Report
Stephane Foucaud

Zephyr Energy Plc (AIM: ZPHR): Paradox Resources boost following interpretation of well test

• The analysis of the well test result at well 36-2R suggests recoverable resources of 0.84-1.24 mmboe for the 4,000 feet lateral. The reservoir characteristics are consistent across the length of the lateral with consistent contribution from the reservoir matrix to the flow rate. Extrapolating these results across a longer lateral of 10,000 to 15,000 feet suggests recoverable volumes per well of 9 bcf to 37.5 bcf with a condensate yield of 20-60 bbl/mmcf. The base case is 15-17 bcf (plus condensates) for a well with a 11,000 feet lateral. The high end of the range (37.5 bcf) is comparable to the recoverable volumes of an offshore well.
• Assuming US$14 mm drilling and completion cost, the drillex would be below US$5.6/bbl in the base case with initial production of 5-10 mmcf/d (plus condensates).
• Overall, Zephyr estimate recoverable resources across the Cane Creek reservoir of 32.5-112.5 mmboe including 3.5 – 29 mmbbl of condensates (mid case of 72.5 mmboe). Net of royalties, this equates to 25.6-89.5 mmboe (mid case of 57.7 mmboe). A new CPR incorporating the well test result is expected to be published by early 4Q25 and we anticipate a material increase to the previous estimate of 34 mmboe 2C contingent resources. The flow test results enhance the profile of Zephyr with regards to potential partners.
• First gas (~5 mmcf/d gross) is now expected around YE25. Gas production is expected be transported through the existing Enbridge pipeline but we anticipate additional routes to earlier production may be explored.
• We have increased our target price from £0.15/sh to £0.18/sh to incorporate the greater resources estimates in the Paradox. In addition, there are eight overlying reservoirs above the Cane Creek with similar reservoir characteristics on the licence.

Potential growth in the Williston
1Q25 production in the Williston was 756 boe/d (excluding NGLs). Zephyr is in the process of assessing ~US$30 mm of sourced drilling opportunities that could be funded though the recently announced US$100 mm funding partnership.

Valuation
Our Core NAV is unchanged at respectively £0.05/sh but we have increased our ReNAV from £0.15/sh to £0.18/sh. This excludes any contribution from the shallower reservoirs in the Paradox. These reservoirs had been previously estimated to hold 270 mmboe prospective resources with a total unrisked value of ~£0.78/sh.
Underlying
Zephyr Energy

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.

Provider
Auctus Advisors
Auctus Advisors

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. 

Analysts
Stephane Foucaud

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