REG - Zephyr Energy PLC - Half-year Report
26/09/2024 07:00
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RNS Number : 7126F Zephyr Energy PLC 26 September 2024
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.
26 September 2024
Zephyr Energy plc
("Zephyr", the "Company" or the "Group")
Interim Results for the six months ended 30 June 2024
Zephyr Energy plc (AIM: ZPHR) (OTCQB: ZPHRF), the Rocky Mountain oil and gas
company focused on responsible resource development and carbon-neutral
operations, reports its unaudited interim results for the six months ended 30
June 2024 ("H1 2024").
Overview
During H1 2024, and in the period since, Zephyr continued to invest
significant capital into the development of its flagship operated project in
the Paradox Basin, Utah, U.S. (the "Paradox project") primarily by drilling
the State 36-2R LN-CC well (the "State 36-2R well") and conducting the
subsequent successful production tests on the well. This investment activity
was in line with the Company's strategy of generating and compounding cash
flow from its non-operated portfolio in the Williston Basin (the "Williston
project"), which fully funds all general and administrative ("G&A") and
finance costs and allows for continued investment in its Paradox and Williston
projects.
The Company's board of directors (the "Board" or "Directors") is highly
encouraged by progress made on the Paradox project during the year to date and
remains focused on bringing the Paradox project into commercial production
while maximising potential returns for the shareholders of the Company (the
"Shareholders"). To accelerate this process, the Company is focused on
executing asset-level and/or wellbore investment opportunities with U.S.-based
institutional investors, and discussions on this front are now at an advanced
stage. The Company will update the market on the progress of these discussions
in the near-term.
HIGHLIGHTS
Financial
· Revenue for H1 2024 increased to US$13.6 million, net to Zephyr, and
was driven by the Company's hydrocarbon production from the Williston project:
o Revenue for H1 2024 was higher than that in the six months ended 30 June
2023 ("H1 2023") of US$13.4 million. The increased revenues reflected the
addition of production from the six wells operated by Slawson Exploration
Company (the "Slawson wells") and was partially offset by standard production
decline rates from the underlying assets.
· H1 2024 gross profit (including operating and transportation expenses,
production taxes and realised gains from hedging contracts, and excluding
depreciation, depletion and amortisation ("DD&A")) increased to US$10.0
million (H1 2023: US$9.4 million), demonstrating the strong cashflows and high
margins generated by the non-operated production during the period, covering
the entirety of the Company's G&A and finance costs and providing net cash
for reinvestment.
· H1 2024 net sales volumes averaged 1,239 barrels of oil equivalent
per day ("boepd"), for a total of 225,622 barrels of oil equivalent ("boe")
net to Zephyr, over the period.
· Adjusted earnings before interest, tax, DD&A, unrealised foreign
exchange gains, share based payments and unrealised losses on hedging
contracts (together "Adjusted EBITDA") for H1 2024 were US$7.1 million.
· At 30 June 2024, the combined carrying value of the Paradox project
and Williston project was US$98.0 million, demonstrating the scale of the
Company's asset portfolio.
· The Company's gross borrowings at 30 June 2024 were US$29.2 million, a
reduction from US$33.7 million at the end of H1 2023. By 6 September 2024,
gross borrowings had been reduced further to US$27.9 million.
· During H1 2024, the Company embarked on the drilling of the State
36-2R well which was almost entirely funded by proceeds from its well control
insurance policy for the State 36-2 LN-CC well (the "State 36-2 well"). The
well control insurance policy requires Zephyr to make payments in advance,
prior to making claims for reimbursement. As a result, cash balances during H1
2024 fluctuated considerably depending on the level of operational activity
and timing of the reimbursement cycle, including at 30 June 2024 when drilling
operations were particularly active. To date, US$15.3 million has been
reimbursed to Zephyr in respect of the State 36-2 well control insurance
policy, which relates to activity from the well control incident on the State
36-2 well and the State 36-2R well drilling programme.
· At 24 September 2024 (the most practicable date prior to this
statement), the Company had cash balances of US$1.3 million. In addition, the
Company expects to receive the following payments over the next few days:
o Reimbursement of circa US$3.0 million from its insurer. The invoices
relating to the US$3.0 million claim have already been paid in full by the
Company.
o A revenue payment of circa US$0.9 million related to a portion of its
non-operated portfolio.
· Over the coming months, Zephyr expects to submit final claims under
the well control insurance policy of circa US$1.3 million for which it also
expects to be fully reimbursed.
Paradox project (operated asset)
· State 36-2R well drilled and all key drilling objectives met:
o Drilling operations safely and successfully completed to total depth;
o Well successfully 'twinned' to the State 36-2 well and intersected the
same Cane Creek reservoir natural fracture system;
o Confirmed the presence of flowing hydrocarbons; and
o Substantially all drilling costs of the State 36-2R well to be recovered
though the Company's well control insurance policy.
· Following the completion of the State 36-2R well, two successful
production tests were carried out on the well.
o Peak production rates achieved during testing were over 2,100 boepd, a
significant production rate for an onshore U.S. well with only 130 feet of
completed reservoir interval.
o The acidisation operation used on the well successfully removed
near-wellbore formation damage and generated very high reservoir
deliverability, with a notable improvement to near-wellbore reservoir
permeability. As such, the operation not only removed formation damage caused
by the State 36-2 well but also enhanced reservoir productivity.
o This was the first known example of acidisation stimulation in the Paradox
Basin, and the result is highly positive for the development of the play, with
the potential for substantially reduced reservoir risk and removal of the need
for costly hydraulic stimulation as used in other U.S. onshore resource plays.
o Higher than expected liquid yields from the State 36-2R well and almost
zero water production could also materially enhance the economics of the well
and positively impact the future Paradox project development.
o Given the positive observations, Zephyr has commenced the process of
discussing potential well and wider Paradox project development opportunities
with U.S. based industry partners to accelerate additional appraisal and
development of the Paradox project.
o The Company is evaluating the potential to lengthen the completed
reservoir interval by drilling a lateral from the existing wellbore, which
would serve to increase overall estimated ultimate recoveries and drain a
larger portion of the reservoir. This analysis is expected to be completed
shortly.
