OTC:ZNOG
ZION OIL & GAS INC
Zion Oil & Gas Inc. is an OTC-listed energy company with over $30M in total assets and a focus on hydrocarbon production and exploration.
Key Metrics
Investment Thesis
Bull Case
The massive paid-in capital of $312.6M suggests a potential turnaround story where the company could be recapitalized or acquired by a larger energy entity seeking distressed assets; Current assets exceed current liabilities, providing a short-term liquidity buffer that allows management to execute strategic pivots without immediate insolvency; The asset base of nearly $32M offers underlying value if hydrocarbon prices rise or reserves are successfully developed.
Bear Case
The company is burning cash rapidly with negative operating cash flow and no revenue cost structure, indicating a business model that is currently unviable; The deep retained earnings deficit of nearly $300M reflects years of poor performance with little hope for recovery without external intervention; Investors face high dilution risk as the company relies on financing activities to fund operations rather than organic growth or profitable operations.
About ZION OIL & GAS INC
Zion Oil & Gas Inc. (OTC: ZNOG) operates within the oil and gas sector, focusing on upstream exploration, production, and potentially midstream services to secure energy supply chains. The company manages a portfolio of assets aimed at maximizing hydrocarbon recovery while navigating volatile commodity prices. With significant paid-in capital and substantial long-term asset holdings, the firm positions itself for potential future expansion or strategic restructuring.
Analysis
Management Discussion
Despite a slight improvement in operating profit margins compared to 2022, the company continues to report significant annual losses, driven by high general and administrative expenses of $4.6M against negligible cost of revenue. The burn rate remains concerning with net changes in cash positive only due to financing inflows rather than operational efficiency, as operations consumed $6.2M while investing activities spent another $5.3M. Management must pivot quickly to reduce SG&A costs and generate positive operating cash flow to address the deepening retained earnings deficit.
Industry Overview
The oil and gas industry is cyclical and heavily influenced by global energy demand, geopolitical stability, and commodity price volatility. Companies in this sector require significant capital expenditure for exploration and drilling, making profitability highly sensitive to market conditions. Regulatory changes regarding environmental impact and carbon emissions also pose substantial risks to traditional extraction methods.
Financial Statements
Income Statement
Balance Sheet
Cash Flow
| Metric | 2022 | 2023 | 2024 |
|---|---|---|---|
| Revenue | $0 | $0 | — |
| Cost of Revenue | $0 | $0 | $0 |
| Gross Profit | $0 | $0 | — |
| Operating Expenses | $55.0M | $8.0M | — |
| Operating Income | $-55.0M | $-8.0M | $-7.3M |
| G&A | $6.2M | $5.2M | $4.6M |
| Stock-Based Comp | — | — | $334.0K |
| Depreciation | $794.0K | $767.0K | $779.0K |
| Other OpEx | $48.7M | $2.8M | — |
| Non-Operating Income | $-127.0K | $-2.0K | $-4.0K |
| Pre-Tax Income | $-55.1M | $-8.0M | $-7.3M |
| Income Tax | $0 | $0 | $0 |
| Continuing Ops | $-55.1M | $-8.0M | $-7.3M |
| Discontinued Ops | $0 | $0 | $0 |
| Net Income | $-55.1M | $-8.0M | $-7.3M |
| Minority Interest | $0 | $0 | $0 |
| Net to Common | $-55.1M | $-8.0M | $-7.3M |
| Metric | 2022 | 2023 | 2024 |
|---|---|---|---|
| Current Assets | $4.6M | $2.3M | $3.9M |
| Cash & Equivalents | $1.7M | $615.0K | $2.3M |
| Prepaid Expenses | $600.0K | $515.0K | $567.0K |
| Other Current Assets | $2.3M | $1.2M | $1.1M |
| Long-Term Assets | $22.9M | $22.9M | $27.9M |
| PP&E (Net) | $112.0K | $5.6M | $4.9M |
| Operating Leases | $202.0K | $194.0K | $759.0K |
| Other LT Assets | $22.6M | $17.1M | $22.2M |
| Total Assets | $27.5M | $25.2M | $31.8M |
| Current Liabilities | $3.9M | $2.6M | $2.2M |
| Accounts Payable | $2.1M | $777.0K | $604.0K |
| Current Leases | $196.0K | $167.0K | $107.0K |
| Other Current Liab | $571.0K | $1.0M | $1.1M |
| Long-Term Liabilities | $469.0K | $523.0K | $1.2M |
| LT Operating Leases | $12.0K | $24.0K | $637.0K |
| Other LT Liab | $457.0K | $499.0K | $548.0K |
| Total Liabilities | $4.4M | $3.2M | $3.4M |
| Shareholders' Equity | $23.1M | $22.0M | $28.4M |
| Paid-In Capital | — | — | $312.6M |
| Retained Earnings | $-278.6M | $-286.6M | $-293.9M |
| Total L&E | $27.5M | $25.2M | $31.8M |
| Metric | 2022 | 2023 | 2024 |
|---|---|---|---|
| Net Income (CFO) | $-55.1M | $-8.0M | $-7.3M |
| Non-Cash Adjustments | $50.7M | $3.6M | $1.5M |
| Working Capital Changes | $-1.4M | $-788.0K | $-435.0K |
| Cash from Operations | $-5.7M | $-5.1M | $-6.2M |
| Capital Expenditures | $17.0K | $1.0K | — |
| Cash from Investing | $-16.3M | $-2.4M | $-5.3M |
| Cash from Financing | $19.1M | $6.0M | $13.2M |
| FX Effect | $0 | $0 | $0 |
| Net Change in Cash | $-2.8M | $-1.5M | $1.7M |
| Beginning Cash | $6.0M | $3.1M | $1.6M |
| Ending Cash | $3.1M | $1.6M | $3.3M |
Frequently Asked Questions
How does ZION OIL & GAS INC make money?
Upstream Exploration and Production focusing on oil and natural gas reserves; Midstream Operations potentially involving gathering or transportation infrastructure; Corporate and Other encompassing general administrative functions, lease liabilities, and non-operating activities.
What are the main risks for ZNOG?
Persistent Negative Net Income trends with losses widening from -$55.1M in 2022 to -$7.3M in 2024 indicate ongoing profitability challenges; Heavy reliance on Non-Cash Adjustments of $1.5M suggests earnings quality concerns and potential reliance on accounting entries; Massive Retained Earnings Deficit of -$293.9M signals a long-term financial distress that could trigger shareholder dilution or bankruptcy; Negative Cash Flow from Operations of -$6.2M combined with Investing outflows shows the company is burning through its limited cash reserves.
What is ZNOG's competitive advantage?
Substantial Paid-In Capital of $312.6M provides a strong equity base for future acquisitions or debt financing without immediate dilution risk; Significant Long-Term Assets totaling $27.9M indicate established infrastructure or reserve holdings that can generate cash flow upon optimization; Strong Current Asset position of $3.9M relative to current liabilities offers liquidity flexibility for operational adjustments.
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Not financial advice. All content is for informational purposes only. Data may contain errors. Consult a qualified financial advisor before making investment decisions.