Zephyr Energy Plc (AIM: ZPHR): Potential resource boost in the Paradox
• Zephyr has nominated ~38,000 net contiguous Paradox acres for inclusion in upcoming federal lease sales by the U.S. Bureau of Land Management. If fully awarded, this would represent a material expansion of the current 46,000 net acre position, of which only ~20,000 acres are currently covered by seismic. Existing estimates of ~35 mmboe 2P reserves and 39 mmboe contingent resources are based solely on those 20,000 acres. If successful, the company intends to shoot 3D seismic across the additional acreage, which could unlock a significant increase in potential resources.• Now that nominations have occurred, the acreage is under review to be advanced to public auction. While timing under the current administration is uncertain, the historical process from nomination to bid to award would suggest an auction within 6 months and potentially sooner. Zephyr’s ownership of the regional gathering system provides a strong competitive advantage in securing and developing these assets.
• To fund the bid for new acreage and meet newly instituted higher federal bonding requirements, Zephyr has secured a US$2 mm convertible debt facility from a strategic industry lender. The facility carries a 14% annual coupon, with drawn amounts convertible into equity at 3.75p per share. In addition, the lender has been granted ~18.2 mm warrants at the same exercise price.
• We reiterate our target price of £0.16 per share. The shares currently trade at ~one-third of the business value based on 2P reserves alone. Near-term catalysts include securing a marketing agreement for oil and gas production and progress toward a partner for the Paradox project.
Debt redetermination highlights the value of the non-op assets
Despite producing over 0.2 mmboe of reserves since YE24 and facing a ~US$10/bbl decline in oil prices between 4Q24 and 4Q25, Zephyr’s borrowing base of US$22.1 mm for its non-Paradox assets has been reaffirmed. The lending bank applies a conservative policy, advancing only up to 50% of PDP PV10, and has generated a current valuation of US$46 mm (1.5p per share) for Zephyr’s non-Paradox PDP. This figure excludes any upside from the significant non-operated PUD reserves within the Zephyr portfolio, and does not take into account any reserves in the Paradox.
Valuation
Our Core NAV and ReNAV stand at £0.07 per share and £0.16 per share respectively. These valuations are underpinned by the company’s 2P reserves, 2C resources, and the risked value of only one overlying Paradox sand (out of eight), highlighting the significant upside potential from further development.
Rose Petroleum is an oil and gas (O&G) and mining company with exploration assets and an operational crushing and flotation mill. Co.'s principal activities are the exploration and development of O&G resources together with the evaluation and acquisition of other mineral exploration targets, principally gold, silver, uranium and copper, and the development and operation of mines in Mexico. In Co.'s O&G division, the area of focus is on two unconventional oil and gas basins in the U.S.: the Uinta Basin and the Paradox Basin. In its mining division, Co. continues its milling operations through its subsidiary, Minerales VANE S.A. de C.V., which owns the SDA Mill in Mexico.
Auctus Advisors is a specialist Equity Capital Markets and Advisory business with a focus in the Energy Sector.
The partners have complementary skill sets, with decades of experience across Equity Capital Markets, Investment Banking and the Energy industry. We have worked at Société Générale, Canaccord Capital, BMO Capital Markets and Schlumberger. Most recently we have worked together for many years at GMP FirstEnergy.
Auctus has been set up at the beginning of a new decade in which we see significant opportunities in the Energy space. Globally, demand for energy is at record levels and continues to grow. Conversely, investment in traditional energy sources has been severely constrained. We believe this imbalance creates opportunities for both companies and investors.
Auctus provides Corporate Broking, Equity Research and Investment Banking services.
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