Williston project (non-operated assets)
· Zephyr continues with its strategy of building and developing a
portfolio of working interest positions in value accretive, high-quality,
high-margin production assets with significant near-term growth potential in
the Williston Basin.
o The Company has continued to deploy capital into new drilling
opportunities on its existing acreage, including two recently drilled wells
operated by Continental Resources in the Harms field in North Dakota, U.S.
· H1 2024 sales volumes averaged 1,239 boepd (or 225,622 boe), net to
Zephyr, over the six-month period.
· H1 2024 revenue, net to Zephyr, totalled US$13.6 million.
· H1 2024 gross profit (including operating and transportation expenses,
production taxes and realised gains from hedging contracts, and excluding
DD&A) increased to US$10.0 million (H1 2023: US$9.4 million),
demonstrating the strong cashflows and high margins generated by the
non-operated production during the period, covering the entirety of the
Company's G&A and finance costs and providing net cash for reinvestment.
· At 30 June 2024, 231 wells in Zephyr's portfolio were available for
production. Net working interests across the Company's portfolio now average
7.1% per well, equivalent to 16.3 gross wells in total.
Corporate
· There were no reported health or safety incidents during H1 2024.
· In May 2024, the Company retired US$3.88 million of existing debt
through the issuance of US$3.88 million of equity comprised of 64,045,768
new Ordinary Shares of 0.1 pence each in the Company ("Ordinary Shares") at
a price of 4.85 pence per new Ordinary Share.
· In May 2024, the Group announced that it had been awarded an
additional US$0.25 million of grant funding from the U.S. Department of
Energy (the "DOE") for operations on the State 36-2R well. This brings the
total DOE grant funding made available to the Group to US$3.65 million in
recent years.
· In April 2024, during its standard semi-annual borrowing base
redetermination process, Zephyr's commercial lender (First International Bank
and Trust) increased the Company's overall borrowing base by US$5.6 million
due to the newly added production from the Slawson wells. The addition to the
borrowing base was in the form of a new term loan which will amortise monthly
over four years and has an interest rate of 10% per annum. Proceeds from the
new term loan were used to fully retire the Company's remaining 12%
acquisition credit facility.
Colin Harrington, Chief Executive of Zephyr, said:
"H1 2024 was an active time for Zephyr, during which we invested a significant
amount of capital into the Paradox project with the drilling of the State
36-2R well and the subsequent production tests. We were delighted with the
results from this activity and over the coming months we will continue with
the work required to transform the Paradox project into a revenue generating
asset. On a related note, we are in advanced conversations with U.S.-based
institutions regarding wellbore and asset-level investment opportunities, and
look forward to updating the market in the near-term regarding our proposed
next steps for the Paradox project.
"Our Williston project continues to perform as a robust cash flowing engine
for the Company, funding our G&A and debt service costs in addition to
providing capital for the Paradox project and growth in the Williston (where
production has increased for four consecutive quarters). We also look forward
to progressing the Salt Wash hydrocarbon and helium project located in close
proximity to the Paradox project.
"I would like to extend my appreciation to the Zephyr team and our contractors
on site in Utah for their intensive, safe and successful efforts. I would also
like to extend my gratitude to my fellow Board members, advisors and, most
importantly, our Shareholders for their continued support.
"We have an exciting period ahead of us and I believe, more than ever, that we
have the pieces in place to enable us to deliver on our strategic objectives
successfully."
Contacts Tel: +44 (0)20 7225 4590
Zephyr Energy plc
Colin Harrington (CEO)
Chris Eadie (Group Finance Director and Company Secretary)
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 Liberum Limited - Joint-Broker Tel: +44 (0) 20 7886 2500
Mark Murphy / Kieron Hodgson / James Sinclair-Ford
Celicourt Communications - PR
Mark Antelme / Felicity Winkles / Ali AlQahtani Tel: +44 (0) 20 7770 6424
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 46,000-acre lease holding 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 2024
The Board is pleased to present Zephyr's unaudited interim report for the
six-month period to 30 June 2024.
REVIEW OF ACTIVITIES
OVERVIEW
During H1 2024, and in the period since, Zephyr continued to invest
significant capital into the development of its flagship operated project in
the Paradox Basin, Utah, U.S. (the "Paradox project") where it recently
drilled the State 36-2R LN-CC well (the "State 36-2R well") and conducted
subsequent successful production tests on the well.
This investment activity was in line with the Company's strategy of generating
and compounding cash flow from its non-operated portfolio in the Williston
Basin (the "Williston project"), which fully funds all G&A and finance
costs, and allows for continued investment in its Paradox and Williston
projects.
The Company's board of directors (the "Board" or "Directors") is highly
encouraged by progress made on the Paradox project during the year to date and
is now considering multiple options to bring the Paradox project into
commercial production and maximise potential returns for shareholders of the
Company ("Shareholders"). Various options are under review to achieve this,
and we are in advanced conversations with U.S.-based institutions regarding
wellbore and asset-level investment opportunities. We look forward to updating
the market in the near-term regarding our proposed next steps for the Paradox
project.
The Board remains 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.
PARADOX PROJECT
The main operational focus in H1 2024 was the drilling of the State 36-2R well
and the follow-on production tests on the well.
State 36-2R well
In February 2024, the Company announced that it had received the regulatory
approvals and permits required to proceed with the drilling of the State 36-2R
well and in March 2024, following a detailed selection process, Zephyr
announced that it had signed a rig contract with Helmerich & Payne for
its Rig 257 to drill the well.
The key objectives of the State 36-2R well were:
· To successfully complete drilling operations to total depth safely and
without harm to people, the environment or equipment;
· To successfully twin the State 36-2 well and intersect the same Cane
Creek reservoir natural fracture system identified by it;
· To confirm the presence of hydrocarbons as found by the State 36-2R
well, and further appraise the Cane Creek reservoir at Zephyr's federal
White Sands Unit ("WSU"); and
· Should the original well result be replicated, to assess the reservoir
productivity by flow testing the new well.
