REG - Zephyr Energy PLC - Half-year Report
29/09/2023 07:00
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RNS Number : 0862O Zephyr Energy PLC 29 September 2023
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.
29 September 2023
Zephyr Energy plc
("Zephyr", the "Company" or the "Group")
Interim Results for the six months ended 30 June 2023
Zephyr Energy plc (AIM: ZPHR) (OTCQB: ZPHRF), the Rocky Mountain oil and gas
company focused on responsible resource development from carbon-neutral
operations, reports its unaudited interim results for the six months ended 30
June 2023 ("H1 2023").
HIGHLIGHTS
Overview
During H1 2023, and in the period since, Zephyr invested significant capital
into the development of its flagship operated project in the Paradox Basin,
Utah, U.S. (the "Paradox project") while also substantially growing its
portfolio of non-operated assets in the Williston Basin (the "Williston
assets"). All investment activity was in line with the Company's strategy of
generating and compounding cash flow from its non-operated portfolio in order
to fund the development of the Paradox project, with the ultimate goal of
opening up the next prolific onshore U.S. oil and gas play.
The Company's board of directors (the "Directors" or the "Board") remain
committed to delivering long-term value to Shareholders, while upholding the
Company's core values of being responsible stewards of Shareholders' capital
and of the environment in which it operates.
Financial
· During H1 2023, capital expenditure ("CAPEX") across the Paradox
project and the Williston assets totalled US$21.6 million.
· Revenues for H1 2023 were US$13.4 million, and were driven by the
Company's hydrocarbon production from its Williston assets:
o Revenues for H1 2023 were lower than those in the comparative interim
period, reflecting the standard decline rates expected from the Williston
assets and the lower commodity price environment during H1 2023.
o Following significant investment in H1 2023, non-operated revenue and
production are forecast to increase in the second half of the 2023 financial
year ("H2 2023") when the non-operated wellbore interests operated by Slawson
Exploration Company ("Slawson" and the "Slawson wells" ) come online.
· Adjusted earnings before interest, tax, depreciation, depletion and
amortisation ("DD&A"), unrealised foreign exchange gains and unrealised
gains on hedging contracts (together "Adjusted EBITDA") for H1 2023 was US$6.5
million.
· At 30 June 2023, the combined carrying value of the Company's Paradox
project and Williston assets was US$103.2 million (30 June 2022: US$75.9
million), demonstrating the scale of investment made in the asset portfolio
over the last twelve months.
· The Company's gross borrowings at 30 June 2023 were US$33.7 million
and net borrowings (gross borrowings less cash and cash equivalents) were
US$27.5 million.
· During H1 2023, the Company hedged production volumes of circa 69,000
barrels ("bbls") with a realised gain of US$1.2 million on these contracts.
Paradox project (operated asset)
· The Company completed the acquisition of the remaining 25% working
interest in the Paradox project, increasing its working-interest to 100%
across approximately 46,000 gross acres. Based on the increased working
interest, the Competent Persons Report (the "CPR") prepared by Sproule
International ("Sproule") in 2022 estimates the Paradox project to contain:
o Net 2P Reserves: Proved Reserves of 2.6 million barrels of oil equivalent
("mmboe") net to Zephyr, an increase from 2.1 mmboe.
o Net 2C Contingent Resources: 34 mmboe net to Zephyr, an increase from 27
mmboe.
o Net 2U Prospective resources from overlying reservoirs: 270 net unrisked
mmboe net to Zephyr, an increase from 203 net unrisked mmboe.
· The State 36-2 LNW-CC well (the "State 36-2 well") was drilled and
encountered significant flowing hydrocarbons upon intersecting the Cane Creek
reservoir.
· During subsequent preparations for a production test on the State
36-2 well, the Company experienced a major well control incident. The
incident, which resulted in the uncontrolled release of hydrocarbons over a
period of four days, was ultimately brought under control safely and with no
injuries and no significant environmental damage.
· At present, the State 36-2 well remains static and under control.
· During the incident and subsequent well control efforts, multiple
joints of the well's 2 7/8-inch production tubing were compressed and/or
compromised, and Zephyr's operations team has been working methodically to
remove and inspect the remaining joints while keeping the wellbore static.
Recently, operations to retrieve the damaged tubing have progressed much
slower than expected due to the poor condition of the tubing, as exhibited by
the multiple damaged and buckled joints retrieved that led to the need for
milling operations and resulted in shorter retrievals per trip.
· While the Company is continuing to attempt to remove the remainder of
the production tubing, it has, in parallel, commenced discussions with its
insurer to assess alternative options for realising the significant potential
productivity of the reservoir at this location. Alternatives being discussed
include both a potential sidetrack from, or a re-drill of, the original well.
· As previously reported, the Company retains comprehensive well
control insurance coverage, and the Board expects to recover substantially all
costs associated with the well control incident, including those associated
with any sidetrack or re-drill scenario. Discussions with its insurer continue
and the Company will update the market in the event a new course of action is
deemed to be appropriate.
o To date the Company has recovered over US$3.7 million from its insurer in
respect of the well control incident.
· In September 2023, the Company was notified by Dominion Energy, Utah,
LLC ("Dominion") that its gas supply pipeline from the Northwest Gas Pipeline
system to the Green River area (the "pipeline") will be operational in the
early part of the fourth quarter of 2023, and that the pipeline will also be
available to accept natural gas volumes from third-party sources, slightly
ahead of original timeframe estimates. The completion of the Dominion pipeline
is a welcome development which will enable the export of natural gas volumes
from Zephyr's Paradox project.
Williston assets (non-operated assets)
· Zephyr continues to deliver on its strategy to acquire working
interest positions in value accretive, high-quality, high-margin production
assets with significant near-term growth potential in the Williston Basin.
· H1 2023 sales volumes averaged 1,225 barrels of oil equivalent per
day ("boepd").
· H1 2023 revenues totalled US$13.4 million.
· H1 2023 gross profit (after operating and transportation expenses,
production taxes, gains from derivative contracts and excluding DD&A) was
US$9.6 million demonstrating the high margins realised from the produced
barrels.
· At 30 June 2023, 223 wells in Zephyr's portfolio were available for
production. Net working-interests across the portfolio now average 7% per
well, equivalent to 15.1 gross wells in total.
