April 23, 2010 (FinancialWire) — Zion Oil & Gas, Inc. (NASDAQ: ZN) said that the company recently signed a memorandum of understanding  with Aladdin Middle East Ltd, outlining Zion's plan to establish a subsidiary, tentatively named Zion Drilling, Inc., which will purchase AME's 2,000 horsepower drilling rig in exchange for an initial payment of $7 million and a series of $1 million additional payments that are anticipated to coincide with Zion's drilling of seven additional wells in Israel.

Each of these payments is to be funded by Zion Oil & Gas, Inc. The memo provides that Zion Drilling, Inc. will be 51% owned by Zion Oil & Gas and 49% owned by AME. AME will be responsible for the daily drilling operations.

The drilling rig is currently located at Zion's Ma'anit-Rehoboth #2 wellsite, in Israel.

Zion Oil & Gas, a Delaware corporation, holds two petroleum exploration licenses, the Joseph and the Asher-Menashe Licenses and the Issachar-Zebulun Permit Area, totaling approximately 327,000 acres.

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