TIDMZPHR
RNS Number : 3755G
Zephyr Energy PLC
15 November 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.
15 November 2022
Zephyr Energy plc
("Zephyr" or the "Company")
Third Quarter 2022 results from Williston Basin portfolio;
2022 revenue forecast upgraded; and Paradox project operations
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 third quarter
2022 ("Q3") results related to hydrocarbon production from its
non-operated asset portfolio in the Williston Basin, North Dakota,
U.S., and to provide an update on current operations on its project
in the Paradox Basin, Utah, U.S. (the "Paradox project").
Q3 2022 Williston Basin Highlights
-- Q3 revenues totalled US$9.6 million net to Zephyr, giving
Zephyr total revenues for the nine-months to 30 September 2022 of
US$35.5 million.
o Q3 sales volumes averaged circa 1,313 barrels of oil
equivalent per day ("boepd").
o Q3 wellhead production averaged circa 1,208 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.
-- Q3 operating income was US$7.9 million (after taxes, lease
operating expenses, realised hedging impacts, and gathering and
marketing fees), giving Zephyr US$29.8 million operating income for
the nine-months to 30 September 2022 .
-- Based on the strong cash flows from the Williston Basin
portfolio to date, Zephyr has upgraded its full-year 2022 revenue
forecast for the Company to a range of US$40-45 million (up from a
previously announced range of US$35-40 million) and the Company
reaffirms its 2022 full-year production forecast of 500,000 -
550,000 barrels of oil equivalent ("boe").
Paradox project operations update
-- CWC Ironhand Drilling Rig 118 is in the process of mobilising
to the State 36-2 LNW-CC well site, and the Company continues to
expect to spud the well in the second half of November 2022.
Multiple other service providers are currently on-site completing
preparations for the upcoming drilling operation.
-- Preparations to commence production testing of the previously
drilled State 16-2LN-CC are also largely complete. Pre-test
operations included a coil unit cleanout of the well's 5.5 inch
production casing (from surface to total depth), and the completion
of procedures designed to enhance the well's flow assurance. Work
to connect the surface facilities is underway, and production
testing is scheduled to commence in the second half of November
2022.
Colin Harrington, Chief Executive of Zephyr, said : "I continue
to be delighted with the strong cash flows generated from our
non-operated Williston Basin portfolio. Our goal, as we acquired
our various Williston interests, was to generate return multiples
on cash invested which could ultimately be redeployed from the
Williston into our Paradox project activity. I'm pleased to report
the Williston assets have provided exactly that, demonstrating
rapid paybacks and significant cash generation prior to settling
into a more mature production and decline phase.
"The numbers from the portfolio speak for themselves. Over the
last 18 months, Zephyr raised and deployed US$19.6 million of
equity into the Williston portfolio - and in the first three
quarters of 2022 alone, that portfolio generated over US$35 million
in revenue and US$29.8 million of operating income. While quarterly
revenues naturally fluctuate, depending on the timing of new wells
coming online and at times for frac protect operations, the overall
trend has provided stronger year-to-date cash flow performance than
that originally forecast, and significant future cash flow is
expected to continue for many years to come.
"As a direct result of the portfolio's strong performance,
during 2022 we've been able to reduce the Company's borrowings from
an already conservative US$29.9 million to US$24.8 million
(representing a 18.6% reduction in total borrowing), expand our
Paradox acreage position from 36,000 to 45,000 acres, and acquire
the pipeline and processing infrastructure across our White Sands
Unit in the Paradox Basin. In addition, our assets have generated
more than enough excess liquidity (US$18.5 million in cash and
available borrowing base) to fund the next phase of our ambitious
Paradox drilling programme.
"With interests in a further 26 Williston wells expected to come
online over the next six months, our non-op portfolio is poised to
continue to produce significant additional cash flow available for
redeployment across our portfolio.
"We are now rapidly progressing our fully-funded operations in
the Paradox, where the augmented surface infrastructure at the
State 16-2LN-CC is largely complete and the next phase of
production testing is about to commence. Combined with the high
impact drilling potential at the State 36-2 LNW-CC location, I
believe it's a hugely exciting time to be a Zephyr shareholder.
We're coming into a period of significant near-term news flow, and
I look forward to sharing additional updates as operations on the
ground progress."
