REG - Zephyr Energy PLC - Paradox project & Financing Update

Zephyr EnergyAnnouncement

20/11/2025 07:00

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RNS Number : 2683I  Zephyr Energy PLC  20 November 2025

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.

 

 

20 November 2025

 

Zephyr Energy plc

("Zephyr" or the "Company")

 

Paradox project update;

Successful refinancing of existing borrowings; and

 Additional loan financing

 

 

Zephyr Energy plc (AIM: ZPHR) (OTCQB: ZPHRF) is pleased to provide an update
on the ongoing development of its project in the Paradox
Basin, Utah, U.S. (the "Paradox project"). In addition, the Company
announces the successful refinancing of the Company's existing borrowing base
at a lowered blended cost of capital, and the securing of additional
short-term loan financing to fund the Company's incremental near-term
expansion and development plans.

 

Paradox Project Update

 

Following the recent completion of the Competent Person's Report ("CPR"),
which detailed a significant upgrade in Company reserves and resources,
Zephyr's key operational focus has been on tying-in the three previously
drilled Paradox project wells to nearby pipeline infrastructure, in order to
deliver future hydrocarbon production.  The three wells are the State 36-2
LNW-CC-R well, the State 16-2LN-CC well and the Federal 28-11 well.

 

Engineering work and commercial documentation with Enbridge (the operator of
the adjacent 16-inch natural gas pipeline) is progressing, along with a
workstream for securing the necessary regulatory approvals for Zephyr's
proposed natural gas transportation service.  The Company is also in the
latter stages of selecting a marketing partner for its natural gas and
associated hydrocarbon volumes.  Given the increasing demand for natural gas
in the western U.S. markets, Zephyr has seen growing levels of interest for
natural gas volumes located in the Paradox Basin region. The Company will
provide an updated timeline on the steps to first gas production once
documentation is complete.

 

In conjunction with its stated goal to expand the asset base of the Paradox
project both vertically (via overlying reservoirs) and horizontally (via
additional acreage acquisitions), Zephyr is also pleased to announce that it
has nominated approximately 38,000 net contiguous acres for inclusion in
future federal lease sales by the U.S. Bureau of Land Management. Management
believes that the Company's current acreage and existing pipeline and
associated infrastructure footprint will provide a strong competitive
advantage in the upcoming auction process.

 

In addition to its operational focus, the Company continues to run a
structured process aimed at securing potential farm-in/joint-venture partners
to accelerate drilling and the delivery of value from the Paradox project.
The Company will provide further updates on this process in due course.

 

Debt Refinancing

 

The Company's senior lender, North-Dakota based First International Bank
& Trust ("FIBT"), has recently completed its semi-annual redetermination
of the Company's borrowing base, reaffirming the level of Zephyr's existing
borrowing facilities with the bank.

 

Zephyr's total current borrowings with FIBT are approximately US$22.1 million
(versus US$35.3 million in January 2024 and US$27.4 million in October 2024).

 

On 26 August 2025, Zephyr announced the completion of an acquisition of
working interests in accretive proved developed producing ("PDP") assets in
core Rocky Mountain Basins, U.S. (the "Acquisition"), following which FIBT
began its valuation analysis of the Company's non-operated asset portfolio,
incorporating the producing assets acquired. Since the completion of the
Acquisition, value generated from the assets acquired has outperformed
management's expectations.

 

FIBT's policy is to lend up to 50% of its independent PV-10 valuation of
Zephyr's PDP assets all of which reside in the Company's non-operated asset
portfolio.  It is important to point out the Company's PDP assets do not
include any of the Paradox project reserves, which, as noted above, were
significantly upgraded in the recently completed CPR.

 

FIBT's recent work valued the PV-10 of Zephyr's non-Paradox PDP assets in
excess of US$46 million, therefore reaffirming the Company's existing
borrowing base of US$22.1 million.  In addition to the non-operated PDP
assets, the Company holds significant non-operated proved undeveloped ("PUD")
reserves which are currently being assessed in an updated internal valuation,
the results of which will be released when available.

 

As part of the redetermination process, Zephyr elected to combine its two
outstanding FIBT term loans into a single term loan with a lower average
interest rate.  In addition, the Company elected to roll US$4 million of its
existing FIBT revolving credit facility ("RCF") into the new term loan (also
at a lower interest rate). The revised term loan of circa US$11 million will
be amortised over a 48-month period.

 

Following the redetermination, the Group borrowings with FIBT are US$22.1
million, and consist of:

·       US$11.1 million of amortising term loan (at 8.99% interest per
annum); and

·       US$11.0 million of debt drawn on the RCF (at 10% interest per
annum).