In April 2024, the Company announced that full drilling operations had
commenced and in June 2024, Zephyr announced that the State 36-2R well had
been completed safely and successfully, with the well drilled to a total depth
of 10,290 feet (measured depth) where it intersected the same Cane Creek
reservoir within 15 feet of the original well.
Analysis from the drilling indicated that the State 36-2R well, like the State
36-2 well, penetrated a folded and naturally fractured section of the Cane
Creek reservoir. The well encountered drilling mud gas shows of a similar
magnitude to the State 36-2 well and pore pressure analysis suggested
formation pressures estimated at approximately 9,300 pounds per square inch
(which is broadly consistent with previously drilled offset wells).
The well further confirmed the presence of hydrocarbons within a large
structural compartment, within Zephyr's acreage and 3D seismic coverage.
Following the successful drilling operation, Zephyr then proceeded with the
production tests on the well to determine reservoir pressure, fluid
composition, well flow rate, bulk reservoir permeability and deliver an early
estimate of the overall potential recoverable resources.
The Group has full well control insurance coverage for the State 36-2R
drilling operations and expects to recover substantially all costs associated
with the drill under the well control insurance policy it had in place for the
State 36-2 well. To date, the Company has received US$15.3 million under the
State 36-2 well control insurance policy with a further US$3.0 million
submitted for approval and reimbursement, and an estimated final US$1.3
million to be paid and submitted for reimbursement over the coming months.
State 36-2R well production tests
On 23 July 2024 the Company announced that it had successfully completed the
initial phase of the well production test on the State 36-2R well, in which
the well was tested at multiple rates and choke settings to ascertain its
production potential.
Initial production test observations are very encouraging, including:
· High reservoir deliverability and high initial reservoir pressures;
· Peak production rates achieved during the production test were 1,350
boepd, at which level the well was still choked back and constrained; and
· Significantly higher condensate-yield than Zephyr's previously drilled
Paradox project well (with more than a three-fold increase in condensate rate
versus that from the State 16-2LN-CC well).
o Condensate yield peaked at over 600 barrels of condensate per
day. Condensate produced had an average American Petroleum Institute gravity
of 58 degrees, making it a highly desirable barrel for Utah's refinery market.
The condensate produced from the well to date was sold to a Utah refinery
at a price close to current WTI crude oil prices (inclusive of trucking
costs).
o This elevated liquid yield has the potential to be a significant driver of
improved economics and may increase recoverable liquid volumes across the
Company's WSU.
o Almost zero evidence of water production, another potential boost to the
well's economics by reducing the need for water disposal.
While the initial test was successful on multiple fronts, there was also
evidence that the natural fracture network could be partially obstructed from
the greater reservoir at this well location. The Company therefore decided to
acidise the well to further remove any drilling mud emulsions from the natural
fracture network and maximise the well's connectivity with the larger
reservoir.
On 6 September 2024, following the completion of the acidisation process and
the follow up testing, the Company announced the following results from the
second production test:
· Peak production rates achieved during the second test were over 2,100
boepd, a significant production rate for an onshore U.S. well with only 130
feet of completed reservoir interval.
· The acidisation operation successfully removed any remaining
near-wellbore formation damage and generated very high reservoir
deliverability, with a notable improvement to near-wellbore reservoir
permeability after each acid treatment. As such, the operation not only
removed damage but also enhanced reservoir productivity.
· This was the first known example of acidisation stimulation in the
Paradox Basin, and the result was highly positive for the development of the
play, with the potential for substantially reduced reservoir risk and removal
of the need for costly hydraulic stimulation as used in other U.S. onshore
resource plays.
· Variable liquid-yields were observed over the second test, all of
which were higher than that at the Company's State 16-2 well. At the peak
production rates in the second test, condensate/light volatile oil represented
approximately 510 boepd, and these liquid yields were on an increasing trend
at the conclusion of the test.
o The elevated liquid yield has the potential to be a significant driver of
improved economics and may increase recoverable liquid volumes across the
Company's Paradox project acreage.
o A detailed fluid laboratory analysis is currently underway, and the
results will help the Company further characterise the field's fluid fill and
composition.
· Continued evidence of almost zero water production, another potential
boost to the well's economics by material reducing the need for expensive
water disposal.
· Given the highly positive observations, Zephyr has commenced the
process of discussing potential well and wider Paradox project development
opportunities with U.S. based industry partners in an effort to accelerate
additional appraisal and development of the Paradox project.
Results from the second test had multiple positive implications, because in
addition to cleaning up any remaining formation damage, the acidisation
operation appears to have had the unanticipated benefit of significantly
enhancing near-wellbore reservoir quality (by dissolving calcite and dolomite
minerals known to exist in the reservoir, creating higher porosity and
permeability where those minerals have been dissolved away). The Company has
previously observed widespread minor fracturing in the reservoir cores of the
State 16-2 well and other Cane Creek wells. Zephyr's initial analysis suggests
that acidisation could materially enhance the permeability of the overall
reservoir matrix, including the minor fracturing (which may be present across
the Company's entire Paradox project acreage position) as well as any major
fracture networks encountered.
This implies that acidisation, when utilised across a longer lateral, may
offer a cost-effective completion technique compared to the hydraulic
stimulation operation used in other U.S. resource plays. This alternative
completion technique could also offer a broader and lower risk method for the
long-term development of the Paradox project versus solely targeting major
natural fracture networks (the historical development approach in this part of
the Paradox Basin).
Now that the second test has been completed, the State 36-2R well has been
temporarily shut in as per standard operations while the operations team
evaluates the new data. A key consideration is whether to produce the well in
the short term, or to defer production temporarily to extend the wellbore and
increase overall hydrocarbon recovery potential. While the well is capable of
considerable production rates in its current form, it would be doing so from
only a 130-foot completed interval which could make it more difficult to
extend the well in the future due to depletion in the near well bore area.
The well is permitted for up to a 10,000-foot lateral extension, and any
future lateral extension would be expected to benefit both from greater
connected volumes and the material positive impact acidisation could have on
the high deliverability of this play.
Next steps
Given the positive results from the production test and the implications for
the Paradox project, the Board has launched a process to identify an industry
or asset-level financial partner to accelerate further appraisal and field
wide development.