· The wellbore interests operated by Slawson, acquired by Zephyr in the
second half of 2022, are fully drilled and completed. Production from these
working interests is forecast to be online in the fourth quarter of 2023 ("Q4
2023"), following completion of surface facilities on the well pad. These
wellbore interests are estimated by management to contain 2P reserves, net to
Zephyr, of 550,000 barrels of oil equivalent ("boe") and will provide a
significant near-term production boost to the Company when they come online.
· In addition, Zephyr has elected to participate in ten new wells
operated by Continental Resources Inc ("Continental" and the "Continental
wells"). The wells are located in a highly attractive area of the Williston
Basin. The CAPEX associated with these wells will be funded from the Company's
existing cash resources.
Corporate
· In June 2023, the Company raised US$3.9 million (before expenses)
through the placing and subscription of 90,000,000 new ordinary shares of 0.1
pence each in the Company ("Ordinary Shares"). The net proceeds from the
placing and subscription are being used to fund working capital requirements
at the Paradox project.
· Zephyr remains carbon neutral on a Scope 1 basis across its
operations, through the purchase of Verified Emission Reduction credits
("VERs").
Colin Harrington, Chief Executive of Zephyr, said:
"The period under review was an active time for Zephyr, during which we
invested significant new capital into both the Williston assets and the
Paradox project. We expect to see initial returns from this investment
commencing in Q4 2023 when the Slawson wells come online, and continuing to
the point of first sustained revenues from the Paradox project when we
complete and tie in our recently drilled wells.
"While our progress on the Paradox project has been impacted by the well
control incident on the State 36-2 well, the incident also illustrated the
significant and larger production potential of the overall project.
"Over the next period we will continue the work required to transform the
Paradox project into a revenue generating development, and we are delighted
that the Dominion Energy pipeline - which crosses our leasehold position - has
now been completed and will shortly be ready to accept third party natural gas
volumes.
"Looking ahead, with a diverse portfolio of cash flowing assets, potential for
substantial future organic growth, a solid financial footing and a talented
and dedicated team of employees, we continue to be extremely optimistic about
Zephyr's future."
A copy of the interim results report will be available on the Company's
updated website later today at http://www.zephyrplc.com
(http://www.zephyrplc.com) .
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
Celicourt Communications - Public Relations Tel: +44 (0) 20 7770 6424
Mark Antelme / Felicity Winkles
Qualified Person
Dr Gregor Maxwell, BSc Hons. Geology and Petroleum Geology, PhD, Technical
Adviser to the Board of Zephyr Energy plc, who meets the criteria of a
qualified person under the AIM Note for Mining and Oil & Gas Companies
-June 2009, has reviewed and approved the technical information contained
within this announcement.
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 lease holding of over 46,000 gross
acres located in the Paradox Basin, Utah, 25,000 acres of which has been
assessed to hold, net to Zephyr, 2P reserves of 2.6 million barrels of oil
equivalent ("mmboe"), 2C resources of 34 mmboe and 2U resources 270 mmboe.
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. 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.
ZEPHYR ENERGY PLC
INTERIM REPORT FOR THE SIX MONTHS TO 30 JUNE 2023
The Board is pleased to present Zephyr's unaudited interim report for the
six-month period to 30 June 2023.
CHIEF EXECUTIVE'S STATEMENT
OVERVIEW
During the first six months of 2023 ("H1 2023"), and in the period since, the
Company continued the development of its flagship operated project in the
Paradox Basin, Utah, U.S. (the "Paradox project") while growing its highly
attractive portfolio of cash-generating non-operated assets in the Williston
Basin (the "Williston assets").
PARADOX PROJECT
Overview
The Board believes that the Paradox project has considerable scale and
economic potential.
The project is an operated lease holding of over 46,000 gross acres, 25,000
acres of which has been assessed, by third-party consultant Sproule
International ("Sproule"), to hold, net to Zephyr, 2P reserves of 2.6 million
barrels of oil equivalent ("mmboe"), 2C resources of 34 mmboe and net unrisked
2U resources of 270 mmboe.
The Company's land management strategy continues to be active, and has
resulted in a defensible and growing land position which Zephyr's Board
believes is increasingly difficult to replicate in today's regulatory and
political environment.
To date, both wells drilled by Zephyr at the Paradox project have discovered
hydrocarbons, and both appear capable of commercial production when ultimately
tied into natural gas infrastructure. In addition, eight overlying reservoirs
have been high graded as suitable for future exploration and potential
development. Of particular significance, the Company's main geological target,
the Cane Creek reservoir, appears to have two demonstrable methods of
development (via the targeting of natural fractures and through hydraulic
stimulation).
The drilling of the two wells has provided the Company with a wealth of new
geological information which has in turn resulted in a far greater geological
understanding of our acreage position. This information includes strong
evidence of:
· A continuous resource play (tight oil and tight gas);
· Repeatable petrophysics across a large area;
· Geology which correlates with the seismic results;
· Consistent reservoir thickness within a sub area;
· High reservoir pressures;
· High matrix permeability for a resource play;
· A reservoir which can be stimulated (with favourable rock mechanics
albeit under high stress); and
· The presence of productive natural fractures
Based on the above, the Board believes that the project contains substantial
potential upside and over the next period we will continue the work required
to develop the Paradox project into a revenue generating project. The Board is
delighted that the Dominion 16-inch gas export pipeline which extends across
the Paradox project has now been completed. This off-take solution is a major
development for Zephyr and will enable the commercial export of hydrocarbons
from the project to market.
State 36-2 LNW-CC well
In November 2022, the Company announced that drilling on the State 36-2 well
had commenced with an objective to target potential production from the Cane
Creek reservoir.
The drilling operation was hampered by extreme weather conditions. When the
well reached the Cane Creek reservoir at a depth of 9,598 feet true vertical
depth, the well experienced a significant influx of hydrocarbons which
consequently led to the suspension of drilling operations until the well was
stabilised. The influx of hydrocarbons was caused by the well intersecting an
apparent major natural fracture network in the reservoir, and the resultant
flowing hydrocarbons were diverted safely at surface through the drilling rig
flare stack whereby they were subsequently flared. Throughout this period,
Zephyr's operations team followed appropriate well control procedures, and
stabilised the well without incident.
