TIDMZPHR
RNS Number : 0862O
Zephyr Energy PLC
29 September 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.
29 September 2023
Zephyr Energy plc
("Zephyr", the "Company" or the "Group")
Interim Results for the six months ended 30 June 2023
Zephyr Energy plc (AIM: ZPHR) (OTCQB: ZPHRF), the Rocky Mountain
oil and gas company focused on responsible resource development
from carbon-neutral operations, reports its unaudited interim
results for the six months ended 30 June 2023 ("H1 2023").
HIGHLIGHTS
Overview
During H1 2023, and in the period since, Zephyr invested
significant capital into the development of its flagship operated
project in the Paradox Basin, Utah, U.S. (the "Paradox project")
while also substantially growing its portfolio of non-operated
assets in the Williston Basin (the "Williston assets"). All
investment activity was in line with the Company's strategy of
generating and compounding cash flow from its non-operated
portfolio in order to fund the development of the Paradox project,
with the ultimate goal of opening up the next prolific onshore U.S.
oil and gas play.
The Company's board of directors (the "Directors" or the
"Board") remain committed to delivering long-term value to
Shareholders, while upholding the Company's core values of being
responsible stewards of Shareholders' capital and of the
environment in which it operates.
Financial
-- During H1 2023, capital expenditure ("CAPEX") across the
Paradox project and the Williston assets totalled US$21.6
million.
-- Revenues for H1 2023 were US$13.4 million, and were driven by
the Company's hydrocarbon production from its Williston assets:
o Revenues for H1 2023 were lower than those in the comparative
interim period, reflecting the standard decline rates expected from
the Williston assets and the lower commodity price environment
during H1 2023.
o Following significant investment in H1 2023, non-operated
revenue and production are forecast to increase in the second half
of the 2023 financial year ("H2 2023") when the non-operated
wellbore interests operated by Slawson Exploration Company
("Slawson" and the "Slawson wells" ) come online.
-- Adjusted earnings before interest, tax, depreciation,
depletion and amortisation ("DD&A"), unrealised foreign
exchange gains and unrealised gains on hedging contracts (together
"Adjusted EBITDA") for H1 2023 was US$6.5 million.
-- At 30 June 2023, the combined carrying value of the Company's
Paradox project and Williston assets was US$103.2 million (30 June
2022: US$75.9 million), demonstrating the scale of investment made
in the asset portfolio over the last twelve months.
-- The Company's gross borrowings at 30 June 2023 were US$33.7
million and net borrowings (gross borrowings less cash and cash
equivalents) were US$27.5 million.
-- During H1 2023, the Company hedged production volumes of
circa 69,000 barrels ("bbls") with a realised gain of US$1.2
million on these contracts.
Paradox project (operated asset)
-- The Company completed the acquisition of the remaining 25%
working interest in the Paradox project, increasing its
working-interest to 100% across approximately 46,000 gross acres.
Based on the increased working interest, the Competent Persons
Report (the "CPR") prepared by Sproule International ("Sproule") in
2022 estimates the Paradox project to contain:
o Net 2P Reserves: Proved Reserves of 2.6 million barrels of oil
equivalent ("mmboe") net to Zephyr, an increase from 2.1 mmboe.
o Net 2C Contingent Resources: 34 mmboe net to Zephyr, an
increase from 27 mmboe.
o Net 2U Prospective resources from overlying reservoirs: 270
net unrisked mmboe net to Zephyr, an increase from 203 net unrisked
mmboe.
-- The State 36-2 LNW-CC well (the "State 36-2 well") was
drilled and encountered significant flowing hydrocarbons upon
intersecting the Cane Creek reservoir.
-- During subsequent preparations for a production test on the
State 36-2 well, the Company experienced a major well control
incident. The incident, which resulted in the uncontrolled release
of hydrocarbons over a period of four days, was ultimately brought
under control safely and with no injuries and no significant
environmental damage.
-- At present, the State 36-2 well remains static and under control.