This could come in the form of a farm-in with an industry operator, a joint
venture with a non-operator investor, or asset level funding. The Board now
believes that the data generated from drilling the State 16-2, State 36-2 and
State 36-2R wells, combined with the significant technical analysis developed
from the Paradox project over the past four years (including extensive 3D
seismic, core samples, log data, stimulation data and the recent production
test results) provides a robust dataset for prospective partners to evaluate.
In addition, with the new data generated from the second test and that from
the Company's other Paradox wells, Zephyr will move as quickly as possible to
produce an updated Competent Person's Report on the Company's Paradox project
acreage.
Salt Wash hydrocarbon and helium project
In October 2023, the Group announced that it had opted to farm-in to the
neighbouring Salt Wash Field to increase the Group's oil and gas resource
potential, and to achieve exposure to the U.S. industrial helium market (the
"farm-in"). The farm-in agreement is to a minimum 75% working interest in a
1,047-acre leasehold position which lies three miles to the south of the
Group's WSU.
The Board is continually looking at ways to increase the scale, optionality
and attractiveness of the Paradox project, and the Board views the farm-in as
a natural extension to the Paradox project.
While helium is a new addition to the Company's current resource exposure,
many nearby Paradox Basin oil and gas operators are already producing
commingled helium in commercial quantities, with an active local offtake
market for produced helium.
While Zephyr is not seeking for helium to become the Company's primary focus,
the Board is cognisant that it may offer optionality and represent a
value-added opportunity for Shareholders.
The field has an already discovered, proven helium resource in the Leadville
Formation, with further opportunity for upside through two deeper helium
exploration targets.
The Group's management forecasts the Salt Wash project to include:
· Net helium discovered resource potential of 0.07 to 0.19 bcf (Lower
Leadville Formation only);
· Net helium un-risked, prospective resource of a further 0.04 to 0.66
bcf (including exploration targets); and
· An estimated net present value at a 10% discount rate ("NPV-10") of
circa US$58.0 million with the risked upside case having an NPV-10 of
circa US$120.0 million (using US$650 per thousand standard cubic feet
("mscf") and US$750/mscf pricing, respectively).
Under the terms of the farm-in agreement, total payments of US$0.6 million
were made to the incumbent leaseholder and it is the Group's intention that
the dual-purpose Leadville Formation delineation well (the "Commitment Well")
will be drilled. The Commitment Well would also test the two additional
helium exploration targets and other potential hydrocarbon bearing reservoirs.
In August 2024, the Company announced that initial operations at the site of
the proposed Commitment Well had commenced, including drilling pad preparation
and fencing the perimeter of the site and that a spudder drilling rig will be
mobilised to the well location and a 30-inch hole will then be drilled to a
depth of approximately 100 feet and 20-inch conductor casing will be set.
While activity on the pad has begun, the Company does not expect full drilling
operations to commence until the first half of 2025, in line with its
operational commitments to the field leaseholders.
Zephyr remains in active conversations with industry and financial investors
regarding the potential funding of up to 100% of the costs of the well at the
asset level, and the Board continues to appraise the available options with
the key objective of maximising value for Shareholders.
WILLISTON PROJECT
Overview
Zephyr's non-operated Williston project was established in 2021 and today,
following multiple 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.
The Group's non-operated portfolio continues to perform above the Board's
initial expectations, and cashflows generated from the portfolio continue to
be recycled into the Paradox project development programme and into additional
Williston Basin drilling opportunities, in addition to covering Zephyr's
G&A and funding costs.
At 30 June 2024, Zephyr had working interests in 231 wells that were available
for production. Net working interests across the Company's portfolio now
average 7.1% per well, equivalent to 16.3 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 and Slawson
Exploration Company (the "Slawson wells"), leading Williston
Basin producers.
The Company will continue to develop and grow its non-operated portfolio
through opportunistic acquisitions.
H1 2024 performance
· H1 2024 sales volumes averaged 1,239 barrels boepd, or 225,672 boe,
net to Zephyr, over the six-month period.
· H1 2024 revenue, net to Zephyr, totalled US$13.6 million.
· H1 2024 gross profit (including operating and transportation expenses,
production taxes and realised gains from hedging contracts, and excluding
DD&A) increased to US$10.0 million (H1 2023: US$9.4
million), demonstrating the strong cashflows and high margins generated by
the non-operated production during the period, covering the entirety of the
Company's G&A and finance costs and providing net cash for reinvestment.
Slawson wells
In December 2022, Zephyr announced the acquisition of working interests in six
Slawson wells (equivalent to 1.1 total wells). Zephyr's working interest in
the six wells ranges from 11% to 32% and management estimates 2P Reserves
acquired were circa 550,000 boe, net to Zephyr.
The wells initially came online in November 2023, although production from the
Slawson wells was temporarily curtailed in mid-December 2023 due to adverse
weather conditions and infrastructure constraints. Production resumed in
late January 2024.
During H1 2024, production from the Slawson wells continued to be partially
impacted by gas export infrastructure constraints. The Slawson wells averaged
stable production of approximately 525 boepd in the second quarter of 2024,
with minimal signs of decline due to the constrained status of the wells.
While the delays and constraints in production from the Slawson wells did
impact sales volumes in early H1 2024, management believes that overall
performance from the wells will meet expectations, and the wells have served
to increase to the Group's overall production in 2024 to date.
Further production additions
During February 2024, ten wells in which Zephyr invested and which are
operated by Continental Resources (Harms Federal and Quale Federal) were
placed in production. Early production data shows these wells performing ahead
of management expectations, adding initial production rates, net to Zephyr, of
circa 75 boepd. The Company has recently consented to participate in two
additional wells which have recently been drilled on the same acreage.
Hedging
In H1 2024 the Company hedged 51,500 barrels of oil.
· 45,500 barrels of oil were hedged at a weighted-average price of
US$81.67 per barrel of oil.
· 6,000 barrels of oil were hedged by way of financial collar options
which enabled the Company to lock-in a minimum price for these barrels of oil.
These collar options gave the Company a minimum price of US$74.0 per barrel of
oil.