The influx of hydrocarbons was managed and safely controlled, which
subsequently allowed for the drilling of an additional 132 feet into the Cane
Creek reservoir, at which point the Company elected to run production casing
down the total depth of the well.
Operations to run 7-inch production casing were successful and the well was
made fully safe and the drilling rig was released. The Company then planned to
commence production testing of the fractured Cane Creek reservoir interval.
In addition to near-term testing, the running of the 7-inch casing string
provided the Company with the option to return to the well (should it elect to
do so) to drill an extended lateral at a later date. A subsequent lateral
would enable the Company to test for further natural fracture presence at this
location within the Cane Creek reservoir, and also enable the well to be
completed by hydraulic stimulation across a longer lateral should Zephyr seek
to increase well productivity in the future.
Results from the drilling operations indicated that the well penetrated a
folded and naturally fractured Cane Creek reservoir, features which have
been highly productive in other Cane Creek wells. Pore pressure analysis
suggested that the well encountered very high reservoir overpressure, with
formation pressures estimated at around 9,300 pounds per square inch (which is
broadly consistent with previously drilled offset wells).
The well further delineated the presence of natural gas and condensate within
a large structural compartment, and at a new location within Zephyr's acreage
and 3D seismic coverage, which provided additional confirmation of Zephyr's
model for hydrocarbons in place across the acreage position.
State 36-2 well production test and well control incident update
On 8 March 2023, the Company announced, amongst other matters, that planning
for the production test had been completed and that all services for the test
had been procured. A service rig was mobilised to the well-site and operations
on the ground commenced. This was achieved despite the ongoing difficult
winter weather conditions encountered at the site. Workover operations (which
were to include perforating the well in the productive portion of the Cane
Creek reservoir) and subsequent production testing were estimated to take
four to six weeks. As the well was expected to flow from natural fractures, no
hydraulic stimulation was expected as part of this test.
On 7 April 2023, as workover operations were being completed, the well
experienced a significant control issue despite multiple attempts to secure
the well by the rig crew. The incident was initially caused by the failure of
a safety valve, and subsequently resulted in hydrocarbons being released from
the well in an uncontrolled manner.
In keeping with safety procedures, all personnel were safely evacuated without
injury. All relevant authorities were notified and a specialist well control
team (recommended by the Company's insurers) was deployed to bring the well
under control as quickly as possible.
Ultimately, well control efforts were successful and remediation and clean-up
operations have commenced. A third-party confirmatory environmental survey was
subsequently completed and the initial results found no evidence of any
lingering environmental impact.
While the State 36-2 well remains static and under control, during the
incident and subsequent well control efforts, multiple joints of the well's 2
7/8-inch production tubing were compressed and/or compromised, and Zephyr's
operations team has been working methodically to remove and inspect the
remaining joints while keeping the wellbore static. Recently, operations to
retrieve the damaged tubing have progressed much slower than expected due to
the poor condition of the tubing, as exhibited by the multiple damaged and
buckled joints retrieved that led to the need for milling operations and
resulted in shorter retrievals per trip.
While the Company is continuing to attempt to remove the remainder of the
production casing left in the hole, it has, in parallel, commenced discussions
with its insurer to assess alternative options for targeting the significant
potential productivity of the reservoir at this location. Alternatives being
discussed include both a potential sidetrack from, or a re-drill of, the
original well.
As previously reported, the Company retains comprehensive well control
insurance coverage, and the Board expects to recover substantially all costs
associated with the well control incident, including those associated with any
sidetrack or re-drill scenario. Discussions with its insurer continue and the
Company will update the market in the event a new course of action is deemed
to be appropriate. To date the Company has recovered over US$3.7 million from
its insurer in respect of the well control incident. Current and future
operations will continue to be conducted in such a way that well control is
maintained and working conditions are safe for our team.
State 16-2LN-CC well update
Following on from the successful drilling, completion and production test of
the State 16-2LN-CC well (the "State 16-2 well") in 2022, the first phase of
the extended production testing on the well was completed within the flare
consent limit set by the regulatory bodies, and Zephyr subsequently tested the
well a second time to commission surface facilities, improve flow assurance
and to gather more production data.
Unfortunately, the second well test was hampered by severe weather and initial
surface facility commissioning issues which resulted in delays to the
programme and, at times, intermittent operational activity.
Once the start-up commissioning issues had been successfully resolved the well
was initially brought online at choked-back, moderate rates to test for flow
assurance at varying levels of production. At a controlled rate of 2 million
cubic feet of gas per day and 100 barrels of oil per day (an average of 433
boepd) the well flowed continuously and surface flow assurance efforts proved
successful.
As flow rates were increased above those levels, well performance became
limited by freshwater pumping capacity and was subsequently impacted by the
formation of down-hole salt precipitate. The precipitate, which blocked and
was subsequently cleared multiple times, impacted the well's flow capacity to
achieve extended higher rates. The Company was in early stages of testing
higher rates when its mandated flaring limits were reached.
The operational team is assessing whether the precipitate issue is a function
of continued flow back of injected completion fluids or a function of normal
flowing conditions. Under either scenario, the Company is evaluating a series
of mitigation solutions and plans to test these solutions in the coming months
(subject to regulatory approvals) in order to fully determine the potential of
the reservoir at this location.
BLM approval of White Sands Unit acreage expansion/contraction
On 25 August, 2022, the Company announced, amongst other matters,
the acquisition of additional Paradox Basin acreage adjacent to its
operated White Sands Unit (the "WSU") through the targeted acquisition of
1,920 leased acres deemed by the Company to have immediate development
potential. Additional contiguous acreage was acquired as reported on 14
September 2022 (collectively, the "acquired acreage").
The acquired acreage was largely covered by Zephyr's existing 3D seismic, and
directly bordered the Zephyr lease on which the State 36-2 is located, and
with access to pre-existing surface infrastructure which Zephyr subsequently
acquired.
A portion of the acquired acreage was envisioned to be added to the WSU,
subject to approval from the U.S. Bureau of Land Management (the "BLM") for
which the Company applied in early 2023. In July 2023, Zephyr announced that
this approval was granted as part of larger expansion/contraction amendment of
the WSU. As part of the approval, 5,000 high-graded acres with near-term
development potential have been added to the WSU, and roughly 5,395 acres
deemed by the Company to be less suitable for future development were
relinquished.
