Zephyr Energy Plc (AIM: ZPHR): Higher 1Q24 production than we anticipated. All eyes on high impact drilling in the Paradox
• 1Q24 production (excluding NGL) in the Williston was 1,151 boe/d. This is 140 boe/d above our expectations and ~100 boe/d above 4Q23 production.• Production in March (excluding NGL) had increased to 1,212 boe/d. This does not represent the full production capacity as the Slawson wells were partially curtailed due to lingering infrastructure constraints. We forecast 1,320 boe/d in 2Q24.
• The State 36-2R well has reached 10,084 feet depth and the casing string has been cemented in place. The well will now drill through a ~270 m horizontal section to intersect the natural fracture system encountered in the original well. The new well is only 10 feet from the original well bore with ultimate intersection on track for less than ten feet of range between the wells. The well could reach TD this week. Hitting the natural fracture system is critical to obtaining a high flow rate.
• Our unrisked NAV for the State 36-2R well is £0.11 per share.
• Success would also allow the booking of 2P reserves and growth in production. Overall production is expected to increase by 250% by 4Q24 (compared to the FY23 average production).
• The Salt Wash helium asset has an unrisked NAV of £0.03 per share for 0.13 bcf of helium.
• We re-iterate our target price of £0.12 per share.
Valuation
Our Core NAV and ReNAV are broadly unchanged at £0.04 per share and £0.11 per share respectively. We forecast the company’s net debt will reduce from US$25 mm at YE23 to US$8 mm at YE24.
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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