-- During the incident and subsequent well control efforts,
multiple joints of the well's 2 7/8-inch production tubing were
compressed and/or compromised, and Zephyr's operations team has
been working methodically to remove and inspect the remaining
joints while keeping the wellbore static. Recently, operations to
retrieve the damaged tubing have progressed much slower than
expected due to the poor condition of the tubing, as exhibited by
the multiple damaged and buckled joints retrieved that led to the
need for milling operations and resulted in shorter retrievals per
trip.
-- While the Company is continuing to attempt to remove the
remainder of the production tubing, it has, in parallel, commenced
discussions with its insurer to assess alternative options for
realising the significant potential productivity of the reservoir
at this location. Alternatives being discussed include both a
potential sidetrack from, or a re-drill of, the original well.
-- As previously reported, the Company retains comprehensive
well control insurance coverage, and the Board expects to recover
substantially all costs associated with the well control incident,
including those associated with any sidetrack or re-drill scenario.
Discussions with its insurer continue and the Company will update
the market in the event a new course of action is deemed to be
appropriate.
o To date the Company has recovered over US$3.7 million from its
insurer in respect of the well control incident.
-- In September 2023, the Company was notified by Dominion
Energy, Utah, LLC ("Dominion") that its gas supply pipeline from
the Northwest Gas Pipeline system to the Green River area (the
"pipeline") will be operational in the early part of the fourth
quarter of 2023, and that the pipeline will also be available to
accept natural gas volumes from third-party sources, slightly ahead
of original timeframe estimates. The completion of the Dominion
pipeline is a welcome development which will enable the export of
natural gas volumes from Zephyr's Paradox project.
Williston assets (non-operated assets)
-- Zephyr continues to deliver on its strategy to acquire
working interest positions in value accretive, high-quality,
high-margin production assets with significant near-term growth
potential in the Williston Basin.
-- H1 2023 sales volumes averaged 1,225 barrels of oil equivalent per day ("boepd").
-- H1 2023 revenues totalled US$13.4 million.
-- H1 2023 gross profit (after operating and transportation
expenses, production taxes, gains from derivative contracts and
excluding DD&A) was US$9.6 million demonstrating the high
margins realised from the produced barrels.
-- At 30 June 2023, 223 wells in Zephyr's portfolio were
available for production. Net working-interests across the
portfolio now average 7% per well, equivalent to 15.1 gross wells
in total.
-- The wellbore interests operated by Slawson, acquired by
Zephyr in the second half of 2022, are fully drilled and completed.
Production from these working interests is forecast to be online in
the fourth quarter of 2023 ("Q4 2023"), following completion of
surface facilities on the well pad. These wellbore interests are
estimated by management to contain 2P reserves, net to Zephyr, of
550,000 barrels of oil equivalent ("boe") and will provide a
significant near-term production boost to the Company when they
come online.
-- In addition, Zephyr has elected to participate in ten new
wells operated by Continental Resources Inc ("Continental" and the
"Continental wells"). The wells are located in a highly attractive
area of the Williston Basin. The CAPEX associated with these wells
will be funded from the Company's existing cash resources.
Corporate
-- In June 2023, the Company raised US$3.9 million (before
expenses) through the placing and subscription of 90,000,000 new
ordinary shares of 0.1 pence each in the Company ("Ordinary
Shares"). The net proceeds from the placing and subscription are
being used to fund working capital requirements at the Paradox
project.
-- Zephyr remains carbon neutral on a Scope 1 basis across its
operations, through the purchase of Verified Emission Reduction
credits ("VERs").
Colin Harrington, Chief Executive of Zephyr, said:
"The period under review was an active time for Zephyr, during
which we invested significant new capital into both the Williston
assets and the Paradox project. We expect to see initial returns
from this investment commencing in Q4 2023 when the Slawson wells
come online, and continuing to the point of first sustained
revenues from the Paradox project when we complete and tie in our
recently drilled wells.
"While our progress on the Paradox project has been impacted by
the well control incident on the State 36-2 well, the incident also
illustrated the significant and larger production potential of the
overall project.