 

Additional funding

 

In tandem with the successful FIBT refinancing, Zephyr also announces that it
has secured US$2 million in additional loan financing ("additional funding")
from a strategic industry lender (the "lender"). The key terms of the
additional funding are set out below.

 

The additional funding will be used to finance incremental near-term
expenditures across Zephyr's portfolio, including federal bonding increases
recently imposed by the U.S. Government and for potential further leasehold
acquisitions.

 

As outlined above, Zephyr has nominated a significant amount of contiguous
acreage with the U.S. Bureau of Land Management for inclusion in future
federal lease sales.  While there can be no guarantee that Zephyr will be
successful in acquiring any additional acreage, the capacity to move quickly
and be fully funded for potential acquisitions is integral to success in the
auction process.

 

Colin Harrington, Chief Executive of Zephyr, said: "We continue to be fully
focused on delivering first production from our Paradox project, and the
exciting conclusions from the recent CPR, matched with strong well test
results and excellent proximity to buoyant U.S. gas markets, have helped to
raise the overall profile of the project significantly.  We are working
diligently with our partners to execute the operational and regulatory tasks
needed to tie in our three wells that are currently capable of production, and
we are vigorously pursuing our ongoing project partnership discussions.

 

"I am happy to report the outcome of our refinancing, which reaffirms the
substantial current value of our non-operated portfolio and reduces our
overall cost of debt. The cash flow generated from our non-operated assets
continues to provide a stable platform for our Company.

 

 "Securing additional funding for Paradox growth, which enhances our
operational flexibility as we look to expand our Paradox project footprint
with as little dilution as possible to our shareholders, is another positive
step.

 

" We look forward to providing further updates as we move towards the pivotal
moment of first production from the Paradox project."

 

An interview with Chief Executive Colin Harrington, providing further
commentary on today's update, is available to view here:
https://youtu.be/4oTZT7oGOtU?si=xBVNTbLUOx06iy2P
(https://youtu.be/4oTZT7oGOtU?si=xBVNTbLUOx06iy2P)

 

 

 

 

Further details on the additional funding

 

The key terms of the additional funding are set out below.

 

 Total amount        US$2 million.  Secured over the intercompany loan balances due to the
                     Company.

 Term                12 months, potentially extendable for an additional 12 months.

 Implied interest    14% per annum, payable in cash at the end of the term.

 Repayment terms     The Company may redeem any amount prior to maturity, subject to an early
                     redemption fee equal to 10% of the principal amount redeemed.

 Conversion terms    The lender, at its sole discretion, can convert all outstanding amounts
                     into new ordinary shares of 0.1 pence each in the share capital of the
                     Company ("ordinary shares") at any time at a price of 3.75p per ordinary share
                     (a premium of 56% to the closing mid-market price of Zephyr's ordinary shares
                     the day before this announcement).

 Implementation fee  Implementation fee equivalent to 6% for each 12-month period.

 Warrants            The Company will grant the strategic investor warrants to subscribe for
                     18,181,818 new ordinary shares with an exercise price of 3.75 pence per
                     warrant expiring on 20 November 2029. These warrants will be issued using
                     authorities granted at the Company's recent Annual General Meeting.

                     The warrants are priced at a 56% premium to Zephyr's mid-market closing price
                     on the day before this announcement.

                     The warrants being issued will be done so using existing share authorities
                     granted to Zephyr's board of directors at the Company's annual general meeting
                     held on 30 July 2025.

 

Contacts

 

 Zephyr Energy plc                                               Tel: +44 (0)20 3475 4389

 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

 Canaccord Genuity Limited - Joint Broker                       Tel: +44 (0)20 7523 8000

 Henry Fitzgerald-O'Connor / Charlie Hammond

 Celicourt Communications - Public Relations                    Tel: +44 (0) 20 7770 6424

 Mark Antelme / Ali AlQahtani

 

Notes to Editors:

Zephyr Energy plc (AIM: ZPHR) (OTCQB: ZPHRF) is a technology-led oil and gas
company focused on responsible resource development in the Rocky Mountain
region of the United States.

Its flagship operated asset is the 46,000-acre Paradox project in Utah, where
an independent 2025 CPR by Sproule International confirmed 2P reserves of 35.3
million boe and total recoverable resources of 74.2 million boe.

Zephyr also holds a portfolio of non-operated production interests across the
Williston and other Rocky Mountain basins, supported by a US$100 million
strategic partnership designed to accelerate growth and enhance cash flow.

 

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