Zephyr Energy Plc (AIM: ZPHR): Well test at State 36-2 likely during 2Q23
• 1Q23 sales volumes averaged 1,093 boe/d. This was in line with our expectations. 1Q23 sales volumes include 783 bbl/d of crude, 144 boe/d of NGL and ~1.3 mmcf/d of natural gas.• 1Q23 operating income was US$5.7 mm, also in line with our expectations.
• While the recently acquired wellbore interests operated by Slawson Exploration have now been drilled and completed, these wells are now forecasted to be online by October rather than by July. This is due to minor delays related to the completion of surface facilities on the well pad.
• We now assume that net production from the Williston will decline ~5% per quarter and rebound to ~1.7-1.8 mboe/d in 4Q23 when the Slawson Exploration operated wells come online.
• Pending further details on the costs of the recompletion of the State 36-2 well and its flow rate, we have not changed our production forecast in the Paradox in 2023. Including the Williston, we now forecast overall FY23 net production of ~1,990 boe/d.
• Our target price of £0.20/sh is unchanged.
Update on the State 36-2 well
Additional well repair work is ongoing at the State 36-2 well. A cement squeeze will be performed before the Cane Creek reservoir is perforated. The well is expected to be re-tested during 2Q23.
Valuation
We now forecast the company will generate ~US$28 mm operating cashflow in 2023, which reflects our new production profile and slightly lower oil price assumptions. Our ReNAV is unchanged at £0.19 per share. The key catalyst to the share price is the upcoming test of the State 36 2 well that will have a significant impact on 4Q23 production. A positive result is also expected to trigger the booking of additional 2P reserves in the Cane Creek reservoir. Our unrisked NAV for the 39 mmboe 2C contingent resources in this reservoir 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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