"Over the next period we will continue the work required to
transform the Paradox project into a revenue generating
development, and we are delighted that the Dominion Energy pipeline
- which crosses our leasehold position - has now been completed and
will shortly be ready to accept third party natural gas
volumes.
"Looking ahead, with a diverse portfolio of cash flowing assets,
potential for substantial future organic growth, a solid financial
footing and a talented and dedicated team of employees, we continue
to be extremely optimistic about Zephyr's future."
A copy of the interim results report will be available on the
Company's updated website later today at http://www.zephyrplc.com
.
Contacts:
Zephyr Energy plc Tel: +44 (0)20 7225
Colin Harrington (CEO) 4590
Chris Eadie (CFO)
Allenby Capital Limited - AIM Nominated Tel: +44 (0)20 3328
Adviser 5656
Jeremy Porter / Vivek Bhardwaj
Turner Pope Investments - Joint Broker Tel: +44 (0)20 3657
James Pope / Andy Thacker 0050
Panmure Gordon (UK) Limited - Joint Tel: +44 (0) 20 7886
Broker 2500
John Prior / Hugh Rich / James Sinclair-Ford
Celicourt Communications - Public Relations Tel: +44 (0) 20 7770
Mark Antelme / Felicity Winkles 6424
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 lease holding of over
46,000 gross acres 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 270 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.
ZEPHYR ENERGY PLC
INTERIM REPORT FOR THE SIX MONTHS TO 30 JUNE 2023
The Board is pleased to present Zephyr's unaudited interim
report for the six-month period to 30 June 2023.
CHIEF EXECUTIVE'S STATEMENT
OVERVIEW
During the first six months of 2023 ("H1 2023"), and in the
period since, the Company continued the development of its flagship
operated project in the Paradox Basin, Utah, U.S. (the "Paradox
project") while growing its highly attractive portfolio of
cash-generating non-operated assets in the Williston Basin (the
"Williston assets").
PARADOX PROJECT
Overview
The Board believes that the Paradox project has considerable
scale and economic potential.
The project is an operated lease holding of over 46,000 gross
acres, 25,000 acres of which has been assessed, by third-party
consultant Sproule International ("Sproule"), to hold, net to
Zephyr, 2P reserves of 2.6 million barrels of oil equivalent
("mmboe"), 2C resources of 34 mmboe and net unrisked 2U resources
of 270 mmboe.
The Company's land management strategy continues to be active,
and has resulted in a defensible and growing land position which
Zephyr's Board believes is increasingly difficult to replicate in
today's regulatory and political environment.
To date, both wells drilled by Zephyr at the Paradox project
have discovered hydrocarbons, and both appear capable of commercial
production when ultimately tied into natural gas infrastructure. In
addition, eight overlying reservoirs have been high graded as
suitable for future exploration and potential development. Of
particular significance, the Company's main geological target, the
Cane Creek reservoir, appears to have two demonstrable methods of
development (via the targeting of natural fractures and through
hydraulic stimulation).
The drilling of the two wells has provided the Company with a
wealth of new geological information which has in turn resulted in
a far greater geological understanding of our acreage position.
This information includes strong evidence of:
-- A continuous resource play (tight oil and tight gas);
-- Repeatable petrophysics across a large area;
-- Geology which correlates with the seismic results;
-- Consistent reservoir thickness within a sub area;
-- High reservoir pressures;
-- High matrix permeability for a resource play;
-- A reservoir which can be stimulated (with favourable rock
mechanics albeit under high stress); and
-- The presence of productive natural fractures
Based on the above, the Board believes that the project contains
substantial potential upside and over the next period we will
continue the work required to develop the Paradox project into a
revenue generating project. The Board is delighted that the
Dominion 16-inch gas export pipeline which extends across the
Paradox project has now been completed. This off-take solution is a
major development for Zephyr and will enable the commercial export
of hydrocarbons from the project to market.
State 36-2 LNW-CC well
In November 2022, the Company announced that drilling on the
State 36-2 well had commenced with an objective to target potential
production from the Cane Creek reservoir.