These actions are part of the Company's active and ongoing portfolio
management of its project position. The Board is pleased with its recent BLM
interactions and subsequent approval, which results in an amended federal unit
with an upgraded and manageable acreage position - a position increasingly
difficult to replicate in today's regulatory and political environment.
Acquisition of additional project acreage
On 15 August 2023, the Company announced an agreement to increase its land
position in the Paradox Basin through the targeted acquisition of an
additional 640 leased acres deemed by the Company to be prospective for mid to
long-term development.
The new acreage is on Utah School and Institutional Trust Lands
Administration ("SITLA") lands and was secured during the most recent SITLA
auction. The acreage is close to the Company's existing WSU and gas export
infrastructure.
The acquisition of the new acreage is part of Zephyr's ongoing portfolio
management of its Paradox Basin position. Consideration for the new acreage
was satisfied from the Company's existing cash resources. Following the
closing of the acquisition of the new acreage, the Company now operates over
46,000 gross acres in the Paradox Basin, the majority of which the Company
holds as operator with a 100% working interest.
Assessment underway on recently acquired Greentown wells
In July 2023, the Company announced, amongst other matters, that it has
commenced the assessment on five existing wellbores (located in the WSU)
acquired as part of a larger acquisition of infrastructure assets and which
was announced on 14 September 2022. Several of the existing wells are former
producers of hydrocarbons and were subsequently shut-in due to lack of
operating infrastructure. Others were deemed to have potential future use as
salt water disposal wells or as producers of salt water brine for potential
extraction of lithium resources.
As part of this assessment, Zephyr's operations team recently recommenced
production from the Greentown Federal 28-11 well in order to understand the
well's potential contribution to overall field production when ongoing field
infrastructure work has been completed.
WILLISTON ASSETS
Overview
Zephyr's non-operated business was established in 2021 and today, following
twelve discrete acquisitions, Zephyr continues to deliver on its strategy to
acquire working interest positions in value accretive, high-quality,
high-margin production assets with significant near-term growth potential.
At 30 June 2023, Zephyr had working interests in 223 wells that were available
for production. Net working interests across the Company's portfolio now
average 7% per well, equivalent to 15.1 gross wells in total, all of which
utilise horizontal drilling and modern, hydraulically stimulated completions.
The majority of the wells are operated by Chord Energy Corporation, a
leading Williston Basin producer.
H1 2023 performance
· H1 2023 sales volumes averaged 1,225 boepd.
· H1 2023 revenues totalled US$13.4 million.
· H1 2023 gross profit (after operating and transportation expenses,
production taxes, gains from derivative contracts and excluding DD&A) was
US$9.6 million demonstrating the high margins realised from the produced
barrels.
Future growth in the portfolio
The Slawson operated wellbore interests, acquired in December 2022 and funded
in 2023, are now fully drilled and completed. Production from these working
interests is now forecast to be online in Q4 2023 following completion of
surface facilities on the well pad. Zephyr's working-interest in these
wells' ranges from 11% to 32%, and management estimates 2P Reserves being
acquired are circa 550,000 boe net to Zephyr. The Company will provide an
updated production guidance when these wells are brought online.
The Company has also received notice from Continental Resources
("Continental"), operator of a drilling spacing unit ("DSU") in which Zephyr
holds existing working interests, stating that it plans to drill ten new wells
on the DSU. The acreage is located in a highly attractive part of
the Williston Basin, and the initial two wells drilled by Continental in 2021
have been some of the top performers in Zephyr's non-operated portfolio,
paying out in under six months from first production. Zephyr's Board of
Directors has elected to participate in the upcoming drilling programme, and
Zephyr's forecasted net capital expenditure (CAPEX) related to the drilling is
approximately US$205,000 which will be funded from existing cash
resources. The planned new development drilling is an illustration of the
continued organic growth from the Company's existing Williston assets position
and provides continued access to low risk, near-term production.
FINANCIAL REVIEW
The financial information is reported in United States Dollars ("US$").
Income Statement
· The Company reports revenues for H1 2023 of US$13.4 million (H1 2022:
US$25.9 million). Revenues largely relate to the Company's hydrocarbon
production from the non-operated Williston assets. The reduction in revenues
reflects the standard decline rates expected from the Williston assets and the
lower commodity price environment during H1 2023. A near-term production boost
is expected in the second half of 2023 when the six Slawson wellbore interests
come online.
· Adjusted earnings before interest, tax, depreciation, depletion and
amortisation ("DD&A"), unrealised foreign exchange gains and unrealised
gains on hedging contracts (together "Adjusted EBITDA") for H1 2023 was US$6.5
million (H1 2022: US$19 million).
· In H1 2023, there was a DD&A charge of US$5.6 million (H1 2022:
US$5.4 million). This accounting charge relates to the resource depletion of
the Williston assets over the period.
· H1 2023 net loss after tax was US$2.3 million or a loss of 0.15
cents per Ordinary Share (H1 2022: net profit after tax of US$17.4 million or
a profit of 1.16 cents per share).
· H1 2023 net loss was enhanced by foreign exchange differences which
arise on the restatement of the Company's sterling loans to its subsidiaries
and resulted in an unrealised loss of US$2.6 million for the six months ended
30 June 2023 (H1 2022: unrealised gain of US$5.4 million). The unrealised loss
in this period is the result of sterling strengthening against the U.S.
dollar.
· Administrative expenses for the six months ended H1 2023 were US$3.0
million (H1 2022: US$2.2million). The increase in administrative expenses
mirrors the Company's growth over the last twelve months, the increase in its
asset portfolio and significantly enhanced corporate and operational
footprint. Costs continue to be closely controlled and monitored regularly by
executive management and is a continuing priority of the Board. It is
recognised by the Board, however, that additional technical, legal and other
costs were justified to help deliver the acquisitions which the Company has
secured over the period under review.
Balance Sheet
· Exploration and evaluation assets at 30 June 2023 were US$50.8
million (30 June 2022: US$23.8 million) which reflects the Company's ongoing
investment into upstream activity, including the drilling costs of the State
36-2 well.
