Filed
pursuant to Rule 433
Registration
Statement No. 333-164563
Zion Oil
& Gas Newsletter
June 10,
2010
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Dear
Shareholder and/or Friend of Zion
As Zion's
annual meeting is scheduled to take place on Monday, June 14, 2010, in Israel,
we are distributing this email one day earlier than normal. This will give those
who are not attending the meeting and have not yet voted, a chance to vote. You
can vote either by returning your prepaid voting card, by telephone or by way of
the Internet.
For
everyone with an interest in Israel and its energy resources, we are living
through momentous times!
Recently,
'Oil & Gas in Israel' has been featured in Israel's business news as almost
a daily headline event. For example:
On June
2, 2010, Israel's business press reported that the estimated natural gas
reserves in the Tamar offshore license have been increased... again. They have
nearly doubled
since the first estimates were published in 2009 and represent approximately 35
years of Israel's natural gas needs at projected 2012 demand rates.
On June
3, 2010, Israel's business press reported that initial seismic analysis
indicated that the Leviathan prospect, offshore Israel, is estimated at double the size of the Tamar
discovery.
Clearly
the prediction of the United States Geological Survey's report in April 2010
that estimated the undiscovered oil and gas resources of the Levant Basin at a
mean of 1.7 Billion barrels of recoverable oil and 122 Trillion cubic feet of
recoverable gas in the Levant Basin is beginning to unfold before our very
eyes.
As all of
Zion's exploration areas fall within the Levant Basin... we are very optimistic
regarding our petroleum exploration areas, onshore Israel.
(You can
read the USGS Report if you click
here.)
Zion Oil
& Gas, Inc. was established 10 years ago, at a time when the idea of 'Oil in
Israel' was seen as 'very
unlikely' (to say the least), as the last major discovery in Israel was
the Heletz field (onshore southern Israel) in 1955. Subsequently, Heletz
produced more than 17 million barrels of oil.
Now, we have seen a massive gas discovery offshore and even, in December 2009, an announcement of an onshore gas discovery, in another company's license area, just to the south of Zion's license area.
The year
1955 was also the one in which Frank Sinatra first sang, "Love & Marriage go
together like a Horse & Carriage". From our perspective, where there is
'Gas', there is likely to be 'Oil'. We all know the term 'Oil &
Gas'...
When
Zion's Founder and Chairman of the Board, John Brown, heard the recent news
regarding the offshore gas deposits, he pointed to Isaiah 60:5:
"Then you will see this and rejoice,
and your heart will be thrilled with joy, because the riches of the sea will be
brought to you. The wealth of the nations will come to you."
He
commented that, in the short space of ten years, Zion Oil & Gas, Inc. has
achieved much. Today, Zion's extensive petroleum exploration areas are very
close to world class natural gas discoveries and, in a few weeks, Zion plans to
drill the Ma'anit-Joseph #3 well, deep to reach the Permian geologic layer, in
the Ma'anit structure.
“Whatsoever the Lord pleased, that
did he in heaven, and in earth, in the seas, and all deep
places.”
Psalms
135:6
As you
can read below, there is much pre-drilling operational activity, whether with
the field seismic acquisition that is currently under way, the sourcing of drill
pipe and other necessary equipment or our petroleum engineers fine-tuning the
well design for Zion's next well.
Of
course, none of this could take place without our loyal and, we believe, 'heaven sent' stockholders
who enable us to carry out our work in Israel. Without your continued support,
we would be hard-pressed to continue at our current pace, as exploration costs
are substantial.
We
believe that, subject to the final permits, we are approximately ten weeks away
from spudding our next well, the Ma'anit-Joseph #3 and hopefully much closer to
the day when we can also announce a discovery.
.................................................................................
A NEW
ZION FILM - to watch the film, please click
here
As I
write, over 1,650 people have viewed our latest film, in which Bill Ottaviani
(Zion's President and Chief Operating Officer) and I discuss our goal to
establish Zion Drilling, Inc. and purchase Aladdin Middle East Ltd's 2,000
horsepower drilling rig, as soon as practicable.
The film
gives you a chance to learn the strategic thinking behind some of our business
decisions. If you haven't yet watched the film, please take a few minutes to do
so and please share the link to the film with your friends.
.................................................................................
RIGHTS
OFFERING
Under the
rights offering (see www.zionoil.com/investor-center) Zion stockholders, at the
close of business on May 6, 2010, were issued, at no charge, the
following
ONE
subscription right for every TWO shares of stock owned (as of the close of
business on May 6, 2010).
Each
subscription right entitles the holder to purchase one share of Zion stock at a
price of $5.00, irrespective of the market price at the time of
purchase.
The
subscription rights may be exercised at any time prior to the end of June 2010.
However, after 5:00 pm EDT on June 30, 2010, unexercised subscriptions rights
will expire with no residual value.
Please
note that if you want to exercise your rights and you hold your stock in a
brokerage account, then you will need to contact your broker to determine when
and how you can exercise your rights, as each individual brokerage firm has
their own timeline and procedures for processing subscriptions.
As
detailed in the press release, we plan to use the proceeds from the rights
offering: (a) to purchase a 51% interest in a new yet to be established company
(Zion Drilling, Inc. that will own a 2,000 horsepower drilling rig), (b) to
drill further 'deep' exploration wells on Zion's licenses in Israel (in
continuation of Zion's oil and gas exploration efforts) and (c) for general
corporate purposes.
