I just got back from vacation and finally had some time to look into the zenith energy accounts. I was particularly interested at looking why the administrative costs had raised from $8.6 million Canadian dollars in 2023 to $24.4 million Canadian dollars in 2024. Once I started putting the data into my own excel spreadsheet and being able to move it around, the answer was interesting and frankly unexpected.

All of the additional $16 million costs came from only two areas:

a) Foreign Exchange Gain/Loss – total difference $8,857,000
b) Impairment costs $6,927,000

You can see the details of this on my excel document here: https://ibb.co/4MDh78d

In total these amounted to $15,784,000 of additional costs in 2024 compared to 2023. The important thing to remember about these costs is that they're just accountancy terms and not cash losses. In 2023 when the company benefited from nearly $6 million of foreign exchange gains they did not end up with an extra $6 million in the bank. Similarly in 2024 when they lost $2.8 million on foreign exchange they did not actually have to pay out this money. As can be seen on page 54 of the annual accounts under note 5 this is explicitly described as being “due to the foreign exchange related to the retranslation of the assets, a non-cash expense.”

It's the same situation with the $6.9 million impairment in the non recurring expenses. The company no longer own any assets in Congo so these obviously have to be written off compared to the 2023 accounts and impairment of the Tunisian assets is also very logical. Although Zenith still own them, the fact that the company has been prevented by the Tunisian government from selling any oil makes a write-down on their value inevitable. This is also described on page 54 in note 5 as being “non-recurring expenses which relate to the impairment of the assets in Congo and Tunisia”.

If you remove these figures from the account then you end up with a very different perspective on the cost base between 2023 and 2024 and there is only an increase in costs of $21,000 between the two years

You can see the details of this on my excel document here: https://ibb.co/7nGgPvr

Note that this is including the $1.6 million spent on Arbitration costs, which are clearly necessary to the company’s claim against the Tunisian state. If we were to remove these too, then costs would have declined by $1.6 million on a year to year basis.

You can see the details of this on my excel document here: https://ibb.co/RBzchkT

On a line by line basis the company has pretty much reduced costs across the board. They have saved $1.7 million in consultancy costs $42,000 in legal costs $247,000 in office costs and almost $1,000,000 in salaries. Even travel has gone down by $11,000. The only place that general and administrative expenses have going up is in order to the remuneration and accountancy which is up by $224,000 and administrative expenses which is up by $2,006,000. In total the savings on general administrative expenses a $761,000.

You can see the details on this here: https://ibb.co/6Jh6bk6

In Terms of non recurring expenses, the bond issue costs are down by $24,000; the costs for acquisitions are down by $134,000 and share-based payments are down by $733,000. Listing costs are up by $15,000 and the arbitration expenses are $1,658,000. Therefore, costs here are up by only $21,000.

You can see the details on this here: https://ibb.co/bmt7Bs9

So overall despite what some have been saying in these forums when you look at the accounts properly sentence expenses have not increased significantly in 2024 compared to 2023. In fact if you remove the arbitration costs the expenses have decreased.

As always with looking at accounts you need to look beyond the headline figures and really study the detail in order to understand what was going on and things that definitely not as bad as they're being portrayed here.