Q3 Williston Basin Sales Detail
For the third quarter of 2022, the Company reports net sales of
approximately 120,821 boe. Product mix for Q3 was 74% crude oil,
14% natural gas, and 12% natural gas liquids. The table below
provides sales volumes, product mix, and average sales prices for
the quarter:
Oil: 88,883 barrels ("bbls") at an average sales price of
US$91.38/bbl
Natural Gas: 101,315 thousand cubic feet ("mcf") at an average
sales price of US$8.19 /mcf
Natural Gas Liquids: 15,052 bbls at an average sales price of US$42.65 per bbl
( Note: Third quarter production volumes and average sales
prices figures include field estimates in respect of Sep 2022
natural gas and natural gas liquids sales volumes and are subject
to future revision.)
During Q3, 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 are 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.
In comparison to Q3, Q2 sales volumes of 168,880 boe included
approximately 41,480 boe produced prior to Q2 but for which
payments were received during Q2. 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 fluctuating impacts to
quarterly sales volumes and revenues during times of significant
completion activity.
Q3 revenues totalled US$9.6 million, net to Zephyr. This
compares to quarterly revenues in the second quarter of 2022 ("Q2")
of US$14.3 million. As referred to above, Q2 revenues were
positively impacted by deferred payments for production of US$3.7
million on newly completed wells generated prior to that quarter
but paid to Zephyr in Q2.
Total revenues for the nine months to 30 September 2022 were
US$35.5 million.
Q3 operating income was US$7.9 million (after taxes, lease
operating expenses, realised hedging impacts, and gathering and
marketing fees).
Q3 Williston Basin Production Detail
Q3 wellhead production averaged circa 1,208 boepd of wet oil and
gas produced, net to Zephyr, in line with management expectations
albeit 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 Q3, 199 wells in the portfolio were
available for production, including four wells which came online
during the quarter.
An estimated 26 additional wells in which Zephyr has minority
working interests are forecast to be brought on production over the
next six months, which will help to decrease typical Williston
Basin portfolio decline rates.
Net working interests across the Williston Basin non-operated
portfolio now average 7.3% per well, equivalent to 15 gross wells,
all of which utilised horizontal drilling and modern, hydraulically
stimulated completions.
Williston Basin production outlook
As mentioned above, 26 additional producing wells from Zephyr's
existing portfolio are expected to be brought online during the
next six months, which will partially mitigate further decline
rates typical of Williston Basin production.
The Company previously announced hedges on just under half of
its forecast non-operated production for the fourth quarter of
2022, with an average hedged production price of US$94.55 for the
remainder of the 2022 calendar year.
Based on the strong cash flows to date from the Williston Basin
portfolio, Zephyr is upgrading its 2022 revenue forecast for the
Company to a range of US$40-45 million (an increase from a
previously announced range of US$35-40 million) and reaffirms its
2022 production forecast of 500,000 - 550,000 boe.
Contacts
Zephyr Energy plc Tel: +44 (0)20 7225
Colin Harrington (CEO) 4590
Chris Eadie (CFO)
Allenby Capital Limited - AIM Nominated Tel: +44 (0)20 3328
Adviser 5656
Jeremy Porter / Vivek Bhardwaj
Turner Pope Investments - Joint-Broker Tel: +44 (0)20 3657
James Pope / Andy Thacker 0050
Panmure Gordon (UK) Limited - Joint-Broker
John Prior / Hugh Rich / James Sinclair-Ford Tel: +44 (0) 20 7886
/ Harriette Johnson 2500
Celicourt Communications - PR
Mark Antelme / Felicity Winkles
Tel: +44 (0) 20 8434
2643
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 by third party consultants Sproule International to hold,
net to Zephyr, 2P reserves of 2.1 million barrels of oil equivalent
("mmboe"), 2C resources of 27 mmboe and 2U resources 203 mmboe.
Following the successful initial production testing of the recently
drilled and completed State 16-2LN-CC well, Zephyr has planned a
three well drilling program - commencing in 2022 with the State
36-2 LNW-CC well - to further delineate the scale and value of the
project.
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.
The Williston portfolio currently consists of working-interests
in over 200 modern horizontal wells which are expected to provide
US$35-40 million of revenue, net to Zephyr, in 2022. 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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