· Property, plant and equipment at 30 June 2023 were US$52.4 million
(30 June 2022: US$52.1 million) which reflects the Company's ongoing
investment in its non-operated portfolio of oil and gas properties.
· Cash and cash equivalents at 30 June 2023 were US$6.2 million (30
June 2022: US$10.6 million). Responsible cash management remains a key
priority of the Board.
· During H1 2023 CAPEX across the Williston assets and the Paradox
project totalled US$21.6 million.
· At 5 September 2023, the Company had cash and cash equivalents
of US$3.5 million.
· The Company's gross borrowings at 30 June 2023 were US$33.7m and net
borrowings (total borrowings less cash and cash equivalents) were US$27.5
million. During H1 2023 the Company met all its funding obligations in respect
of the outstanding borrowings.
CORPORATE
· Zephyr continued to achieve Scope 1 carbon-neutrality across its
operational footprint during the period under review.
· In June 2023, the Company raised US$3.9 million (before expenses)
through the placing of new Ordinary Shares in the Company. The net proceeds
from the placing are being used to fund CAPEX requirements at the Paradox
project.
CONCLUSION
Despite recent operational challenges on the State 36-2 well, Zephyr continues
to be well positioned as a profitable, cash generating exploration and
production company and our balanced portfolio of operated and non-operated
assets is expected to continue to yield strong results for Zephyr. Cash flows
generated from our non-operated portfolio will continue to be primarily used
for the ongoing development of our flagship Paradox project.
Looking ahead, with a diverse portfolio of cash flowing assets, potential for
substantial future organic growth, a solid financial footing and a talented
and dedicated team of employees, we continue to be extremely optimistic about
Zephyr's future.
I would like to thank our employees and contractors for their hard work and I
also wish to express gratitude to our Shareholders, lenders, advisers and
other stakeholders for their ongoing support to the Company as we continue in
our pursuit of opening up the next prolific onshore U.S. oil and gas play.
Colin
Harrington
Chief Executive
Officer
29 September 2023
ZEPHYR ENERGY PLC
CONDENSED CONSOLIDATED INCOME STATEMENT
For the six months ended 30 June 2023
Unaudited Unaudited Audited
six months six months year ended
ended 30 June ended 30 June 31 December
2023 2022 2022
Notes US$'000 US$'000 US$'000
Revenue 13,407 25,948 41,062
Operating and transportation expenses (4,085) (2,055) (4,458)
Production taxes (1,065) (2,048) (3,318)
Depreciation, depletion and amortisation (5,608) (5,439) (12,666)
Gain/(loss) on derivative contracts 3 1,305 (908) 1,781
Gross profit 3,954 15,498 22,401
Administrative expenses (2,969) (2,193) (4,834)
Share-based payments (6) (212) (210)
Foreign exchange (losses)/gains (2,595) 5,431 6,102
Finance income - - 3
Finance costs (1,550) (1,110) (2,236)
(Loss)/profit on ordinary activities before taxation (3,166) 17,414 21,226
Taxation credit/(charge) 845 - (1,955)
(Loss)/profit for the period attributable to owners of the parent company
(2,321) 17,414 19,271
(Loss)/profit per Ordinary Share
Basic, cents per share 4 (0.15) 1.16 1.26
Diluted, cents per share 4 (0.15) 1.09 1.18
ZEPHYR ENERGY PLC
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the six months ended 30 June 2023
Unaudited Unaudited Audited
six months six months year ended
ended 30 June ended 30 June 31 December
2023 2022 2022
US$'000 US$'000 US$'000
(Loss)/profit for the period attributable to owners of the parent company
(2,321) 17,414 19,271
Other comprehensive income/(loss)
Items that may be subsequently reclassified to profit or loss
Foreign currency translation differences on foreign operations 2,618 (5,504) (6,205)
Total comprehensive income for the period attributable to owners of the parent
company
297 11,910 13,066
ZEPHYR ENERGY PLC
CONDENSED CONSOLIDATED BALANCE SHEET
As at 30 June 2023
Unaudited Unaudited Audited
as at as at as at
30 June 30 June 31 December
2023 2022 2022
Notes US$'000 US$'000 US$'000
Non-current assets
Exploration and evaluation assets 5 50,770 23,762 37,986
Property, plant and equipment 6 52,436 52,162 51,805
Derivative contracts - 50 175
103,206 75,974 89,966
Current assets
Trade and other receivables 6,039 6,845 4,290
Prepayments and accrued income 1,303 855 347
Cash and cash equivalents 6,188 10,587 8,996
Derivative contracts 1,440 - 1,133
14,970 18,287 14,766
Total assets 118,176 94,261 104,732
Current liabilities
Trade and other payables (12,757) (3,837) (12,520)
Borrowings 7 (24,988) (15,740) (14,572)
Derivative contracts - (490) -
(37,745) (20,067) (27,092)
Non-current liabilities
Borrowings 7 (8,726) (12,840) (10,821)
Deferred tax (1,110) - (1,955)
Provisions (4,874) (2,321) (4,138)
(14,710) (15,161) (16,914)
Total liabilities (52,455) (35,228) (44,006)
Net assets 65,721 59,033 60,726
Equity
Share capital 8 42,568 42,412 42,412
Share premium account 71,727 66,879 66,847
Shares to be issued - - 539
Warrant reserve 1,557 1,647 1,557
Share-based payment reserve 3,485 3,298 3,284
Cumulative translation reserves (13,366) (15,283) (15,984)
Retained deficit (40,250) (39,920) (37,929)
Equity attributable to owners of the parent company
65,721 59,033 60,726
ZEPHYR ENERGY PLC
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the six months ended 30 June 2023 (Unaudited)
Share-based payment reserve
Share premium account Cumulative translation reserve
Share capital Shares to be issued Warrant reserve Retained deficit
Total
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
As at 1 January 2023 42,412 66,847 539 1,557 3,284 (15,984) (37,929) 60,726
Transactions with owners in their capacity as owners:
Issue of equity shares 156 5,310 (539) - - - - 4,927
Expenses of issue of equity shares
- (430) - - 195 - - (235)
Share-based payments - - - 6 - - 6
Total transactions with owners in their capacity as owners
156 4,880 (539) - 201 - - 4,698
Loss for the period - - - - - - (2,321) (2,321)
Other comprehensive income:
Currency translation differences
- - - - - 2,618 - 2,618
Total other comprehensive income for the year
- - - - - 2,618 - 2,618
