TIDMZPHR
RNS Number : 2906J
Zephyr Energy PLC
15 August 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.
15 August 2023
Zephyr Energy plc
("Zephyr" or the "Company")
Second Quarter 2023 Williston Basin results;
Paradox acreage acquisition;
State 36-2 LNW-CC well work continues
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
second quarter 2023 ("Q2") results related to hydrocarbon
production and cashflows from its non-operated asset portfolio in
the Williston Basin, North Dakota, U.S (the "Williston project"),
and an update on its flagship project in the Paradox Basin, Utah,
U.S (the "Paradox project").
Q2 Williston Basin Highlights
-- Quarterly revenues totaled US$7.1 million, net to Zephyr,
compared to first quarter 2023 ("Q1") revenues of US$6.3 million
(subject to audit).
-- Q2 operating income was US$4.2 million (after taxes, lease
operating expenses, realised hedging impacts, and gathering and
marketing fees), compared to Q1 operating income of US$5.7
million.
-- Q2 sales volumes averaged 1,385 barrels of oil equivalent per
day ("boepd") compared to Q1 sales volumes average of 1,093
boepd.
-- At 30 June 2023, 223 wells in the portfolio were available for production.
o Net working interests across the Company portfolio now average
7% 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 on 21 December 2022) are
fully drilled and completed. Production from these working
interests is forecast to be online by October 2023 following
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.
-- The Company has received notice from Continental Resources
("Continental"), operator of a drilling and drilling spacing unit
("DSU") in which Zephyr holds existing working interests, 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 position and provides continued access to low
risk, near-term production.
Acquisition of additional acreage in the Paradox Basin
Zephyr is also pleased to announce 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 White Sands Unit and gas export infrastructure.
The acquisition of the new acreage is part of Zephyr's ongoing
portfolio management of its Paradox Basin position - this active
land management strategy 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.
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.
State 36-2 LNW-CC well update
The State 36-2 LNW-CC well remains static and under control, and
Zephyr's operations team continues to complete the well work
required prior to commencement of a production test. Operations
over the last month were hindered by the extreme heat witnessed in
the U.S. Southwest, with record high temperatures being recorded in
the region. In order to maintain safe working conditions,
operations over the last month were limited to nighttime only.
Given recent improvements in conditions, the team plans to resume
daytime operations this week.
All current and future operations will continue to be conducted
in such a way that well control is maintained and working
conditions are safe for the team. The Board notes the safe progress
to date and fully expects to deliver a production test in the
near-term. This methodical and patient approach is necessitated by
the expected high pressure and substantial apparent deliverability
of the well and reservoir, as witnessed during the earlier phases
of operations.
As previously reported, the Company retains comprehensive well
control insurance coverage, and the Board ultimately expects to
recover the vast majority of costs associated with the well control
incident. Under the terms of Zephyr's insurance policy these
payment recoveries are made on a reimbursement basis (after
approval by the insurer, and after the Company has paid the
corresponding contractor invoices).
The Company is pleased to report that all invoices submitted to
date to its insurer have been approved and funds due from Zephyr's
claims have been paid promptly. Additional invoices are being
submitted on a regular basis with payments expected within 30 days
of receipt by the insurer.
Colin Harrington, Chief Executive of Zephyr, said : "Zephyr's
profitable and diverse non-operated asset base continues to deliver
low risk, high margin cash flows for the Company. The Company now
has a multi-year track record of successful non-operated
investment, with rapid paybacks and solid cash flows available 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 which are expected to
significantly boost non-operated production rates when brought
online in the autumn. The new wells proposed by Continental will
also help to grow volumes over the upcoming year and demonstrate
continued growth from the existing non-operated portfolio.
"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 the
test commences."
Q2 Sales Detail
Zephyr's net sales for Q2 were approximately 126,044 boe.
Q2 sales product mix was 89% crude oil, 4% natural gas, and 7%
natural gas liquids. The table below provides sales volumes,
product mix, and average sales prices for the quarter:
Oil: 85,310 bbls at an average sales price of US$74.70/bbl*
Natural Gas: 121,773 thousand cubic feet ("mcf") at an average
sales price of US$2.21 /mcf
Natural Gas Liquids: 20,438 bbls at an average sales price of US$24.33
per bbl
*not including hedges
(Note: Q2 volumes and average sales prices figures include field
estimates in respect of June 2023 natural gas and natural gas
liquids sales volumes and are subject to future revision.)
The Company has hedged 117,000 barrels of oil for 12 months
starting 1 April 2023 at a weighted-average price of US$83.35 per
barrel. 33,000 bbls were hedged in Q2 at an average price of
$90.05. 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.
During Q2, 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.
Contacts
Zephyr Energy plc Tel: +44 (0)20 7225 4590
Colin Harrington (CEO)
Chris Eadie (CFO)
Allenby Capital Limited - AIM Nominated Tel: +44 (0)20 3328 5656
Adviser
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 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 lease holding of over
46,000 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 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.
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END
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