The Company will continue to evaluate its commodity price risk management
strategy on a regular basis.
Outlook
Zephyr forecasts a range of 1,100-1,300 boepd for its 2024 full year
non-operated production forecast, an increase from 1,040 boepd in the previous
year.
FINANCIAL REVIEW
The financial information is reported in United States Dollars ("US$").
Income Statement
· The Company reports revenue for H1 2024 of US$13.6 million, net to
Zephyr, (H1 2023: US$13.4 million). Revenue relates to the Company's
hydrocarbon production from the non-operated Williston project. The increase
in revenue from H1 2023 reflects the impact of the Slawson wells coming
online, partially offset by the standard decline rates expected from the
Williston assets.
· H1 2024 gross profit (including operating and transportation expenses,
production taxes and realised gains from hedging contracts, and excluding
DD&A) increased to US$10.0 million (H1 2023: US$9.4 million),
demonstrating the strong cashflows generated by the non-operated production
during the period, covering the entirety of the Company's G&A and finance
costs and providing net cash for reinvestment.
· Adjusted earnings before interest, tax, DD&A, unrealised foreign
exchange gains, share-based payments and unrealised losses on hedging
contracts (together "Adjusted EBITDA") for H1 2024 was US$7.1 million (H1
2023: US$6.5 million).
· In H1 2024, there was a DD&A charge of US$5.4 million (H1 2023:
US$5.6 million), a non-cash accounting charge related to the asset depletion
of the Williston project.
· H1 2024 net loss after tax was US$3.0 million or a loss of 0.18 cents
per Ordinary Share (H1 2023: net loss after tax of US$2.3 million or a loss of
0.15 cents per Ordinary Share).
· Administrative expenses for the six months ended H1 2024 were US$2.9
million (H1 2023: US$3.0 million). Administrative expenses are in line with
those in H1 2023. Costs continue to be closely controlled and monitored
regularly by executive management and cash management is a continuing priority
of the Board.
· H1 2024 net loss was enhanced by a non-cash share-based payment charge
of US$3.2 million which relates to the issue of 61,503,028 options over
Ordinary Shares in April 2024. The options were issued to Directors, certain
employees and consultants of Zephyr, either to reflect historic awards under
the Company's Long-Term Incentive Plan, bonuses for performances achieved in
2021 and 2022, to satisfy employee contractual commitments or commitments in
lieu of deferred remuneration and fees from 2020, during the COVID-19
pandemic. Due to legal and regulatory restrictions it was not possible to
issue these share options until April 2024 although the majority of these
awards were fully disclosed and provided for by the Company in its historical
financial statements. No cash or share-based bonuses were awarded to senior
management or the Board in respect of the 2023 financial year.
· Without the non-cash share-based payment charge in H1 2024 of US$3.2
million, the Company would have made a profit before tax for the period of
circa US$0.1 million versus a loss of US$3.2 million in H1 2023.
Balance Sheet
· Exploration and evaluation assets at 30 June 2024 were US$52.2 million
(30 June 2023: US$50.8 million) which reflects the Company's ongoing
investment into the Paradox project, including some costs for the State 36-2R
well. It should be noted that substantially all the costs of the State 36-2R
drilling programme were covered under the Company's well control insurance
policy for the State 36-2 well.
· Property and equipment assets at 30 June 2024 were US$45.8 million (30
June 2023: US$52.4 million) which reflects the Company's ongoing investment in
its non-operated portfolio of oil and gas properties offset by depletion
charges.
· Cash and cash equivalents as at 30 June 2024 were US$1.1 million (30
June 2023: US$6.2 million). Cash balances during H1 2024 fluctuated
considerably primarily due to well control insurance policy for the State 36-2
well. The well control insurance policy, which has almost entirely covered the
drilling costs of the State 36-2R well, requires Zephyr to make payments in
advance, prior to making claims for reimbursement. As a result, cash levels
during H1 2024 were therefore highly dependent on the level of operational
activity and timing of the reimbursement cycle, including at 30 June 2024 when
drilling operations were particularly active. To date, US$15.3 million has
been reimbursed to Zephyr in respect of the State 36-2 well control insurance
policy, which relates to activity from the well control incident on the State
36-2 well and the State 36-2R well drilling programme.
· At 24 September 2024 (the most practicable date prior to this
statement), the Company had cash balances of US$1.3 million. In addition, the
Company expects to receive the following payments over the next few days:
o Reimbursement of circa US$3.0 million from its insurer. The invoices
relating to the US$3.0 million claim have already been paid in full by the
Company.
o A revenue payment of circa US$0.9 million in relation to a portion of its
non-operated portfolio.
· Over the coming months, Zephyr expects to submit final claims under
the well control insurance policy of circa US$1.3 million for which it also
expects to be fully reimbursed.
· The Company's gross borrowings as at 30 June 2024 were US$29.2 million
(30 June 2023: US$33.7 million) During H1 2024 the Company met all its funding
obligations in respect of the outstanding borrowings. Gross borrowings on 6
September 2024 were US$27.9 million.
CORPORATE
· There were no reported health or safety incidents at Zephyr operated
assets during the reporting period.
· In May 2024, the Company retired US$3.88 million of existing debt
through the issuance of US$3.88 million of equity comprised of 64,045,768
new Ordinary Shares at a price of 4.85 pence per new Ordinary Share. The issue
price of the Ordinary Shares was the undiscounted mid-market closing price of
the Company's Ordinary Shares on 2 May 2024. The Ordinary Shares were issued
to SGR Investments LLC ("SGRI"), a US-based institutional investor.
In December 2022, SGRI provided debt funding to Zephyr Williston LLC, one of
the Group's subsidiaries, to enable it to acquire the Slawson wells.
· In May 2024, the Group announced that it had been awarded an
additional US$0.25 million of grant funding from the U.S. DOE for operations
on the State 36-2R well. This brings the total DOE grant funding made
available to the Group to US$3.65 million in recent years.
· In June 2024, the Group announced a new US$5.6 million term loan. The
new term loan will amortise monthly over four years and has an interest rate
of 10% per annum. Proceeds from the new term loan were used to repay the 12%
acquisition credit facility, which has now been fully repaid.
