REG - Zephyr Energy PLC - Q2 2022 results from Williston Basin portfolio

Zephyr EnergyAnnouncement

11/08/2022 07:00

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RNS Number : 6349V  Zephyr Energy PLC  11 August 2022

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

 

 

11 August 2022

Zephyr Energy plc

("Zephyr" or the "Company")

 

Second Quarter 2022 results from Williston Basin portfolio

 

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 second quarter 2022 ("Q2") results related
to hydrocarbon production and cashflows from its non-operated asset portfolio
in the Williston Basin, North Dakota, U.S.

 

Q2 2022 Williston Basin Highlights

 

·    Quarterly revenues totalled US$14.3 million net to Zephyr, up from
US$11.5 million in the first quarter of 2022 ("Q1") and a 16-fold increase
from US$0.9 million reported in Q2 2021.

·    Quarterly operating income was US$10.1 million (after taxes, lease
operating expenses, hedging impacts, and gathering and marketing fees).

·    Q2 sales volumes averaged circa 1,856 barrels of oil equivalent per
day ("boepd"), an increase from circa 1,600 boepd in Q1 2022 and from 148
boepd in Q2 2021.

o  Q2 revenue was positively impacted by deferred payments for production on
newly completed wells generated in earlier months but received in Q2.

o  Q2 wellhead production averaged circa 1,400 boepd, net to Zephyr, in line
with management expectations and marginally impacted by temporary shut-ins due
to planned "frac-protect" procedures on existing wells while new nearby wells
were completed.

·    At the end of Q2, 195 wells in the portfolio were available for
production, including 10 wells which came online during the quarter.

o  An estimated 30 additional wells in which Zephyr will have working
interests are forecast to be brought on production by the end of 2022, which
will help to decrease standard portfolio decline rates.

·    Net working interests across the Williston Basin non-operated
portfolio now average 7.1%, equivalent to 15 gross wells, all of which
utilised horizontal drilling and modern, hydraulically stimulated completions.

·    Zephyr reiterates its previously released 2022 production and revenue
guidance of an expected US$35-40 million in non-operated revenue, net to
Zephyr, for FY 2022 based on a forecast production range of 500,000 to 550,000
barrels of oil equivalent ("boe") for the year.

 

Q2 Sales Detail

During the second quarter of 2022, the Company reported net sales of
approximately 168,880 boe. Product mix for Q2 was 73% crude oil, 15% natural
gas, and 12% natural gas liquids. The table below provides sales volumes,
product mix, and average sales prices for the quarter:

Oil:                                     123,233 barrels
("bbls") at an average sales price of US$99.84/bbl

Natural Gas:                     149,860 thousand cubic feet ("mcf")
at an average sales price of US$6.69 /mcf

Natural Gas Liquids:        20,671 bbls at an average sales price of
US$50.40 per bbl

 

(Note: Second quarter production volumes and average sales prices figures
include field estimates in respect of June 2022 natural gas and natural gas
liquids sales volumes and are subject to future revision.)

 

During Q2, a number of Zephyr's existing production wells were temporarily
shut-in due to "frac-protect" procedures while new nearby wells were
stimulated and completed.  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. Offset wells are then re-instated for
production when the new infill wells are started up for production.

Q2 sales volumes of 168,880 boe include approximately 41,480 boe produced
prior to Q2 but for which payments were received during the quarter.  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 in Q3 2022 given the Company's
interests in 10 newly drilled wells which came online during Q2.

 

Williston Basin production outlook

 

30 additional producing wells from Zephyr's existing portfolio are expected to
be brought online during the next six months, which will partially mitigate
decline rates typical of Williston Basin production.

 

The Company has hedged just under half of its forecast non-operated production
over the next 21 months.  Using an average hedged production price of
US$96.28 for the remainder of the 2022 calendar year and using US$90 flat for
the remainder of its anticipated production, the Company reiterates its
forecast of an expected US$35-40 million in non-operated revenue, net to
Zephyr, for FY 2022 based on forecast production range of 500,000 to 550,000
boe for the year.

 

Colin Harrington, Chief Executive of Zephyr, said: "In the 15 months since we
announced Zephyr's first non-operated acquisition in the Williston Basin, I've
been delighted with the growth and strong cash flows generated from that part
of our portfolio.   Having completed six discrete acquisitions, our
non-operated asset base is a now diverse mix of 195 low-risk, high margin
producing wells operated by some of the strongest companies in the Williston
Basin.  With a further 30 wells expected to come online over the next six
months, the platform is demonstrating its capacity for future organic growth.

 

"This highly attractive portfolio is delivering substantial cashflows which
will fuel the ongoing development of our flagship Paradox project, and
potentially facilitate further opportunistic portfolio acquisitions.

"It's an exciting time for Zephyr and we look forward to keeping Shareholders
regularly updated on progress in the coming weeks. In particular, we look
forward to commencing the upcoming drilling programme on the Paradox
project.  With internal development potential fully funded from our existing
asset portfolio, we plan on significant further growth over the next twelve
months."

 

 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 / Liz Kirchner / Vivek Bhardwaj

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

 James Pope / Andy Thacker

 Celicourt Communications                         Tel: +44 (0) 20 8434 2643

 Mark Antelme / Felicity Winkles

 

 

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.

 

 

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