Total comprehensive income for the year
- - - - - 2,618 (2,321) 297
As at 30 June 2023 42,568 71,727 - 1,557 3,485 (13,366) (40,250) 65,721
ZEPHYR ENERGY PLC
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2022 (Audited)
Share-based payment reserve
Share premium account Cumulative translation reserve
Share capital Shares to be issued Warrant reserve Retained deficit
Total
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
As at 1 January 2022 42,065 52,875 - 89 3,065 (9,779) (57,721) 30,594
Transactions with owners in their capacity as owners:
Issue of equity shares 347 17,023 - - - - - 17,370
Exercise of warrants - - 539 (122) - - 122 539
Expenses of issue of equity shares
- (1,461) - - 408 - - (1,053)
Warrant exercise extension
- (33) - 33 - - - -
Grant of warrants - (1,557) - 1,557 - - - -
Share-based payments - - - - 210 - - 210
Transfer to retained deficit in respect of lapsed warrants
- - - - (387) - 387 -
Transfer to retained deficit in respect of expired warrants
- - - - (12) - 12 -
Total transactions with owners in their capacity as owners
347 13,972 539 1,468 219 - 521 17,066
Profit for the period - - - - - - 19,271 19,271
Other comprehensive income:
Currency translation differences
- - - - - (6,205) - (6,205)
Total other comprehensive income for the year
- - - - - (6,205) - (6,205)
Total comprehensive income for the year
- - - - (6,205) 19,271 13,066
As at 31 December 2022
42,412 66,847 539 1,557 3,284 (15,984) (37,929) 60,726
ZEPHYR ENERGY PLC
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the six months ended 30 June 2022 (Unaudited)
Share-based payment reserve
Share premium account Cumulative translation reserve
Share capital Warrant reserve Retained deficit
Total
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
As at 1 January 2022 42,065 52,875 89 3,065 (9,779) (57,721) 30,594
Transactions with owners in their capacity as owners:
Issue of equity shares 347 15,465 1,558 - - - 17,370
Expenses of issue of equity shares
- (1,461) - 408 - - (1,053)
Transfer to retained deficit in respect of lapsed options
- - - (387) - 387 -
Share-based payments - - - 212 - - 212
Total transactions with owners in their capacity as owners
347 14,004 1,558 233 - 387 16,529
Profit for the period - - - - - 17,414 17,414
Other comprehensive income:
Currency translation differences
- - - - (5,504) - (5,504)
Total other comprehensive income for the period
- - - - (5,504) - (5,504)
Total comprehensive income for the period
- - - - (5,504) 17,414 11,910
As at 30 June 2022 42,412 66,879 1,647 3,298 (15,283) (39,920) 59,033
ZEPHYR ENERGY PLC
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
For the six months ended 30 June 2023
Unaudited Unaudited Audited
six months six months year ended
ended 30 June ended 30 June 31 December
2023 2022 2022
US$'000 US$'000 US$'000
Operating activities
(Loss)/profit before taxation from continuing operations (3,166) 17,414 21,226
Adjustments for:
Finance income - - (3)
Finance costs 1,550 1,110 2,236
Unrealised (gain)/loss on derivative contracts (132) 440 (1,308)
Depreciation and depletion of property, plant and equipment 5,609 5,440 12,668
Share-based payments 6 212 210
Unrealised foreign exchange loss/(gain) 2,615 (5,571) (5,672)
Operating cash inflow before movements in working capital 6,482 19,045 29,357
Decrease/(increase) in trade and other receivables 1,035 (5,631) (3,028)
(Increase)/decrease in prepayments and accrued income (934) (286) 178
Increase in trade and other payables 736 628 723
Cash generated from operations 7,319 13,756 27,230
Income tax paid - - -
Net cash generated from operating activities 7,319 13,756 27,230
Investing activities
Additions to exploration and evaluation assets (11,813) (1,007) (13,297)
Business combination - - (37,880)
Acquisition of oil and gas properties - (36,000) (3,362)
Additions to oil and gas properties (8,444) (8,640) (10,482)
Deposits paid - 3,000 -
Proceeds on disposal of oil and gas properties 2,262 - -
(Decrease)/increase in capital expenditure related payables (3,068) (2,269) 9,300
Grant funds received 302 - -
Interest received - - 3
Net cash used in investing activities (20,761) (44,916) (55,718)
Financing activities
Net proceeds from issue of shares 3,692 16,317 16,317
Exercise of warrants - - 539
Proceeds from borrowings 10,000 28,000 30,500
Repayment of borrowings (2,058) (3,078) (8,931)
Interest and fees paid on borrowings (1,003) (1,223) (2,218)
Increase in prepayments and deposits - 50 -
Net cash generated from financing activities 10,631 40,066 36,207
Net (decrease)/increase in cash and cash equivalents (2,811) 8,906 7,719
Cash and cash equivalents at beginning of period 8,996 1,811 1,811
Effect of foreign exchange rate changes 3 (130) (534)
Cash and cash equivalents at end of period 6,188 10,587 8,996
ZEPHYR ENERGY PLC
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the six months ended 30 June 2023
1. ACCOUNTING POLICIES
Basis of preparation
This report was approved by the Directors on 29 September 2023.
The financial statements have been prepared in accordance with UK-adopted
International Accounting Standards and with the requirements of the Companies
Act 2006 as applicable to companies reporting under those standards.
The condensed consolidated interim financial statements are presented in
United States Dollar ("US$"). All amounts have been rounded to the nearest
thousand unless otherwise indicated.
The Company is domiciled in the United Kingdom. The Company's shares are
admitted to trading on the AIM market in the UK and the OTCQB Venture Market
("OTCQB") in the U.S.
The current and comparative periods to June have been prepared using the
accounting policies and practices consistent with those adopted in the annual
financial statements for the year ended 31 December 2022, and with those
expected to be adopted in the Group's financial statements for the year ending
31 December 2023.
Comparative figures for the year ended 31 December 2022 have been extracted
from the statutory financial statements for that period which carried an
unqualified audit report, did not contain a statement under section 498(2) or
(3) of the Companies Act 2006 and have been delivered to the Registrar of
Companies.
