the regional success in Givot
           Olam's Meged Field.  Subject to raising adequate financial resources,
           of which no assurance can be provided, we plan to continue with
           testing of the multiple zones of interest higher in the well.
        c. We know that the primary zones located within the Triassic-aged
           formations have proven to have low permeability and few natural
           fractures.  If the questions above continue to provide answers that
           suggest producible oil, advanced stimulation techniques could be used
           to help create an environment of higher permeability and a fracture
           regime more conducive to commercial flow rates.
    2. If answers to the foregoing questions above are positive, and we raise
       the needed financial resources, we plan to acquire additional focused
       seismic data to help guide potential field development and continue with
       Zion's vision to help make Israel energy independent.

Management, along with all of our staff, want to sincerely thank you for your continued support. This mission has been one of the most difficult challenges we have undertaken, and we are not done yet. We also recognize that we are completely shareholder funded and as a result, this is your company. There is so much left to do, and it is an honor to represent our shareholders in this mission.

There will be more updates to come as we know there are many more questions regarding the administration and regulatory issues facing Zion that many of you have.

"But everything exposed by the light becomes visible and everything that is illuminated becomes a light"

Ephesians 5:13

"....The LORD has broken through my enemies before me, like a breakthrough of water"

2 Samuel 5:20

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 or tested, the presence or recoverability of hydrocarbons, operational risks in testing and well completion, 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 Info:
Zion Oil & Gas, Inc. (NASDAQ: ZN)
12655 North Central Expressway, Suite 1000, Dallas, TX 75243
Andrew Summey
Telephone: 888-891-9466
Email: andrew.summey@zionoil.com
www.zionoil.com

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