OUTLOOK
H1 2024 was an active time for Zephyr, during which we invested significant
new capital into the Paradox project with the drilling of the State 36-2R well
and the subsequent production tests. We were delighted with the results from
this activity and over the coming months we will continue with the work
required to transform the Paradox project into a revenue generating
development.
The Williston project continues to perform as a robust cash flowing engine for
the Company, funding our G&A costs and providing capital for further
development of the Paradox and Williston projects. We also look forward to
progressing the Salt Wash oil, gas and helium project and securing asset level
funding for the initial well.
I would like to extend my appreciation to the Zephyr team and our contractors
for their ongoing work, and I would also like to extend my gratitude to my
fellow Board members, leadership team, advisors and most importantly, our
Shareholders for their continued support.
We have an exciting period ahead of us and I believe, more than ever, that we
have the pieces in place to enable us to deliver on our strategic objectives
successfully.
Colin Harrington
Chief Executive Officer
26 September 2024
ZEPHYR ENERGY PLC
CONDENSED CONSOLIDATED INCOME STATEMENT
For the six months ended 30 June 2024
Unaudited Unaudited Audited
six months six months year ended
ended 30 June ended 30 June 31 December
2024 2023 2023
Notes US$'000 US$'000 US$'000
Revenue 13,591 13,407 25,225
Operating and transportation expenses (2,622) (4,085) (6,964)
Production taxes (1,110) (1,065) (1,878)
Depreciation, depletion and amortisation (5,364) (5,608) (9,607)
(Loss)/gain on derivative contracts 3 (101) 1,305 412
Gross profit 4,394 3,954 7,188
Administrative expenses (2,897) (2,969) (5,997)
Share-based payments (3,157) (6) (6)
Foreign exchange gains/(losses) 360 (2,595) (2,776)
Finance income 1 - -
Finance costs (1,764) (1,550) (3,472)
Loss on ordinary activities before taxation (3,063) (3,166) (5,063)
Taxation credit 51 845 1,560
Loss for the period attributable to owners of the parent company
(3,012) (2,321) (3,503)
Loss per Ordinary Share
Basic and diluted, cents per share 4 (0.18) (0.15) (0.21)
ZEPHYR ENERGY PLC
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the six months ended 30 June 2024
Unaudited Unaudited Audited
six months six months year ended
ended 30 June ended 30 June 31 December
2024 2023 2023
US$'000 US$'000 US$'000
Loss for the period attributable to owners of the parent company
(3,012) (2,321) (3,503)
Other comprehensive (loss)/income
Items that may be subsequently reclassified to profit or loss
Foreign currency translation differences on foreign operations (358) 2,618 2,772
Total comprehensive (loss)/income for the period attributable to owners of the
parent company
(3,370) 297 (731)
ZEPHYR ENERGY PLC
CONDENSED CONSOLIDATED BALANCE SHEET
As at 30 June 2024
Unaudited Unaudited Audited
as at as at as at
30 June 30 June 31 December
2024 2023 2023
Notes US$'000 US$'000 US$'000
Non-current assets
Exploration and evaluation assets 5 52,189 50,770 49,941
Property and equipment 6 45,790 52,436 50,840
97,979 103,206 100,781
Current assets
Trade and other receivables 11,507 7,342 7,897
Cash and cash equivalents 1,093 6,188 3,611
Derivative contracts 83 1,440 278
12,683 14,970 11,786
Total assets 110,662 118,176 112,567
Current liabilities
Trade and other payables (7,576) (12,757) (6,983)
Borrowings 7 (20,709) (24,988) (28,950)
Lease liabilities (39) - (39)
Derivative contracts (54) - -
(28,378) (37,745) (35,972)
Non-current liabilities
Borrowings 7 (8,460) (8,726) (6,401)
Lease liabilities (11) - (31)
Deferred tax (344) (1,110) (395)
Provisions (5,084) (4,874) (5,067)
(13,899) (14,710) (11,894)
Total liabilities (42,277) (52,455) (47,866)
Net assets 68,385 65,721 64,701
Equity
Share capital 8 42,648 42,568 42,568
Share premium account 75,292 71,727 71,735
Warrant reserve 1,557 1,557 1,557
Share-based payment reserve 6,489 3,485 3,270
Cumulative translation reserves (13,570) (13,366) (13,212)
Accumulated deficit (44,031) (40,250) (41,217)
Equity attributable to owners of the parent company
68,385 65,721 64,701
ZEPHYR ENERGY PLC
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the six months ended 30 June 2024 (Unaudited)
Share premium account Share-based payment reserve Cumulative translation reserve
Share capital Warrant reserve Accumulated deficit
Total
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
As at 1 January 2024 42,568 71,735 1,557 3,270 (13,212) (41,217) 64,701
Transactions with owners in their capacity as owners:
Issue of equity shares 80 3,817 - - - - 3,897
Expenses of issue of equity shares
(49) 49 -
Warrant exercise extension
- (211) - 211 - - -
Share-based payments - - - 3,157 - - 3,157
Transfer to accumulated deficit in respect of lapsed options
- - - (88) - 88 -
Transfer to accumulated deficit in respect of expired options
- - - (107) - 107 -
Transfer to accumulated deficit in respect of exercised warrants
- - - (3) - 3 -
Total transactions with owners in their capacity as owners
80 3,557 - 3,219 - 198 7,054
Loss for the period - - - - - (3,012) (3,012)
Other comprehensive loss:
Currency translation differences
- - - - (358) - (358)
Total other comprehensive loss for the period
- - - - (358) - (358)
Total comprehensive loss for the period
- - - - (358) (3,012) (3,370)
As at 30 June 2024 42,648 75,292 1,557 6,489 (13,570) (44,031) 68,385
ZEPHYR ENERGY PLC
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2023 (Audited)
Share premium account Share-based payment reserve Cumulative translation reserve
Share capital Shares to be issued Warrant reserve Accumulated deficit
Total
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
As at 1 January 2023 42,412 66,847 539 1,557 3,284 (15,984) (37,929) 60,726
Transactions with owners in their capacity as owners:
Issue of equity shares 156 5,318 - - - - - 5,474
Exercise of warrants - - (539) - - - - (539)
Expenses of issue of equity shares
- (430) - - 195 - - (235)
Share-based payments - - - - 6 - - 6
Transfer to accumulated deficit in respect of expired options
- - - - (215) - 215 -