The financial information contained in this report does not constitute
statutory financial statements as defined by section 434 of the Companies Act
2006, and should be read in conjunction with the Group's financial statements
for the year ended 31 December 2022. This report has not been audited or
reviewed by the Group's auditors.
During the first six months of the current financial year there have been no
related party transactions that materially affect the financial position or
performance of the Group and there have been no changes in the related party
transactions described in the last annual financial report.
Having considered the Group's current cash forecast and projections, the
Directors have a reasonable expectation that the Company and the Group have,
or have access to, sufficient resources to continue operating for at least the
next 12 months. Accordingly, the Directors continue to adopt the going concern
basis in preparing the financial statements.
The principal risks and uncertainties of the Group have not changed since the
publication of the last annual financial report where a detailed explanation
of such risks and uncertainties can be found.
2. DIVIDENDS
The Directors do not recommend the payment of a dividend for the period.
3. GAIN/(LOSS) ON DERIVATIVE CONTRACTS
During the period, the Group entered into hedging transactions to mitigate its
exposure to fluctuations in commodity prices. The net change in these
contracts resulted in a realised net gain of US$1.2 million (30 June 2022: net
loss of US$0.5 million, 31 December 2022: net gain of US$0.5 million) and an
unrealised net gain of US$0.1 million (30 June 2022: net loss of US$0.4
million, 31 December 2022: net gain of US$1.3 million) for the period to 30
June 2023.
4. (LOSS)/PROFIT PER ORDINARY SHARE
Basic (loss)/profit per Ordinary Share is calculated by dividing the net
(loss)/profit for the period by the weighted average number of Ordinary Shares
in issue during the period. Diluted (loss)/profit per Ordinary Share is
calculated by dividing the net (loss)/profit for the period by the weighted
average number of Ordinary Shares in issue during the period, adjusted for the
dilutive effect of potential Ordinary Shares arising from the Company's share
options and warrants.
The calculation of the basic and diluted (loss)/profit per Ordinary Share is
based on the following data:
Unaudited Unaudited Audited
six months six months year ended
ended 30 June ended 30 June 31 December
2023 2022 2022
US$'000 US$'000 US$'000
(Losses)/profits
(Losses)/profits for the purpose of basic and diluted (loss)/profit per
Ordinary Share being net (loss)/profit for the period
(2,321) 17,414 19,271
Number Number Number
'000 '000 '000
Number of shares
Weighted average number of shares for the purpose of basic (loss)/profit per
Ordinary Share
1,558,668 1,505,017 1,533,110
Number of shares
Weighted average number of shares for the purpose of basic (loss)/profit per
Ordinary Share
1,558,668 1,505,017 1,533,110
Dilutive share options - 42,528 42,526
Dilutive warrants - 55,730 55,721
Weighted average number of shares for the purpose of diluted (loss)/profit per
Ordinary Share
1,558,668 1,603,275 1,631,357
(Loss)/profit per Ordinary Share
Basic, cents per share (0.15) 1.16 1.26
Diluted, cents per share (0.15) 1.09 1.18
Due to the losses incurred in the period ended 30 June 2023, there was no
dilutive effect from the share options or warrants.
At 31 December 2022, 2.4 million (30 June 2022: 2.8 million) share options and
89.6 million (30 June 2022: 89.6 million) warrants were excluded from the
diluted number of shares bases on their market share price and exercise price.
5. EXPLORATION AND EVALUATION ASSETS
US$'000
Cost
At 1 January 2022 22,773
Additions 15,213
At 31 December 2022 37,986
Acquisition 1,000
Additions 12,086
Grant funds received (302)
At 30 June 2023 50,770
Carrying amount
At 30 June 2023 50,770
At 31 December 2022 37,986
On 10 February 2023, the Group announced that it had completed the acquisition
of the remaining 25% working interest in the WSU in the Paradox Basin, Utah
from Rockies Standard Oil Company LLC ("RSOC") with the issue of up to
40,449,284 new Ordinary Shares of 0.1 pence at a price of 6.05 pence per new
Ordinary Share. On 10 February 2023, 13,483,095 Ordinary Shares were issued to
settle the initial consideration of US$1 million for the acquisition. A
further 26,966,189 new Ordinary Shares will be issued when the Group makes a
final investment decision relating to the processing plant. See note 8.
6. PROPERTY, PLANT AND EQUIPMENT
Oil and gas properties Plant and machinery
US'000 US'000 Total
US'000
Cost
At 1 January 2022 12,902 27 12,929
Business combination 40,199 - 40,199
Acquisitions 3,362 - 3,362
Additions 9,757 - 9,757
Exchange differences - (3) (3)
At 31 December 2022 66,220 24 66,244
Additions 8,819 - 8,819
Disposal (3,106) - (3,106)
At 30 June 2023 71,933 24 71,957
Accumulated depreciation, depletion and amortisation
At 1 January 2022 1,755 18 1,773
Charge for the period 12,666 2 12,668
Exchange differences - (2) (2)
At 31 December 2022 14,421 18 14,439
Charge for the period 5,608 1 5,609
Disposal (527) - (527)
At 30 June 2023 19,502 19 19,521
Carrying amount
At 30 June 2023 52,431 5 52,436
At 31 December 2022 51,799 6 51,805
7. BORROWINGS
Unaudited Unaudited Audited
six months six months year ended
ended 30 June ended 30 June 31 December
2023 2022 2022
US$'000 US$'000 US$'000
Bridge loan facility - 1,687 -
Term loan 12,926 16,937 14,957
Revolving credit 20,788 9,956 10,436
33,714 28,580 25,393
Maturity analysis
Amounts due within one year* 24,988 15,740 14,572
Amounts due 1 year to 2 years 4,576 4,384 4,471
Amounts due 2 years to 4 years 4,150 8,456 6,350
33,714 28,580 25,393
First International Bank and Trust ("FIBT")
In February 2022, the Group signed a bank facility with First International
Bank & Trust ("FIBT") in the U.S., consisting of a Term loan of US$18
million and a Revolving credit facility of US$10 million, which was increased
to US$13 million in October 2022.