The drilling operation was hampered by extreme weather
conditions. When the well reached the Cane Creek reservoir at a
depth of 9,598 feet true vertical depth, the well experienced a
significant influx of hydrocarbons which consequently led to the
suspension of drilling operations until the well was stabilised.
The influx of hydrocarbons was caused by the well intersecting an
apparent major natural fracture network in the reservoir, and the
resultant flowing hydrocarbons were diverted safely at surface
through the drilling rig flare stack whereby they were subsequently
flared. Throughout this period, Zephyr's operations team followed
appropriate well control procedures, and stabilised the well
without incident.
The influx of hydrocarbons was managed and safely controlled,
which subsequently allowed for the drilling of an additional 132
feet into the Cane Creek reservoir, at which point the Company
elected to run production casing down the total depth of the
well.
Operations to run 7-inch production casing were successful and
the well was made fully safe and the drilling rig was released. The
Company then planned to commence production testing of the
fractured Cane Creek reservoir interval.
In addition to near-term testing, the running of the 7-inch
casing string provided the Company with the option to return to the
well (should it elect to do so) to drill an extended lateral at a
later date. A subsequent lateral would enable the Company to test
for further natural fracture presence at this location within the
Cane Creek reservoir, and also enable the well to be completed by
hydraulic stimulation across a longer lateral should Zephyr seek to
increase well productivity in the future.
Results from the drilling operations indicated that the well
penetrated a folded and naturally fractured Cane Creek reservoir,
features which have been highly productive in other Cane Creek
wells. Pore pressure analysis suggested that the well encountered
very high reservoir overpressure, with formation pressures
estimated at around 9,300 pounds per square inch (which is broadly
consistent with previously drilled offset wells).
The well further delineated the presence of natural gas and
condensate within a large structural compartment, and at a new
location within Zephyr's acreage and 3D seismic coverage, which
provided additional confirmation of Zephyr's model for hydrocarbons
in place across the acreage position.
State 36-2 well production test and well control incident
update
On 8 March 2023, the Company announced, amongst other matters,
that planning for the production test had been completed and that
all services for the test had been procured. A service rig was
mobilised to the well-site and operations on the ground commenced.
This was achieved despite the ongoing difficult winter weather
conditions encountered at the site. Workover operations (which were
to include perforating the well in the productive portion of the
Cane Creek reservoir) and subsequent production testing were
estimated to take four to six weeks. As the well was expected to
flow from natural fractures, no hydraulic stimulation was expected
as part of this test.
On 7 April 2023, as workover operations were being completed,
the well experienced a significant control issue despite multiple
attempts to secure the well by the rig crew. The incident was
initially caused by the failure of a safety valve, and subsequently
resulted in hydrocarbons being released from the well in an
uncontrolled manner.
In keeping with safety procedures, all personnel were safely
evacuated without injury. All relevant authorities were notified
and a specialist well control team (recommended by the Company's
insurers) was deployed to bring the well under control as quickly
as possible.
Ultimately, well control efforts were successful and remediation
and clean-up operations have commenced. A third-party confirmatory
environmental survey was subsequently completed and the initial
results found no evidence of any lingering environmental
impact.
While the State 36-2 well remains static and under control,
during the incident and subsequent well control efforts, multiple
joints of the well's 2 7/8-inch production tubing were compressed
and/or compromised, and Zephyr's operations team has been working
methodically to remove and inspect the remaining joints while
keeping the wellbore static. Recently, operations to retrieve the
damaged tubing have progressed much slower than expected due to the
poor condition of the tubing, as exhibited by the multiple damaged
and buckled joints retrieved that led to the need for milling
operations and resulted in shorter retrievals per trip.
While the Company is continuing to attempt to remove the
remainder of the production casing left in the hole, it has, in
parallel, commenced discussions with its insurer to assess
alternative options for targeting the significant potential
productivity of the reservoir at this location. Alternatives being
discussed include both a potential sidetrack from, or a re-drill
of, the original well.
As previously reported, the Company retains comprehensive well
control insurance coverage, and the Board expects to recover
substantially all costs associated with the well control incident,
including those associated with any sidetrack or re-drill scenario.
