Zephyr Energy Plc (AIM: ZPHR): Initial investment through US$100 mm partnership in the Rockies. More to come
• The first investment under the US$100 mm Zephyr Hawk partnership has been approved, comprising a US$2.5 mm commitment fully funded by Zephyr’s partner. The investment secures a share in a work programme targeting up to 13 wells.• Zephyr estimates life-of-well undiscounted cashflows of ~US$1.8 mm, net to its interest.
• This marks the first in a series of similar transactions. Even assuming a conservative NPV10 of 30–50% of the undiscounted cashflow, the US$2.5 mm investment by the funding partner would generate US$0.6–0.9 mm of value to Zephyr.
• Assuming future investments deliver comparable returns, scaling this model across the full US$100 mm programme implies potential value of US$24–36 mm net to Zephyr, equivalent to £0.010–0.015 per share.
• We reiterate our target price of £0.16 per share. The shares currently trade at a 60% discount to the value of the business based on 2P reserves alone. Near-term catalysts include additional investments under the Zephyr Hawk partnership and progress toward securing a partner for the Paradox project.
Valuation
Our Core NAV and ReNAV stand at £0.04 per share £0.07 per share and £0.16 per share respectively. Additional upside lies in the 26,000 acres of Paradox acreage outside the WSU, not yet covered by 3D seismic, and 7 overlying sands above the Cane Creek with ~235 mmboe prospective resources.
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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