REG - Zephyr Energy PLC - Completion of acquisition of infrastructure assets

Zephyr EnergyAnnouncement

10/10/2022 07:00

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RNS Number : 2578C  Zephyr Energy PLC  10 October 2022

Prior to publication, the information contained within this announcement was
deemed by the Company to constitute inside information as stipulated under the
UK Market Abuse Regulation. With the publication of this announcement, this
information is now considered to be in the public domain.

 

10 October 2022

Zephyr Energy plc

("Zephyr" or the "Company")

 

Completion of acquisition of infrastructure assets

 

Zephyr Energy plc (AIM: ZPHR) (OTCQB: ZPHRF), the Rocky Mountain oil and gas
company focused on responsible resource development from carbon-neutral
operations, is pleased to announce the completion of the acquisition of a
package of oil and gas assets located on and around the Company's Paradox
project, Utah, U.S. (the "Paradox project") (the "Acquisition"). Details of
the Acquisition were announced on 14 September 2022.

 

The Acquisition is comprised of 21 miles of natural gas gathering lines, the
Powerline Road gas processing plant (the "Plant", which is not currently in
operation), rights of way for additional gathering lines, active permits, five
existing wellbores and additional acreage (the "New Acreage") which is partly
contiguous to the Company's operated White Sands Unit (the "WSU").

 

The Acquisition will allow Zephyr to substantially reduce the capital required
to build the necessary gas export infrastructure for its forecast gas
production from the Paradox project.  The estimated replacement cost value of
the acquired pipelines and plant is over US$10.6 million.

 

The consideration for the Acquisition was US$750,000, which was satisfied by a
payment from Zephyr's existing cash resources, and as the new owner, Zephyr
has assumed responsibility for all future decommissioning, plugging and
abandonment liabilities associated with the assets (estimated to be
approximately US$2.5 million in today's terms).

 

Zephyr now operates 45,000 gross acres in the Paradox Basin, the majority of
which the Company holds a 75% or greater working interest.

 

A full summary of the assets purchased as part of the Acquisition was outlined
in the Company's announcement on 14 September 2022.

 

Colin Harrington, Zephyr's Chief Executive, said:  "I am delighted that we
have now completed  the Acquisition which is expected to bring multiple
commercial benefits to the Company.

 

"Firstly, it allows us to greatly reduce the capital needed to build out the
gas infrastructure required to sell our produced gas volumes from the Paradox
project into the market.  Secondly, it completes the acquisition of all key
acreage covered by the WSU 3D and thirdly, it provides us with an additional
well pad already tied to the pipeline, which in combination with the newly
acquired acreage will simplify future development drilling.  Similarly, the
gas plant, while currently not in use, has excellent potential for
reintroduction to service and can potentially act as a WSU supply base.

 

"The Acquisition marks the start of an exciting period for Zephyr as we
kick-off our extended production test on the State 16-2LN-CC well and as we
make final preparations for our forthcoming drilling programme. While supply
chain and labour availability issues continue to exist across the sector,
Zephyr's team is working hard to ensure the necessary pieces are in place in
order to commence drilling shortly after the final federal permit has been
received.  Further updates on this will be announced shortly and will be
presented at our Investor Webinar on 25 October 2022, details of which we
announced on 28 September 2022."

 

 

 

Contacts:

 

 Zephyr Energy plc                                                   Tel: +44 (0)20 7225 4590

 Colin Harrington (CEO)

 Chris Eadie (CFO)

 Allenby Capital Limited - AIM Nominated Adviser                     Tel: +44 (0)20 3328 5656

 Jeremy Porter / Vivek Bhardwaj

 Turner Pope Investments - Joint-Broker                              Tel: +44 (0)20 3657 0050

 James Pope / Andy Thacker

 Panmure Gordon (UK) Limited - Joint-Broker                         Tel: +44 (0) 20 7886 2500

 John Prior / Hugh Rich / James Sinclair-Ford / Harriette Johnson

 Celicourt Communications - PR

 Mark Antelme / Felicity Winkles                                    Tel: +44 (0) 20 8434 2643

 

 

Notes to Editors

 

Zephyr Energy plc (AIM: ZPHR) (OTCQB: ZPHRF) is a technology-led oil and gas
company focused on responsible resource development from carbon-neutral
operations in the Rocky Mountain region of the United States.  The Company's
mission is rooted in two core values: to be responsible stewards of its
investors' capital, and to be responsible stewards of the environment in which
it works.

 

Zephyr's flagship asset is an operated 45,000-acre leaseholding located in the
Paradox Basin, Utah which has been assessed by third party consultants Sproule
International to hold, net to Zephyr, 2P reserves of 2.1 million barrels of
oil equivalent ("mmboe"), 2C resources of 27 mmboe and 2U resources 203 mmboe.
Following the successful initial production testing of the recently drilled
and completed State 16-2LN-CC well, Zephyr is planning a three well drilling
program commencing later this year to further delineate the scale and value of
the project.

 

In addition to its operated assets, the Company owns working interests in a
broad portfolio of non-operated producing wells across the Williston Basin in
North Dakota and Montana.  The Williston portfolio currently consists of
working-interests in over 200 modern horizontal wells which are expected to
provide US$35-40 million of revenue, net to Zephyr, in 2022.  Cash flow from
the Williston production will be used to fund the planned Paradox Basin
development. In addition, the Board will consider further opportunistic
value-accretive acquisitions.

 

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