This
opportunity is only available until June 30, 2010, in less than 20
days.
....................................................
With
regard to 'Operations', we are now preparing for the next well, as you can
read.
The Issachar-Zebulun Permit
Area
Zion and
the Geophysical Institute of Israel (GII) have signed an agreement for GII to
acquire approximately 32 kilometers of seismic data in Zion's Issachar-Zebulun
Permit area. Zion will use this seismic data in search of geologic prospects
that we hope can be matured into new well candidates.
Field
acquisition of seismic began in the Jordan River Valley region on June 6. The
weather report from the field thus far has been “hot, dry, and
calm”. While this makes for a long day for the field workers, these
conditions are very desirable for acquiring seismic data. Several
kilometers of data have already been acquired and preliminary indications are
that overall data quality is good.
Seismic
acquisition will continue through June after which the collected data will be
“processed” and interpreted for use in a geologic model of the
area.
Processing
seismic data means the conversion of sound wave data into a two-dimensional (2D)
graphic image depicting the various layers of subsurface rock in which the sound
waves were reflected. These sound waves were of course generated at
the surface during the seismic acquisition process.
A final
‘processed’ 2D image might look something like this example noted
here:
Our
geologists will then interpret this imagery as a basis for determining if all
the necessary geological elements are in place for creating a drilling
prospect. .
Ma'anit-Joseph #3 Well (M-J
#3)
As
previously noted, we have implemented a bidding process for key equipment and
services needed for the M-J #3 well and that early indications of response from
our selected vendors have been very favorable. The bidding process is
now closed and we are extremely pleased with the results.
To cite a
few metrics regarding the process, we created (8) equipment and service
categories targeting (39) companies – both local and
international. These categories included casing, casing hardware,
wellheads, drill bits, cementing service, mud and drilling fluids service,
wireline and logging service, and equipment rentals. A total of (47)
bid packages were issued and (38) offers received…a very respectable 81%
positive response rate.
We are
now working through each category of bids, focusing first on those that are most
time-sensitive so that we have the equipment or service we need, on location,
when the well is spud. Several purchase orders for this critical
equipment have already been placed.
We
continue to be encouraged by the pace in which “permitting” for the new well is
occurring. As noted last time, permitting a well in Israel is a
lengthy and time consuming process. Yet, we feel that we are ‘on
track’ in working with the various regulatory agencies to ensure that we are
fully compliant with the law and that we properly address the legitimate issues
of other concerned stakeholders in the project.
With
vendor selection and well permitting moving along according to plan, we now turn
our attention to construction of the well site itself. To this end,
we are using the same philosophy we did in our bidding process for well
equipment and services. That is, we will seek out the best
contractors that are capable of doing the job to our specifications and who
offer the best overall value to Zion.
Ultimately,
we want to position ourselves to begin well site construction immediately after
the final permit is ‘in hand’ that allows construction activity to
begin. Our expectation is that this timing will occur sometime in
July. Site construction can last about one month.
Overall,
work continues at a steady and productive pace in getting ready for a summer
2010 spud date of the Ma'anit-Joseph #3 well.
Elijah #3
Well
As
previously noted, 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
decided to acquire approximately 32 kilometers of additional field seismic data
(in Zion's Asher-Menashe License area) that will help us to resolve certain
questions regarding the geology of the area surrounding the Elijah #3 well. GII
will perform this seismic acquisition work following the work being done for us
in the Issachar-Zebulun permit area.
Ma'anit-Rehoboth #2 Well
(M-R #2)
This well
is currently temporarily suspended for possible future use as an offset well to
the Ma'anit-Joseph #3 (M-J #3) well (see above) which is to be drilled a short
distance away.
It is
important to note that while the M-J #3 well is just a short distance from the
M-R #2 well, the geologic target for the M-J #3 well is completely different
than the zones tested in M-R #2. We are drilling to the deep
“Permian” structure in M-J #3; whereas the various intervals tested in M-R #2
were shallower and comprised of younger, Triassic, age rocks. As
such, the results of testing the M-R #2 well are not correlative to what we
expect should we reach and test the Permian in the M-J #3 well.
................................................................................
2010 Annual Meeting of
Stockholders
The
annual meeting is scheduled to take place at the Dan Caesarea Hotel in Caesarea,
Israel at 2:00 p.m. (local time) on Monday, June 14, 2010.
The Zion
shareholders own Zion Oil & Gas, Inc., but management can only manage Zion
effectively if you support us by voting your shares.
If you
have already voted... thank you!
But if
you haven't yet voted... please take action and...
PLEASE
VOTE YOUR ZION STOCK TODAY
In prior
years, the SEC allowed brokers to vote the shares of stockholders who held
shares at the broker but did not express an opinion as to how they wished to
vote their shares.
The new
rules do not allow your shares to be voted on certain items without you
personally voting your shares, so please vote your shares today.
You can
vote either by returning your prepaid voting card, by telephone or by way of the
Internet.
Your vote
really does count, so please take a very few minutes in order to exercise your
right as a Zion Oil & Gas stockholder.
"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 (the current owner
of the drilling rig) 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
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
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
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