Zephyr Energy Plc (AIM: ZPHR): Completing Rockies acquisition with lower abandonment costs. Non-op drilling imminent.
• Zephyr has completed the acquisition of its new Rockies portfolio. On closing, the company divested a small package of newly acquired operated wells in North Dakota and Wyoming to a neighbouring private upstream operator for US$0.7 mm in cash. The buyer also assumed approximately US$0.8 mm in predominantly near-term plugging and abandonment liabilities that Zephyr would otherwise have incurred within the next year.• Post-divestment, the net acquisition is expected to contribute 388 boe/d of production to Zephyr, broadly in line with prior estimate of ~400 boe/d.
• The newly acquired non-operated drilling inventory has expanded from 13 to 18 potential locations, with initial drilling expected imminently. These wells may be funded through Zephyr’s US$100 mm strategic partnership facility. We anticipate near-term approval of several opportunities by the funding partner, which could act as a catalyst for share price re-rating. Notably, our valuation currently attributes no upside to the non-operated Rockies drilling inventory.
• We re-iterate our target price to £0.15 per share in line with our ReNAV. This valuation excludes the potential Paradox resources beyond the current 3D seismic coverage (~50% of the acreage) and the eight analogous horizons above the Cane Creek.
Near term newsflow in the Paradox
A revised Competent Person’s Report (CPR) from Sproule is expected in 3Q25, incorporating a material resource upgrade alongside a detailed operational update on the Paradox project.
Valuation
Our Core NAV is unchanged at £0.04 per share with a ReNAV of £0.15 per share. Our total unrisked NAV, including the shallower reservoir overlying the Cane Creek in the Paradox, is ~£0.81/sh.
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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