Zenith Energy annual report: Revenue rises as Tunisia costs drive heavy exceptional charges

Zenith Energy Ltd has published its independently audited results for the year ended 31 March 2026, revealing modest revenue growth alongside substantial legal costs and impairments connected with Tunisia.

The figures capture a company in transition. Zenith's Italian operations continued generating revenue, while management invested in renewable energy, uranium and additional energy assets. However, the financial picture was heavily affected by arbitration spending and prudent reductions in the carrying value of Tunisian assets.

The central question for investors is whether these exceptional costs are funding future value creation or placing too much pressure on a relatively small existing revenue base.

Zenith Energy's key annual figures

Metric	2026 financial year	2025 financial year	Change
Oil and natural gas revenue	CAD$2.327 million	CAD$2.147 million	Up 8.4%
Italian natural gas sold	178,778 Mcf	185,080 Mcf	Down 3.4%
Italian electricity sold	12,121 MWh	11,321 MWh	Up 7.1%
Tunisian crude oil inventory	CAD$1.108 million	CAD$2.412 million	Down 54.1%
Unsold Tunisian crude oil	11,871 barrels	Not disclosed	Not disclosed

Revenue from oil and natural gas increased by CAD$180,000 to CAD$2.327 million. That is positive directionally, although the absolute revenue base remains small compared with the exceptional expenditure recorded during the year.

Italian gas sales declined to 178,778 thousand cubic feet, or Mcf, while electricity sales rose to 12,121 megawatt-hours, or MWh. This suggests a mixed operational year in Italy, with electricity volumes improving but gas volumes moving backwards.

The announcement does not disclose the group's total reported loss, cash balance, debt position or operating cash flow. Investors seeking those figures will need to review the original company announcement and the full audited report.

Tunisia arbitration costs dominate the results

Zenith said the annual loss was significantly affected by several extraordinary and non-cash items.

Item	Amount
Tunisia arbitration legal and related costs	CAD$8.041 million
Tunisian asset impairment	CAD$5.557 million
Spotlight Stock Market listing costs	CAD$1.670 million
Non-cash items, including stock-option valuation	CAD$1.397 million
Tunisian oil inventory impairment	CAD$1.232 million
Total disclosed items	CAD$17.897 million

The largest cash-related charge was CAD$8.041 million of legal, advisory, administrative and court costs associated with arbitration proceedings against the Republic of Tunisia. This included costs relating to the hearing held in April 2026.

That expenditure is more than three times the group's reported annual oil and natural gas revenue. It demonstrates the scale of Zenith's legal campaign relative to its current operating activities.

Management describes these costs as non-recurring and views the legal proceedings as an important potential source of value. Even so, investors should distinguish between a legal claim and a realised financial recovery. The timing and outcome remain in the hands of the relevant tribunals and courts.

Why the impairments matter

Zenith recorded a CAD$5.557 million impairment against its Tunisian asset and a further CAD$1.232 million impairment against oil inventory produced in Tunisia.

An impairment is an accounting reduction in an asset's recorded value. It does not necessarily involve cash leaving the business during the reporting period, but it indicates that the board considers the previous carrying value too high under current circumstances.

The company attributed the adjustments to continuing uncertainty arising from the actions of the Republic of Tunisia. Management said it had taken the most prudent approach possible while remaining confident about the arbitration proceedings.

Tunisian crude oil inventory ended the year at CAD$1.108 million, down from CAD$2.412 million. This inventory represented 11,871 barrels of oil already produced but not yet sold.

For investors, prudence in the accounts is preferable to maintaining asset values that management cannot presently support. The less comfortable point is that the impairments underline how uncertainty in Tunisia continues to affect both the income statement and the value assigned to Zenith's assets.

The US$700 million arbitration opportunity

Zenith said its wholly owned subsidiary claimants are pursuing aggregate claims of approximately US$700 million through International Centre for Settlement of Investment Disputes, or ICSID, and International Chamber of Commerce, or ICC, proceedings.

The company is also continuing to enforce a final award already obtained in what it calls the ICC-1 arbitration.

Chief executive Andrea Cattaneo said management remained extremely confident in the merits of the claims. He added that developments following the final ICSID hearing had strengthened that confidence and were significant to Zenith's legal position.

The potential scale is clearly material, particularly when set beside annual oil and gas revenue of CAD$2.327 million. However, the announcement does not disclose an expected decision date, probability of success, likely recovery amount or timetable for collecting any award.

The gap between the headline claim value and Zenith's current revenue base makes the arbitration highly important, but it also increases uncertainty. Until an award is secured and successfully enforced, it should not be treated as operating income or available cash.

Zenith's diversification strategy

Alongside the legal proceedings, Zenith says it continued transforming into a more diversified international energy company.

Activity during the year included:

• Expanding its Italian renewable energy platform.
• Beginning construction of its first solar projects.
• Progressing towards approximately 200 MWp of renewable capacity.
• Creating and listing Reveille Resources Plc as a dedicated uranium company.
• Advancing acquisitions intended to increase production and recurring revenue.

MWp means megawatt-peak, a measure of a solar project's maximum rated generating capacity under standard conditions.

The renewable strategy gives investors something beyond the Tunisia proceedings to monitor. Zenith has previously outlined how its solar pipeline expanded to 188.5 MWp, bringing it closer to the stated 200 MWp objective.

Nevertheless, the latest announcement does not disclose how much revenue or cash flow the solar portfolio currently generates. It also provides no financial details for the acquisitions being advanced. Development milestones, construction funding and eventual recurring revenue will therefore be important measures of execution.

What investors should watch next

There are three main areas to follow after these results.

First, the arbitration proceedings remain central. Investors will want clarity on tribunal decisions, enforcement progress and whether legal spending starts to decline after the April 2026 hearing.

Second, Zenith needs to demonstrate that diversification can produce meaningful recurring revenue. Italian electricity sales moved in the right direction, but group oil and gas revenue remains modest compared with the year's exceptional costs.

Third, funding matters. The RNS does not disclose year-end cash, debt, cash burn or the capital required to build the renewable portfolio and complete acquisitions. Those figures are important when assessing how Zenith intends to finance its plans.

The audited results therefore present two contrasting stories. Operational revenue improved and the company advanced several strategic initiatives, but CAD$17.897 million of disclosed exceptional, non-cash and impairment items overshadowed a CAD$2.327 million revenue base.

For followers of Zenith Energy Ltd, progress in the new financial year will be judged less by ambition and more by tangible outcomes - legal decisions, collected funds, producing renewable assets and stronger recurring revenue.