Discussions with its insurer continue and the Company will update
the market in the event a new course of action is deemed to be
appropriate. To date the Company has recovered over US$3.7 million
from its insurer in respect of the well control incident. Current
and future operations will continue to be conducted in such a way
that well control is maintained and working conditions are safe for
our team.
State 16-2LN-CC well update
Following on from the successful drilling, completion and
production test of the State 16-2LN-CC well (the "State 16-2 well")
in 2022, the first phase of the extended production testing on the
well was completed within the flare consent limit set by the
regulatory bodies, and Zephyr subsequently tested the well a second
time to commission surface facilities, improve flow assurance and
to gather more production data.
Unfortunately, the second well test was hampered by severe
weather and initial surface facility commissioning issues which
resulted in delays to the programme and, at times, intermittent
operational activity.
Once the start-up commissioning issues had been successfully
resolved the well was initially brought online at choked-back,
moderate rates to test for flow assurance at varying levels of
production. At a controlled rate of 2 million cubic feet of gas per
day and 100 barrels of oil per day (an average of 433 boepd) the
well flowed continuously and surface flow assurance efforts proved
successful.
As flow rates were increased above those levels, well
performance became limited by freshwater pumping capacity and was
subsequently impacted by the formation of down-hole salt
precipitate. The precipitate, which blocked and was subsequently
cleared multiple times, impacted the well's flow capacity to
achieve extended higher rates. The Company was in early stages of
testing higher rates when its mandated flaring limits were
reached.
The operational team is assessing whether the precipitate issue
is a function of continued flow back of injected completion fluids
or a function of normal flowing conditions. Under either scenario,
the Company is evaluating a series of mitigation solutions and
plans to test these solutions in the coming months (subject to
regulatory approvals) in order to fully determine the potential of
the reservoir at this location.
BLM approval of White Sands Unit acreage
expansion/contraction
On 25 August, 2022, the Company announced, amongst other
matters, the acquisition of additional Paradox Basin acreage
adjacent to its operated White Sands Unit (the "WSU") through the
targeted acquisition of 1,920 leased acres deemed by the Company to
have immediate development potential. Additional contiguous acreage
was acquired as reported on 14 September 2022 (collectively, the
"acquired acreage").
The acquired acreage was largely covered by Zephyr's existing 3D
seismic, and directly bordered the Zephyr lease on which the State
36-2 is located, and with access to pre-existing surface
infrastructure which Zephyr subsequently acquired.
A portion of the acquired acreage was envisioned to be added to
the WSU, subject to approval from the U.S. Bureau of Land
Management (the "BLM") for which the Company applied in early 2023.
In July 2023, Zephyr announced that this approval was granted as
part of larger expansion/contraction amendment of the WSU. As part
of the approval, 5,000 high-graded acres with near-term development
potential have been added to the WSU, and roughly 5,395 acres
deemed by the Company to be less suitable for future development
were relinquished.
These actions are part of the Company's active and ongoing
portfolio management of its project position. The Board is pleased
with its recent BLM interactions and subsequent approval, which
results in an amended federal unit with an upgraded and manageable
acreage position - a position increasingly difficult to replicate
in today's regulatory and political environment.
Acquisition of additional project acreage
On 15 August 2023, the Company announced an agreement to
increase its land position in the Paradox Basin through the
targeted acquisition of an additional 640 leased acres deemed by
the Company to be prospective for mid to long-term development.
The new acreage is on Utah School and Institutional Trust Lands
Administration ("SITLA") lands and was secured during the most
recent SITLA auction. The acreage is close to the Company's
existing WSU and gas export infrastructure.
The acquisition of the new acreage is part of Zephyr's ongoing
portfolio management of its Paradox Basin position. Consideration
for the new acreage was satisfied from the Company's existing cash
resources. Following the closing of the acquisition of the new
acreage, the Company now operates over 46,000 gross acres in the
Paradox Basin, the majority of which the Company holds as operator
with a 100% working interest.
