TIDMZPHR
RNS Number : 0443L
Zephyr Energy PLC
08 September 2021
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.
8 September 2021
Zephyr Energy plc
(the "Company" or "Zephyr")
Non-operated asset portfolio update;
acquisition of further Williston Basin working-interests;
joint-venture with Purified Resource Partners
Zephyr Energy plc (AIM: ZPHR), the Rocky Mountain oil and gas
company focused on responsible resource development, is pleased to
provide an update on its non-operated working interests in the
Williston Basin, North Dakota, U.S., to announce the acquisition of
two additional non-operated near-term production portfolios in the
Williston Basin (the "new acquisitions"), and to announce a
joint-venture ("JV") with Purified Resource Partners LLC
("Purified") related to ongoing non-operated business development
efforts.
Overview
-- Current production update : Zephyr owns minority working
interests in seven non-operated producing wells in the Williston
Basin. These wells were acquired in the first half of 2021 with a
goal of delivering a diversified and stable cash flow stream which
could be used to fund additional operated Paradox Basin drilling
and/or potential new acquisitions.
o The Company is pleased to report that production from the
seven wells was, net to Zephyr, 509 barrels of oil equivalent per
day ("boepd") during August 2021.
o Four of the wells continue to be brought into full production,
with oil production still rising, water cuts reducing and stable
gas oil ratios.
o Four of the wells were initially brought on at reduced
production rates in order to minimise any gas flaring and CO2
emission impact while gas export infrastructure constraints were
addressed, a CO2 mitigation effort very much welcomed by the Zephyr
Board. Now that those infrastructure constraints have been
resolved, the Company expects overall production to continue to
rise during the next quarter and further updates will be announced
as production data matures.
-- New Acquisitions : Zephyr is also pleased to announce the
completion of two additional non-operated portfolio acquisitions in
the Williston Basin.
o The first acquisition purchased 72.5 net acres, resulting in
an average 5.6% working interest ("WI") in four drilled but
uncompleted ("DUC") wells operated by Prima Exploration Inc.
("Prima") which target production from the Middle Bakken reservoir
in Richland County, Montana, U.S.
o The second acquisition purchased an average 3.1% WI in 11
wells (one currently being drilled and 10 DUC wells) operated by
Whiting Petroleum Corporation ("Whiting"), all of which target the
Middle Bakken reservoir in Mountrail County, North Dakota, U.S.
o All newly acquired wells are estimated by Zephyr to have rapid
paybacks (within two years), high internal rates of return and a
combined total 2P estimated ultimate recoveries (EURs) net to
Zephyr, of 194,000 barrels of oil equivalent ("boe").
o Once initial payback has been achieved, Zephyr can utilise its
historical tax losses of more than US$15 million to reduce the
federal tax payable on the revenues received from these new
acquisitions.
o Total consideration for the new acquisitions is $968,000,
which has been paid for from the Company's existing cash
resources.
o In addition to the acquisition price paid, Zephyr plans to
fund the discretionary net capital expenditure ("CAPEX") related to
the drilling and completion of the 15 wells acquired. This CAPEX
total is forecast to be circa $3.9 million. CAPEX will be due in
late 2021 and early 2022, and the Board expects to be able to fund
this CAPEX out of its current cash resources and with additional
revenues from its current production.
o The Company expects all 15 newly acquired wells to be in
production by 31 March 2022, resulting in a forecasted additional
200-300 net boepd. Additional updates will be provided as wells
come online and adequate production history is gathered.
-- JV Partnership : The Company is excited to announce the
formation of a JV with Purified for the identification and
execution of additional non-operated acquisitions. Purified's
principals have substantial experience in the Williston Basin, a
basin in which they previously helped assemble and close over $70
million of non-operated asset acquisitions and associated CAPEX for
a private equity-backed vehicle. More recently, Purified assisted
and/or co-invested in all four Williston acquisitions that Zephyr
has closed this year, and their team will have the right to
continue to co-invest up to 20% in future transactions. The newly
formed JV provides Zephyr with significant land and business
development expertise directly in Zephyr's geographic region of
focus.
Colin Harrington, Chief Executive of Zephyr, said : "While the
safe and successful completion of the State 16-2 LN-CC well on our
Paradox project remains the Company's top priority, I'm delighted
to report continued progress and significant growth on the
non-operated side of our business.
