Zephyr Energy Plc (AIM: ZPHR): First payment from insurance received
• Initial invoices submitted to the insurer have now been approved and reimbursement totalling ~US$0.8 mm have been received. This represents ~100% of the initial claim (after US$0.2 mm full claim deductible was satisfied). Additional invoices are being submitted on a regular basis with payments expected within 30 days of receipt by the insurer.• Zephyr expects total costs for the remedial work on well State 36-2 to be in the region of US$3-5 mm, all of which are expected to be covered by the insurance. The initial US$0.8 mm reimbursement was largely for well control services and oil-based mud. Greater costs will come later in the process and are expected to be regularly re-imbursed as invoices are submitted.
• To date approximately 7,000 feet of 8,900 feet of tubing in well State 36-2 has been pulled and inspected with circa 15% of the pulled joints requiring replacement. Over the last two weeks Zephyr has retrieved ~500 feet of tubing and, importantly, a difficult area has now been passed and the company is making good progress again.
• Dominion expects to start delivering gas to Green River in late 3Q23 or early 4Q23, as previously announced.
• We re-iterate our target price of £0.18 per share in line with our ReNAV.
Re-instating wells on the White Sands Unit (WSU)
• The Paradox acreage acquired around the White Sands Unit (WSU) last August and September has been incorporated into the WSU. This will simplify both the development of the area and the ability of Zephyr to hold the lands.
• Zephyr has recommenced production from the Greentown Federal 28-11 well (located on the WSU Paradox acreage acquired last September). In order to understand the well's potential contribution to overall field production when ongoing field infrastructure work has been completed. This is part of the assessment of five existing wellbores on the acreage.
Forecasts and Valuation
Our ReNAV is unchanged at £0.18 per share. We continue to forecast overall net production increasing from ~1 mboe/d in 1Q23 to >4.5 mboe/d d in 1Q24 and >7.5 mboe/d in 4Q24. Assuming US$74/bbl for WTI from 3Q23 to YE25, we estimate that Zephyr will hold >US$40 mm in net cash by YE25. Our unrisked NAV for the 39 mmboe 2C contingent resources in Cane Creek reservoir targeted by the State 36-2 well in the Paradox basin is £0.15 per share.
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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