Assessment underway on recently acquired Greentown wells
In July 2023, the Company announced, amongst other matters, that
it has commenced the assessment on five existing wellbores (located
in the WSU) acquired as part of a larger acquisition of
infrastructure assets and which was announced on 14 September 2022.
Several of the existing wells are former producers of hydrocarbons
and were subsequently shut-in due to lack of operating
infrastructure. Others were deemed to have potential future use as
salt water disposal wells or as producers of salt water brine for
potential extraction of lithium resources.
As part of this assessment, Zephyr's operations team recently
recommenced production from the Greentown Federal 28-11 well in
order to understand the well's potential contribution to overall
field production when ongoing field infrastructure work has been
completed.
WILLISTON ASSETS
Overview
Zephyr's non-operated business was established in 2021 and
today, following twelve discrete acquisitions, Zephyr continues to
deliver on its strategy to acquire working interest positions in
value accretive, high-quality, high-margin production assets with
significant near-term growth potential .
At 30 June 2023, Zephyr had working interests in 223 wells that
were available for production. Net working interests across the
Company's portfolio now average 7% per well, equivalent to 15.1
gross wells in total, all of which utilise horizontal drilling and
modern, hydraulically stimulated completions. The majority of the
wells are operated by Chord Energy Corporation, a leading Williston
Basin producer.
H1 2023 performance
-- H1 2023 sales volumes averaged 1,225 boepd.
-- H1 2023 revenues totalled US$13.4 million.
-- H1 2023 gross profit (after operating and transportation
expenses, production taxes, gains from derivative contracts and
excluding DD&A) was US$9.6 million demonstrating the high
margins realised from the produced barrels.
Future growth in the portfolio
The Slawson operated wellbore interests, acquired in December
2022 and funded in 2023, are now fully drilled and completed.
Production from these working interests is now forecast to be
online in Q4 2023 following completion of surface facilities on the
well pad. Zephyr's working-interest in these wells' ranges from 11%
to 32%, and management estimates 2P Reserves being acquired are
circa 550,000 boe net to Zephyr. The Company will provide an
updated production guidance when these wells are brought
online.
The Company has also received notice from Continental Resources
("Continental"), operator of a drilling spacing unit ("DSU") in
which Zephyr holds existing working interests, stating that it
plans to drill ten new wells on the DSU. The acreage is located in
a highly attractive part of the Williston Basin, and the initial
two wells drilled by Continental in 2021 have been some of the top
performers in Zephyr's non-operated portfolio, paying out in under
six months from first production. Zephyr's Board of Directors has
elected to participate in the upcoming drilling programme, and
Zephyr's forecasted net capital expenditure (CAPEX) related to the
drilling is approximately US$205,000 which will be funded from
existing cash resources. The planned new development drilling is an
illustration of the continued organic growth from the Company's
existing Williston assets position and provides continued access to
low risk, near-term production.
FINANCIAL REVIEW
The financial information is reported in United States Dollars
("US$").
Income Statement
-- The Company reports revenues for H1 2023 of US$13.4 million
(H1 2022: US$25.9 million). Revenues largely relate to the
Company's hydrocarbon production from the non-operated Williston
assets. The reduction in revenues reflects the standard decline
rates expected from the Williston assets and the lower commodity
price environment during H1 2023. A near-term production boost is
expected in the second half of 2023 when the six Slawson wellbore
interests come online.
-- Adjusted earnings before interest, tax, depreciation,
depletion and amortisation ("DD&A"), unrealised foreign
exchange gains and unrealised gains on hedging contracts (together
"Adjusted EBITDA") for H1 2023 was US$6.5 million (H1 2022: US$19
million).
-- In H1 2023, there was a DD&A charge of US $5.6 million
(H1 2022: US$5.4 million). This accounting charge relates to the
resource depletion of the Williston assets over the period.
-- H1 2023 net loss after tax was US$2.3 million or a loss of
0.15 cents per Ordinary Share (H1 2022: net profit after tax of
US$17.4 million or a profit of 1.16 cents per share).
