TIDMZPHR
RNS Number : 4919Z
Zephyr Energy PLC
16 May 2023
Prior to publication, the information contained within this
announcement was deemed by the Company to constitute inside
information as stipulated under the UK Market Abuse Regulation.
With the publication of this announcement, this information is now
considered to be in the public domain.
16 May 2023
Zephyr Energy plc
("Zephyr" or the "Company")
First Quarter 2023 results from Williston Basin portfolio;
State 36-2 LNW-CC well update
Zephyr Energy plc (AIM: ZPHR) (OTCQB: ZPHRF), the Rocky Mountain
oil and gas company focused on responsible resource development
from carbon-neutral operations, is pleased to provide initial first
quarter 2023 ("Q1") results related to hydrocarbon production and
cashflows from its non-operated asset portfolio in the Williston
Basin, North Dakota, U.S (the "Williston project"), as well as an
update on the State 36-2 LNW-CC well
Q1 Williston Basin Highlights
-- Quarterly revenues totaled US$6.3 million, net to Zephyr,
compared to fourth quarter 2022 ("Q4") revenues of US$7.4 million
(subject to audit). Q1 revenues reflect the standard decline
expected from the portfolio and the lower commodity price
environment during the quarter.
-- Q1 operating income was US$5.7 million (after taxes, lease
operating expenses, realised hedging impacts, and gathering and
marketing fees), compared to Q4 operating income of US$6.3
million.
-- Q1 sales volumes averaged 1,093 barrels of oil equivalent per
day ("boepd") compared to Q4 sales volumes average of 1,192 boepd.
Q1 sales volumes were in line with management expectations.
-- The Company hedged 36,000 barrels of oil in Q1 at a
weighted-average price of US$90.05 per barrel of oil ("bbl").
-- At 31 March 2023, 223 wells in the portfolio were available
for production, including one well which came online during Q1.
o Net working interests across the Williston Basin portfolio now
average 6.4% per well, equivalent to 15.1 gross wells in total, all
of which utilised horizontal drilling and modern, hydraulically
stimulated completions.
-- The recently acquired Slawson Exploration ("Slawson")
operated wellbore interests (as announced to the market on 21
December 2022) are now fully drilled and completed. Production from
these working interests had been forecast to be online by July
2023, and are now forecast to be online by October 2023 due to
minor delays related to the completion of surface facilities on the
well pad. The Company will provide an update in relation to FY 2023
production guidance when those wells are brought online.
Paradox Basin - State 36-2 LNW-CC well update
Following the well control incident announced on April 11, 2023,
the Company reports that the State 36-2 LNW-CC well remains stable
and under control while additional well repair work is ongoing.
Zephyr plans to commence a production test of the well as soon as
all necessary well work has been completed. This work includes a
cement squeeze and the perforation of the well in the Cane Creek
reservoir. Given the high pressures and significant hydrocarbon
volumes witnessed to date, the continued safety of all personnel on
site and the mitigation of any environmental impact are the top
priorities of the Company.
The Zephyr team is working methodically and carefully to ensure
both goals are met, at which point the Company will announce and
commence the production test.
Colin Harrington, Chief Executive of Zephyr, said : "Over the
last two years, Zephyr has built a successful and profitable
non-operated asset base comprised of a diverse mix of
working-interests in 223 low-risk, high-margin producing wells.
This production is well-hedged at above current market prices, and
delivers rapid payback and solid cash flows to fund future growth
within both our operated and non-operated portfolios.
"Near term growth includes our investment in the newly drilled
and completed Slawson-operated wells, wells which are expected to
significantly boost non-operated production rates when brought
online this Autumn.
"On our operated Paradox project, our near-term priority is to
deliver a safe and successful production test of the State 36-2
LNW-CC well, and we look forward to updating Shareholders when we
commence that test."
Q1 Sales Detail
Zephyr's net sales for Q1 were approximately 98,401 boe.
Q1 product mix was 88% crude oil, 5% natural gas, and 7% natural
gas liquids. The table below provides sales volumes, product mix,
and average sales prices for the quarter:
Oil: 70,464 bbls at an average sales price of US$77.98/bbl*
Natural Gas: 89,675 thousand cubic feet ("mcf") at an average sales price
of US$3.22 /mcf
Natural Gas Liquids: 12,991 bbls at an average sales price of US$37.28 per bbl
*not including hedges
(Note: Q1 volumes and average sales prices figures include field
estimates in respect of March 2023 natural gas and natural gas
liquids sales volumes and are subject to future revision.)
During Q1, more of Zephyr's existing production wells were
changed from temporarily shut-in to producing status. As new infill
wells are drilled, existing offset wells may be temporarily shut in
to optimise the nearby completion and mitigate offset well
production losses. The Company is now seeing those offset wells
being re-instated for production when the new infill wells are
started up for production.
In the Williston Basin, cashflow from non-operated interests in
newly drilled wells may lag actual production by up to five months.
Such payments from the operator accrue on a monthly basis and are
paid in full prior to the sixth month of production, which may
result in impacts to quarterly sales volumes and revenues during
times of significant completion activity. Zephyr expects additional
accrued payments from operators during the remainder of 2023 given
the Company's interests in 25 newly drilled wells which came online
over the last two quarters.
The Company has hedged 164,000 barrels of oil over the next 12
months (starting 1 April 2023) at a weighted-average price of
US$84.34 per barrel. The Company is expecting significant
additional production volumes by the end of October 2023 from new
wells coming online and will continue to evaluate its commodity
price risk management strategy on a regular basis.
Contacts
Zephyr Energy plc Tel: +44 (0)20 7225 4590
Colin Harrington (CEO)
Chris Eadie (CFO)
Allenby Capital Limited - AIM Nominated Tel: +44 (0)20 3328 5656
Adviser
Jeremy Porter / Vivek Bhardwaj
Turner Pope Investments - Joint-Broker Tel: +44 (0)20 3657 0050
James Pope / Andy Thacker
Panmure Gordon (UK) Limited - Joint-Broker Tel: +44 (0) 20 7886 2500
John Prior / Hugh Rich / James Sinclair-Ford
Celicourt Communications - PR
Mark Antelme / Felicity Winkles Tel: +44 (0) 20 8434 2643
Qualified Person
Dr Gregor Maxwell, BSc Hons. Geology and Petroleum Geology, PhD,
Technical Adviser to the Board of Zephyr Energy plc, who meets the
criteria of a qualified person under the AIM Note for Mining and
Oil & Gas Companies - June 2009, has reviewed and approved the
technical information contained within this announcement.
Notes to Editors
Zephyr Energy plc (AIM: ZPHR) (OTCQB: ZPHRF) is a technology-led
oil and gas company focused on responsible resource development
from carbon-neutral operations in the Rocky Mountain region of the
United States. The Company's mission is rooted in two core values:
to be responsible stewards of its investors' capital, and to be
responsible stewards of the environment in which it works.
Zephyr's flagship asset is an operated 45,000-acre leaseholding
located in the Paradox Basin, Utah, 25,000 acres of which has been
assessed to hold, net to Zephyr, 2P reserves of 2.6 million barrels
of oil equivalent ("mmboe"), 2C resources of 34 mmboe and 2U
resources 240 mmboe.
In addition to its operated assets, the Company owns working
interests in a broad portfolio of non-operated producing wells
across the Williston Basin in North Dakota and Montana. Cash flow
from the Williston production will be used to fund the planned
Paradox Basin development. In addition, the Board will consider
further opportunistic value-accretive acquisitions.
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