Repayment of the Term loan commenced in April 2022 and is repayable in 48
monthly payments. Interest is charged at a rate of 6.74% per annum.
*The Revolving credit facility was structured with a term of 12 months, and is
thereby classified as short-term debt due for repayment within one year.
However, the facility has provisions for a semi-annual redetermination
process, at which time the bank estimates the value of Zephyr's reserves used
as collateral and renews or revises the amount of available credit provided by
the facility. At 30 June 2023, the full facility of US$13 million had been
drawn and was outstanding. The Group does not expect any changes to the US$13
million in total availability when the bank's next redetermination process
concludes in October 2023. Interest on the Revolving credit facility is
charged at a rate of 9.74% per annum.
Loan fees on both the term loan and revolving credit facility were capitalised
against the loan and are being amortised over the life of the respective
loans.
FIBT has a lien on the assets of the Group's U.S. subsidiaries, Zephyr Bakken
LLC and Rose Petroleum (Utah) LLC.
Slawson asset bridge facility
On 19 December 2022, the Group entered into a facility agreement with an
experienced U.S. based institutional investor. Under the terms of the
agreement the Group received a 12-month revolving credit facility of up to
US$8 million, of which US$7.8 million had been drawn at 30 June 2023.
The facility incurs interest at a rate of 12% and was subject to an
arrangement fee of US$80,000, both of which have been rolled up into the loan
facility.
8. SHARE CAPITAL
Unaudited Unaudited Audited
as at as at as at
30 June 30 June 31 December
2023 2022 2022
Number Number Number
'000 '000 '000
Authorised
Ordinary Shares of 0.1p each 7,779,297 7,779,297 7,779,297
Deferred Shares of 9.9p each 227,753 227,753 227,753
8,007,050 8,007,050 8,007,050
Unaudited Unaudited Audited
as at as at as at
30 June 30 June 31 December
2023 2022 2022
US$'000 US$'000 US$'000
Allotted, issued and fully paid
1,686,501,822 Ordinary Shares of 0.1p each (30 June 2022: 1,560,746,001: 31 2,263 2,107 2,107
December 2022: 1,560,746,001)
227,752,817 Deferred Shares of 9.9p each 40,305 40,305 40,305
42,568 42,412 42,412
The Deferred Shares are not listed on the AIM Market, do not give the holders
any right to receive notice of, or to attend or vote at, any General Meetings,
have no entitlement to receive a dividend or other distribution or any
entitlement to receive a repayment of nominal amount paid up on a return of
assets on winding up nor to receive or participate in any property or assets
of the Company. The Company may, at its option, at any time redeem all of the
Deferred Shares then in issue at a price not exceeding £0.01 from all
Shareholders upon giving not less than 28 days' notice in writing.
As outlined in the Company's 2021 Annual Report it is the Company's intention
to issue nil-cost options to certain Directors and employees to compensate
them for salaries sacrificed during the COVID-19 pandemic. It has not been
possible to issue these nil-cost options to date due to the Company's ongoing
activity over a long period of time which has precluded transactions involving
the Company's securities.
ISSUED ORDINARY SHARE CAPITAL
In February 2022, the Company issued 256,000,000 Ordinary Shares of 0.1 pence
each at a price of 5 pence per Ordinary Share, raising gross proceeds of
US$17.4 million (£12.8 million).
On 5 January 2023, the Company issued 22,272,726 Ordinary Shares of 0.1 pence
each in respect of warrants exercised during the year ended 31 December 2022,
at a price of 2 pence per Ordinary Share, raising gross proceeds of US$0.5
million (£0.45 million).
On 10 February 2023, the Company issued 13,483,095 Ordinary Shares of 0.1
pence each at a price of 6.05 pence per Ordinary Share, in respect of the
initial consideration of US$1 million due in respect of the acquisition of the
remaining 25% working interest in the WSU in the Paradox Basin, Utah from
RSOC.
On 12 June 2023, the Company issued 90 million Ordinary Shares of 0.1 pence
each at a price of 3.5 pence per Ordinary Share, raising gross proceeds of
US$3.9 million (£3.15 million).
Ordinary Deferred Shares
Shares Number
Number '000
'000
At 1 January 2022 1,304,746 227,753
Allotment of shares 256,000 -
At 31 December 2022 1,560,746 227,753
Allotment of shares 125,756 -
At 30 June 2023 1,686,502 227,753
9. POST BALANCE SHEET EVENTS
All matters relating to events occurring since the period end are reported in
the Chief Executive's Statement.
Dr Gregor Maxwell, BSc Hons. Geology and Petroleum Geology, PhD, Technical
Adviser to the Board of Zephyr Energy plc, who meets the criteria of a
qualified person under the AIM Note for Mining and Oil & Gas Companies
- June 2009, has reviewed and approved the technical information contained
within this announcement.
Estimates of resources and reserves contained within this announcement have
been prepared according to the standards of the Society of Petroleum
Engineers. All estimates are internally generated and subject to third party
review and verification.
Glossary of Terms
Reserves: Reserves are defined as those quantities of petroleum which are
anticipated to be commercially recovered from known accumulations from a given
date forward.
1P: proven reserves (both proved developed reserves + proved undeveloped
reserves)
2P: 1P (proven reserves) + probable reserves, hence "proved and probable"
3P: the sum of 2P (proven reserves + probable reserves) + possible reserves,
all 3Ps "proven and probable and possible"
Contingent Resources: Those quantities of petroleum estimated, as of a given
date, to be potentially recoverable from known accumulations by application of
development projects, but which are not currently considered to be
commercially recoverable due to one or more contingencies.
Contingent Resources may include, for example, projects for which there are
currently no viable markets, or where commercial recovery is dependent on
technology under development, or where evaluation of the accumulation is
insufficient to clearly assess commerciality. Contingent Resources are further
categorised in accordance with the level of certainty associated with the
estimates and may be sub-classified based on project maturity and/or
characterised by their economic status.
1C: Low estimate of Contingent Resources
2C: Best estimate of Contingent Resources
3C: High estimate of Contingent Resources
Prospective Resources: Those quantities of petroleum which are estimated, on a
given date, to be potentially recoverable from undiscovered accumulations.
1U: Low estimate of Prospective Resources
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