Zephyr Energy Plc (AIM: ZPHR): High sales in the Williston. Progress at Well 36 2 (Paradox) hindered by extreme heat
• 2Q23 sales volumes averaged 1,385 boe/d compared to 1Q23 sales volumes of 1,093 boe/d as more of Zephyr's existing production wells were changed from temporarily shut-in to producing status during 2Q23. We conservatively forecasted only ~1,050 boe/d for 2Q23.• The recently acquired Slawson operated wellbore interests are now fully drilled and completed. Production from these working interests continues to be expected to be online by October following completion of surface facilities on the well pad.
• Zephyr has decided to participate in the drilling of 10 new wells in a highly attractive part of the Williston Basin, where the initial two wells drilled by the operator in 2021 have been some of the top performers in Zephyr’s non-operated portfolio, paying out in under six months from first production. The net overall capex is ~US$0.2 mm. The new wells are expected to be on stream before YE23 with first revenues ~150 days later.
• In the Paradox, progress in pulling out the tubing at well 36-2 has been hindered by recent extreme heat with operations limited to nighttime only. The work-over costs have totalled less than U$2 mm so far. All the submitted invoices have been approved by the insurer and reimbursement are regularly received within 30 days of receipt by the insurer.
• Dominion continues to be expected 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/sh in line with our ReNAV.
Additional acreage in the Paradox
Zephyr has acquired an additional 640 leased acres in the Paradox Basin close to Zephyr’s existing White Sands Unit and gas export infrastructure. This takes the company’s total position in the Paradox to >48,000 gross acres The new acreage is on Utah School and Institutional Trust Lands Administration (SITLA) lands and was secured during the most recent SITLA auction.
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$82/bbl for WTI from 3Q23 to YE25, we estimate that Zephyr will hold ~US$55 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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