REG - Zephyr Energy PLC - Q1 Williston Basin & State 36-2 LNW-CC Update

Zephyr EnergyAnnouncement

16/05/2023 07:00

For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20230516:nRSP4919Za&default-theme=true

RNS Number : 4919Z  Zephyr Energy PLC  16 May 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.

16 May 2023

Zephyr Energy plc

("Zephyr" or the "Company")

First Quarter 2023 results from Williston Basin portfolio;

State 36-2 LNW-CC well update

Zephyr Energy plc (AIM: ZPHR) (OTCQB: ZPHRF), the Rocky Mountain oil and gas
company focused on responsible resource development from carbon-neutral
operations, is pleased to provide initial first quarter 2023 ("Q1") results
related to hydrocarbon production and cashflows from its non-operated asset
portfolio in the Williston Basin, North Dakota, U.S (the "Williston project"),
as well as an update on the State 36-2 LNW-CC well

 Q1 Williston Basin Highlights

·    Quarterly revenues totaled US$6.3 million, net to Zephyr, compared to
fourth quarter 2022 ("Q4") revenues of US$7.4 million (subject to audit). Q1
revenues reflect the standard decline expected from the portfolio and the
lower commodity price environment during the quarter.

 

·    Q1 operating income was US$5.7 million (after taxes, lease operating
expenses, realised hedging impacts, and gathering and marketing fees),
compared to Q4 operating income of US$6.3 million.

 

·    Q1 sales volumes averaged 1,093 barrels of oil equivalent per day
("boepd") compared to Q4 sales volumes average of 1,192 boepd. Q1 sales
volumes were in line with management expectations.

 

·    The Company hedged 36,000 barrels of oil in Q1 at a weighted-average
price of US$90.05 per barrel of oil ("bbl").

 

·    At 31 March 2023, 223 wells in the portfolio were available for
production, including one well which came online during Q1.

o Net working interests across the Williston Basin portfolio now average 6.4%
per well, equivalent to 15.1 gross wells in total, all of which utilised
horizontal drilling and modern, hydraulically stimulated completions.

 

·    The recently acquired Slawson Exploration ("Slawson") operated
wellbore interests (as announced to the market on 21 December 2022) are now
fully drilled and completed.  Production from these working interests had
been forecast to be online by July 2023, and are now forecast to be online by
October 2023 due to minor delays related to the completion of surface
facilities on the well pad.  The Company will provide an update in relation
to FY 2023 production guidance when those wells are brought online.

Paradox Basin - State 36-2 LNW-CC well update

Following the well control incident announced on April 11, 2023, the Company
reports that the State 36-2 LNW-CC well remains stable and under control while
additional well repair work is ongoing.  Zephyr plans to commence a
production test of the well as soon as all necessary well work has been
completed.  This work includes a cement squeeze and the perforation of the
well in the Cane Creek reservoir.  Given the high pressures and significant
hydrocarbon volumes witnessed to date, the continued safety of all personnel
on site and the mitigation of any environmental impact are the top priorities
of the Company.

The Zephyr team is working methodically and carefully to ensure both goals are
met, at which point the Company will announce and commence the production
test.

Colin Harrington, Chief Executive of Zephyr, said:  "Over the last two years,
Zephyr has built a successful and profitable non-operated asset base comprised
of a diverse mix of working-interests in 223 low-risk, high-margin producing
wells.   This production is well-hedged at above current market prices, and
delivers rapid payback and solid cash flows to fund future growth within both
our operated and non-operated portfolios.

"Near term growth includes our investment in the newly drilled and completed
Slawson-operated wells, wells which are expected to significantly boost
non-operated production rates when brought online this Autumn.

"On our operated Paradox project, our near-term priority is to deliver a safe
and successful production test of the State 36-2 LNW-CC well, and we look
forward to updating Shareholders when we commence that test."

 

Q1 Sales Detail

Zephyr's net sales for Q1 were approximately 98,401 boe.

Q1 product mix was 88% crude oil, 5% natural gas, and 7% natural gas liquids.
The table below provides sales volumes, product mix, and average sales prices
for the quarter:

Oil:                                     70,464 bbls at
an average sales price of US$77.98/bbl*

Natural Gas:                       89,675 thousand cubic
feet ("mcf") at an average sales price

 of US$3.22 /mcf

Natural Gas Liquids:         12,991 bbls at an average sales price
of US$37.28 per bbl

 *not including hedges

(Note: Q1 volumes and average sales prices figures include field estimates in
respect of March 2023 natural gas and natural gas liquids sales volumes and
are subject to future revision.)

During Q1, more of Zephyr's existing production wells were changed from
temporarily shut-in to producing status.  As new infill wells are drilled,
existing offset wells may be temporarily shut in to optimise the nearby
completion and mitigate offset well production losses. The Company is now
seeing those offset wells being re-instated for production when the new infill
wells are started up for production.

In the Williston Basin, cashflow from non-operated interests in newly drilled
wells may lag actual production by up to five months.  Such payments from the
operator accrue on a monthly basis and are paid in full prior to the sixth
month of production, which may result in impacts to quarterly sales volumes
and revenues during times of significant completion activity. Zephyr expects
additional accrued payments from operators during the remainder of 2023 given
the Company's interests in 25 newly drilled wells which came online over the
last two quarters.

The Company has hedged 164,000 barrels of oil over the next 12 months
(starting 1 April 2023) at a weighted-average price of US$84.34 per barrel.
The Company is expecting significant additional production volumes by the end
of October 2023 from new wells coming online and will continue to evaluate its
commodity price risk management strategy on a regular basis.

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 - PR

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

 

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 45,000-acre leaseholding 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 240 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.

 

 

 

 

 

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
 or visit
www.rns.com (http://www.rns.com/)
.

RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
.   END  UPDNKPBNDBKBPPD