"As we outlined to Shareholders in January, Zephyr's key goal
for 2021 was to establish production and positive cash flow -
either through our existing portfolio, via acquisition, or through
a combination of both. We will end 2021 having significantly
exceeded my expectations. We have now closed five separate
acquisitions this year - and these deals created a balanced asset
base of interests in 22 producing or near-term production wells,
provided exposure to additional non-operated drilling expected in
2022, added significant new operated acreage in the Paradox Basin,
and tie together nicely with the State 16-2LN-CC well which is
lined up for near-term completion and production testing. I'm
particularly pleased that the current blend of strong commodity
prices and highly economic production has the potential to generate
enough cash flow to self-fund additional Paradox Basin development,
as we work to delineate and deliver significant potential upside
from the hydraulic stimulation of that asset.
"The acquisitions announced today are in prime locations, and
the majority of the wells are operated by Whiting, a leading
Williston Basin producer already serving as operator of a number of
our existing wells. Sourcing and structuring these deals takes
detailed basin knowledge and deep local experience, which is why
I'm delighted to further our relationship with the Purified team.
I've known the Purified principals for over two decades, and have
watched as they successfully assembled a top-notch portfolio of
Williston Basin non-operated interests for their former sponsor.
Over the last year, we've worked together even more closely to
successfully close our initial Williston Basin acquisitions, and I
look forward to continued collaboration and co-investment from
their team.
"The next few months are expected to bring news flow on all
fronts as we target completion of our operated State 16-2LN-CC well
in October, further define our Paradox resource potential, achieve
carbon neutrality across our asset base and receive increased cash
flow from our non-operated asset portfolio - including cash flow
from our new acquisitions.
"We look forward to keeping Shareholders updated as we deliver
on our strategy and achieve additional objectives across the
portfolio. In the process of doing so, as always, we will strive to
be responsible stewards of our investors' capital and responsible
stewards of the environment in which we work."
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 / Liz Kirchner
Turner Pope Investments - Broker Tel: +44 (0)20 3657 0050
Andy Thacker / James Pope Tel: +44 (0) 20 7129
Flagstaff Strategic and Investor Communications 1474
Tim Thompson / Mark Edwards / Fergus
Mellon
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.
Glossary of Terms
Reserves are those quantities of petroleum anticipated to be
commercially recoverable by application of development projects to
known accumulations from a given date forward under defined
conditions. Reserves must satisfy four criteria: discovered,
recoverable, commercial, and remaining (as of the evaluation's
effective date) based on the development project(s) applied. When
the range of uncertainty is represented by a probability
distribution, a low, best, and high estimate shall be provided such
that:
Proved Reserves are those quantities of Petroleum that, by
analysis of geoscience and engineering data, can be estimated with
reasonable certainty to be commercially recoverable from known
reservoirs and under defined technical and commercial conditions.
If deterministic methods are used, the term "reasonable certainty"
is intended to express a high degree of confidence that the
quantities will be recovered. If probabilistic methods are used,
there should be at least a 90% probability that the quantities
actually recovered will equal or exceed the estimate.
Probable Reserves are those additional Reserves which analysis
of geoscience and engineering data indicate are less likely to be
recovered than Proved Reserves but more certain to be recovered
than Possible Reserves. It is equally likely that actual remaining
quantities recovered will be greater than or less than the sum of
the estimated Proved plus Probable Reserves (2P). In this context,
when probabilistic methods are used, there should be at least a 50%
probability that the actual quantities recovered will equal or
exceed the 2P estimate.
Possible Reserves are those additional Reserves that analysis of
geoscience and engineering data suggest are less likely to be
recoverable than Probable Reserves. The total quantities ultimately
recovered from the project have a low probability to exceed the sum
of Proved plus Probable plus Possible (3P) Reserves, which is
equivalent to the high-estimate scenario. When probabilistic
methods are used, there should be at least a 10% probability that
the actual quantities recovered will equal or exceed the 3P
estimate.
*Production summaries and estimates are given as two phase well
head fluids (oil and unprocessed gas) summaries or estimates. A 6
mcf (thousand cubic feet) of gas to one boe is used in the
conversion of gas to barrel of oil equivalents.
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