-- H1 2023 net loss was enhanced by foreign exchange differences
which arise on the restatement of the Company's sterling loans to
its subsidiaries and resulted in an unrealised loss of US$2.6
million for the six months ended 30 June 2023 (H1 2022: unrealised
gain of US$5.4 million). The unrealised loss in this period is the
result of sterling strengthening against the U.S. dollar.
-- Administrative expenses for the six months ended H1 2023 were
US$3.0 million (H1 2022: US$2.2million). The increase in
administrative expenses mirrors the Company's growth over the last
twelve months, the increase in its asset portfolio and
significantly enhanced corporate and operational footprint. Costs
continue to be closely controlled and monitored regularly by
executive management and is a continuing priority of the Board. It
is recognised by the Board, however, that additional technical,
legal and other costs were justified to help deliver the
acquisitions which the Company has secured over the period under
review.
Balance Sheet
-- Exploration and evaluation assets at 30 June 2023 were
US$50.8 million (30 June 2022: US$23.8 million) which reflects the
Company's ongoing investment into upstream activity, including the
drilling costs of the State 36-2 well.
-- Property, plant and equipment at 30 June 2023 were US$52.4
million (30 June 2022: US$52.1 million) which reflects the
Company's ongoing investment in its non-operated portfolio of oil
and gas properties.
-- Cash and cash equivalents at 30 June 2023 were US$6.2 million
(30 June 2022: US$10.6 million). Responsible cash management
remains a key priority of the Board.
-- During H1 2023 CAPEX across the Williston assets and the
Paradox project totalled US$21.6 million.
-- At 5 September 2023, the Company had cash and cash equivalents of US$3.5 million.
-- The Company's gross borrowings at 30 June 2023 were US$33.7m
and net borrowings (total borrowings less cash and cash
equivalents) were US$27.5 million. During H1 2023 the Company met
all its funding obligations in respect of the outstanding
borrowings.
CORPORATE
-- Zephyr continued to achieve Scope 1 carbon-neutrality across
its operational footprint during the period under review.
-- In June 2023, the Company raised US$3.9 million (before
expenses) through the placing of new Ordinary Shares in the
Company. The net proceeds from the placing are being used to fund
CAPEX requirements at the Paradox project.
CONCLUSION
Despite recent operational challenges on the State 36-2 well,
Zephyr continues to be well positioned as a profitable, cash
generating exploration and production company and our balanced
portfolio of operated and non-operated assets is expected to
continue to yield strong results for Zephyr. Cash flows generated
from our non-operated portfolio will continue to be primarily used
for the ongoing development of our flagship Paradox project.
Looking ahead, with a diverse portfolio of cash flowing assets,
potential for substantial future organic growth, a solid financial
footing and a talented and dedicated team of employees, we continue
to be extremely optimistic about Zephyr's future.
I would like to thank our employees and contractors for their
hard work and I also wish to express gratitude to our Shareholders,
lenders, advisers and other stakeholders for their ongoing support
to the Company as we continue in our pursuit of opening up the next
prolific onshore U.S. oil and gas play.