Total transactions with owners in their capacity as owners
156 4,888 (539) - (14) - 215 4,706
Loss for the year - - - - - - (3,503) (3,503)
Other comprehensive income:
Currency translation differences
- - - - - 2,772 - 2,772
Total other comprehensive income for the year
- - - - - 2,772 - 2,772
Total comprehensive loss for the year
- - - - 2,772 (3,503) (731)
As at 31 December 2023
42,568 71,735 - 1,557 3,270 (13,212) (41,217) 64,701
ZEPHYR ENERGY PLC
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the six months ended 30 June 2023 (Unaudited)
Share premium account Share-based payment reserve Cumulative translation reserve
Share capital Shares to be issued Warrant reserve Accumulated deficit
Total
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
As at 1 January 2023 42,412 66,847 539 1,557 3,284 (15,984) (37,929) 60,726
Transactions with owners in their capacity as owners:
Issue of equity shares 156 5,310 - - - - - 5,466
Exercise of warrants - - (539) - - - - (539)
Expenses of issue of equity shares
- (430) - - 195 - - (235)
Share-based payments - - - - 6 - - 6
Total transactions with owners in their capacity as owners
156 4,880 (539) - 201 - - 4,698
Loss for the period - - - - - - (2,321) (2,321)
Other comprehensive income:
Currency translation differences
- - - - - 2,618 - 2,618
Total other comprehensive income for the year
- - - - - 2,618 - 2,618
Total comprehensive income for the period
- - - - 2,618 (2,321) 297
As at 30 June 2023 42,568 71,727 - 1,557 3,485 (13,366) (40,250) 65,721
ZEPHYR ENERGY PLC
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
For the six months ended 30 June 2024
Unaudited Unaudited Audited
six months six months year ended
ended 30 June ended 30 June 31 December
2024 2023 2023
US$'000 US$'000 US$'000
Operating activities
Loss on ordinary activities before taxation (3,063) (3,166) (5,063)
Adjustments for:
Finance income (1) - -
Finance costs 1,764 1,550 3,472
Depreciation and depletion of property and equipment 5,384 5,609 9,630
Share-based payments 3,157 6 6
Unrealised foreign exchange (gains)/losses (358) 2,615 2,772
Operating cash inflow before movements in working capital 6,883 6,482 10,817
(Increase)/decrease in trade and other receivables (633) 101 (403)
Unrealised loss/(gain) on derivative contracts 249 (132) 1,029
(Decrease)/increase in trade and other payables (356) 736 191
Cash generated from operations 6,143 7,319 11,634
Income tax paid - - -
Net cash generated from operating activities 6,143 7,319 11,634
Investing activities
Additions to exploration and evaluation assets (9,525) (11,813) (21,643)
Additions to oil and gas properties (389) (8,444) (10,467)
Increase/(decrease) in capital expenditure related payables 966 (3,068) (5,754)
Proceeds on disposal of oil and gas properties - 2,262 2,262
Insurance proceeds received in respect of exploration and evaluation assets
4,256 - 7,712
Grant funds received in respect of exploration and evaluation assets
- 302 302
Interest received 1 - -
Net cash used in investing activities (4,691) (20,761) (27,588)
Financing activities
Net proceeds from issue of shares 10 3,692 3,700
Proceeds from borrowings 5,600 10,000 13,260
Repayment of borrowings (7,915) (2,058) (4,244)
Repayment of lease liabilities (19) - (7)
Interest and fees paid on borrowings (1,646) (1,003) (2,140)
Net cash (used in)/generated from financing activities (3,970) 10,631 10,569
Net decrease in cash and cash equivalents (2,518) (2,811) (5,385)
Cash and cash equivalents at beginning of period 3,611 8,996 8,996
Effect of foreign exchange rate changes - 3 -
Cash and cash equivalents at end of period 1,093 6,188 3,611
ZEPHYR ENERGY PLC
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the six months ended 30 June 2024
1. ACCOUNTING POLICIES
Basis of preparation
This report was approved by the Directors on 25 September 2024.
The financial statements have been prepared in accordance with UK-adopted
International Accounting Standard 34 Interim financial reporting and the
Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's
Financial Conduct Authority.
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 and incorporated in England and Wales under the
Companies Act 2006. 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 2023, and with those
expected to be adopted in the Group's financial statements for the year ending
31 December 2024.
Comparative figures for the year ended 31 December 2023 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 is unaudited and 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 2023. 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. (LOSS)/GAIN 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$0.1 million (30 June 2023: net
gain of US$1.2 million, 31 December 2023: net gain of US$1.4 million) and an
unrealised net loss of US$0.2 million (30 June 2023: net gain of US$0.1
million, 31 December 2023: net loss of US$1.0 million) for the period to 30
June 2024.
4. LOSS PER ORDINARY SHARE
Basic loss per Ordinary Share is calculated by dividing the net loss for the
period by the weighted average number of Ordinary Shares in issue during the
period. Diluted loss per Ordinary Share is calculated by dividing the net loss
for the period by the weighted average number of Ordinary Shares in issue
during the period, adjusted for the dilutive effect of potential Ordinary
Shares arising from the Company's share options and warrants.
The calculation of the basic and diluted loss per Ordinary Share is based on
the following data:
Unaudited Unaudited Audited
six months six months year ended
ended 30 June ended 30 June 31 December
2024 2023 2023
US$'000 US$'000 US$'000
Losses
Losses for the purpose of basic and diluted loss per Ordinary Share being net
loss for the period
(3,012) (2,321) (3,503)
Number Number Number
'000 '000 '000
Number of shares
Weighted average number of shares for the purpose of basic and diluted loss
per Ordinary Share
1,705,299 1,558,668 1,644,490
Loss per Ordinary Share
Basic and diluted, cents per share (0.18) (0.15) (0.21)
Due to the losses incurred in the periods reported there is no dilutive effect
from the existing share options or warrants.
