Zephyr Energy Plc (AIM: ZPHR): Well test success unblocks the Paradox
• The State 36-2 well achieved peak rates of 2,848 boe/d, including 856 bbl/d of oil, on a small 18/64 choke. During a separate, 48-hour phase of testing on an 8/64 choke, production ranged between 700-1,066 boe/d, with 200-400 bbl/d of oil. Importantly, there was no material drop in bottomhole pressure in either test, confirming that sustained production at these levels is feasible long-term. Zephyr highlighted that well deliverability is more than sufficient for commercial operations.• In addition to the high flow rates, there are important take-aways from these results.
• The ~85 bbl/mmcf condensate yield (excluding NGLs) significantly exceeds our initial expectations of 30 bbl/mmcf, positively impacting the project NPV. Water cut remains minimal at just 0.5%.
• Fibre-optic data from the 5,000-ft lateral confirms hydrocarbon inflow along its entire length, suggesting that the previous EUR estimate of 2 mmboe may be conservative. In the future, longer laterals (up to 2 miles) could enhance recovery even further.
• The State 36-2 well has not undergone fracture stimulation. This confirms that the field could be developed at a lower cost.
• The well test success vindicated Zephyr’s theory that the Paradox had been missed and that new technology could turn it into a material basin. This result materially enhances the profile of Zephyr. Incorporating the well test results and the higher estimated condensate yield, we have raised our TP from £0.13/sh to £0.15/sh. Our unrisked NAV for Cane Creek is £0.14/sh, with eight additional overlying reservoirs of similar potential. The total unrisked NAV for the business stands at £1.13/sh.
Next steps
Zephyr is expected to provide further details on the EUR for the State 36-2 well in the coming weeks, alongside the release of a new CPR and development plan. We project a constrained production rate of 5 mmcf/d (plus liquids) from State 36-2 by YE25, with production increasing in 1Q26 as additional wells come online. Given the scale and materiality of the Paradox development, we expect Zephyr will seek a farm-in partner.
Valuation
We have moved a conservative estimate of 2 mmboe recoverable resources for the State 36-2 well into our Core NAV that now stands at £0.05/sh. Our ReNAV is now ~0.15/sh (~£0.13/sh previously).
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.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.