5. EXPLORATION AND EVALUATION ASSETS
US$'000
Cost
At 1 January 2023 37,986
Additions 22,643
Decommissioning - change in estimates 177
Insurance proceeds (10,563)
Funds received in lieu of grants (302)
At 31 December 2023 49,941
Additions 9,525
Decommissioning - change in estimates (36)
Insurance proceeds (7,241)
At 30 June 2024 52,189
Carrying amount
At 30 June 2024 52,189
At 31 December 2023 49,941
6. PROPERTY AND EQUIPMENT
Oil and gas properties Office equipment Right-of-use assets
US$'000 US$'000 US$'000 Total
US$'000
Cost
At 1 January 2023 66,220 24 - 66,244
Additions 10,468 - 77 10,545
Disposals (2,792) - - (2,792)
Decommissioning - change in estimates 463 - - 463
Exchange differences - 1 - 1
At 31 December 2023 74,359 25 77 74,461
Additions 556 - - 556
Disposals (405) - - (405)
Decommissioning - change in estimates (49) - - (49)
Exchange differences - - (1) (1)
At 30 June 2024 74,461 25 76 74,562
Accumulated depreciation, depletion and amortisation
At 1 January 2023 14,421 18 - 14,439
Charge for the period 9,607 2 21 9,630
Disposals (449) - - (449)
Exchange differences - 1 - 1
At 31 December 2023 23,579 21 21 23,621
Charge for the period 5,364 1 19 5,384
Disposals (233) - - (233)
At 30 June 2024 28,710 22 40 28,772
Carrying amount
At 30 June 2024 45,751 3 36 45,790
At 31 December 2023 50,780 4 56 50,840
7. BORROWINGS
Unaudited Unaudited Audited
six months six months year ended
ended 30 June ended 30 June 31 December
2024 2023 2023
US$'000 US$'000 US$'000
Term loan 14,187 12,926 10,824
Revolving credit 14,981 20,788 24,438
Promissory note - - 89
29,168 33,714 35,351
Maturity analysis
Less than 6 months 18,954 16,646 13,109
6 months to 1 year 3,397 10,651 18,103
1 year to 2 years 5,953 5,086 5,086
2 years to 5 years 3,418 4,238 1,699
31,722 36,621 37,997
First International Bank and Trust ("FIBT")
In February 2022, the Group, through its U.S. subsidiaries, entered into
credit facility agreements with FIBT, consisting of a term loan and a
revolving credit facility
Repayment of the term loan commenced in April 2022 and is repayable by 48
monthly instalments. 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.
In December 2023, the revolving credit facility was increased to a commitment
of up to US$15.2 million with the same repayment terms. Interest on the
Revolving credit facility is charged at a variable rate equal to the Wall
Street Prime Rate plus 2.5%, subject to a minimum rate of 6.74%.
At 30 June 2024, the Group had drawn US$15.0 million in respect of the
revolving credit facility.
In April 2024, the Group entered into a new facility agreement with FIBT.
Under the terms of the agreement, the Group received a new term loan of US$5.6
million. The new term loan is repayable by 48 monthly instalments and has an
interest rate of 10% per annum.
The revolving credit is subject to a covenant which is measured on an annual
basis. The Group was in full compliance with the terms of the covenant in the
periods reported.
FIBT has a lien on the assets of the Group's U.S. subsidiaries, Zephyr Bakken
LLC and Rose Petroleum (Utah) LLC.
SGR Investments LLC ("SGRI")
On 19 December 2022, the Group entered into a facility agreement with an
experienced U.S. based institutional investor through its U.S. subsidiary,
Zephyr Williston LLC. Under the terms of the agreement the Group received a
12-month revolving credit facility of up to US$8.6 million incurring interest
at a rate of 12% per annum.
On 3 May 2024, the Group announced that it had retired US$3.88 million of the
facility through the issuance of US$3.88 million of equity comprised of
64,045,768 new Ordinary Shares of 0.1 pence each in Zephyr Energy plc at a
price of 4.85 pence per new Ordinary Share. See note 8.
In June 2024, the Group announced that it had repaid the facility in full.
8. SHARE CAPITAL
Unaudited Unaudited Audited
as at as at as at
30 June 30 June 31 December
2024 2023 2023
Number Number Number
'000 '000 '000
Authorised
Ordinary Shares of 0.1p each 7,779,297 7,779,297 7,779,297
Deferred Shares of 9.9p each 227,753 227,753 227,753
8,007,050 8,007,050 8,007,050
Unaudited Unaudited Audited
as at as at as at
30 June 30 June 31 December
2024 2023 2023
US$'000 US$'000 US$'000
Allotted, issued and fully paid
1,750,719,019 Ordinary Shares of 0.1p each (30 June 2023: 1,686,501,822: 31 2,343 2,263 2,263
December 2023: 1,686,501,822)
227,752,817 Deferred Shares of 9.9p each 40,305 40,305 40,305
42,648 42,568 42,568
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.
ISSUED ORDINARY SHARE CAPITAL
On 3 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
acquisition by the Group of the remaining 25% working interest in the WSU in
the Paradox Basin, Utah from RSOC.
On 12 June 2023, the Company issued 90,000,000 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 (£3.2 million).
On 9 May 2024, the Company issued 64,045,768 Ordinary Shares of 0.1 pence each
at a price of 4.85 pence per Ordinary Share, in settlement of US$3.88 million
of its outstanding loan facility with SGRI. See note 7.
On 16 May 2024, the Company issued 171,429 Ordinary Shares of 0.1 pence each
in respect of the exercise of warrants, at a price of 4.375 pence per Ordinary
Share, raising gross proceeds of US$9,506 (£7,500).
Ordinary Deferred Shares
Shares Number
Number '000
'000
At 1 January 2023 1,560,746 227,753
Allotment of shares 125,756 -
At 31 December 2023 1,686,502 227,753
Allotment of shares 64,217 -
At 30 June 2024 1,750,719 227,753
9. POST BALANCE SHEET EVENTS
All matters relating to events occurring since the period end are reported in
the review of activities.
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.
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