Colin Harrington
Chief Executive Officer
29 September 2023
ZEPHYR ENERGY PLC
CONDENSED CONSOLIDATED INCOME STATEMENT
For the six months ended 30 June 2023
Unaudited Unaudited Audited
six months six months year ended
ended 30 ended 30 31 December
June June
2023 2022 2022
Notes US$'000 US$'000 US$'000
Revenue 13,407 25,948 41,062
Operating and transportation expenses (4,085) (2,055) (4,458)
Production taxes (1,065) (2,048) (3,318)
Depreciation, depletion and amortisation (5,608) (5,439) (12,666)
Gain/(loss) on derivative contracts 3 1,305 (908) 1,781
Gross profit 3,954 15,498 22,401
Administrative expenses (2,969) (2,193) (4,834)
Share-based payments (6) (212) (210)
Foreign exchange (losses)/gains (2,595) 5,431 6,102
Finance income - - 3
Finance costs (1,550) (1,110) (2,236)
(Loss)/profit on ordinary activities
before taxation (3,166) 17,414 21,226
Taxation credit/(charge) 845 - (1,955)
(Loss)/profit for the period attributable
to owners of the parent company (2,321) 17,414 19,271
(Loss)/profit per Ordinary Share
Basic, cents per share 4 (0.15) 1.16 1.26
Diluted, cents per share 4 (0.15) 1.09 1.18
ZEPHYR ENERGY PLC
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the six months ended 30 June 2023
Unaudited Unaudited Audited
six months six months year ended
ended 30 ended 30 31 December
June June
2023 2022 2022
US$'000 US$'000 US$'000
(Loss)/profit for the period attributable
to owners of the parent company (2,321) 17,414 19,271
Other comprehensive income/(loss)
Items that may be subsequently reclassified
to profit or loss
Foreign currency translation differences
on foreign operations 2,618 (5,504) (6,205)
Total comprehensive income for the
period attributable to owners of the
parent company 297 11,910 13,066
ZEPHYR ENERGY PLC
CONDENSED CONSOLIDATED BALANCE SHEET
As at 30 June 2023
Unaudited Unaudited Audited
as at as at as at
30 June 30 June 31 December
2023 2022 2022
Notes US$'000 US$'000 US$'000
Non-current assets
Exploration and evaluation assets 5 50,770 23,762 37,986
Property, plant and equipment 6 52,436 52,162 51,805
Derivative contracts - 50 175
103,206 75,974 89,966
Current assets
Trade and other receivables 6,039 6,845 4,290
Prepayments and accrued income 1,303 855 347
Cash and cash equivalents 6,188 10,587 8,996
Derivative contracts 1,440 - 1,133
14,970 18,287 14,766
Total assets 118,176 94,261 104,732
Current liabilities
Trade and other payables (12,757) (3,837) (12,520)
Borrowings 7 (24,988) (15,740) (14,572)
Derivative contracts - (490) -
(37,745) (20,067) (27,092)
Non-current liabilities
Borrowings 7 (8,726) (12,840) (10,821)
Deferred tax (1,110) - (1,955)
Provisions (4,874) (2,321) (4,138)
(14,710) (15,161) (16,914)
Total liabilities (52,455) (35,228) (44,006)
Net assets 65,721 59,033 60,726
Equity
Share capital 8 42,568 42,412 42,412
Share premium account 71,727 66,879 66,847
Shares to be issued - - 539
Warrant reserve 1,557 1,647 1,557
Share-based payment reserve 3,485 3,298 3,284
Cumulative translation reserves (13,366) (15,283) (15,984)
Retained deficit (40,250) (39,920) (37,929)
Equity attributable to owners
of the parent company 65,721 59,033 60,726
ZEPHYR ENERGY PLC
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the six months ended 30 June 2023 (Unaudited)
Share-based
Share payment Cumulative
Share premium Shares Warrant reserve translation Retained
capital account to be reserve reserve deficit Total
issued
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
As at 1 January
2023 42,412 66,847 539 1,557 3,284 (15,984) (37,929) 60,726
Transactions
with owners
in their capacity
as owners:
Issue of equity
shares 156 5,310 (539) - - - - 4,927
Expenses of
issue of equity
shares - (430) - - 195 - - (235)
Share-based
payments - - - 6 - - 6
Total
transactions
with owners
in their
capacity
as owners 156 4,880 (539) - 201 - - 4,698
Loss for the
period - - - - - - (2,321) (2,321)
Other
comprehensive
income:
Currency
translation
differences - - - - - 2,618 - 2,618
Total other
comprehensive
income for the
year - - - - - 2,618 - 2,618
Total
comprehensive
income for the
year - - - - - 2,618 (2,321) 297
As at 30 June
2023 42,568 71,727 - 1,557 3,485 (13,366) (40,250) 65,721
ZEPHYR ENERGY PLC
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2022 (Audited)
Share-based
Share payment Cumulative
Share premium Shares Warrant reserve translation Retained
capital account to be reserve reserve deficit Total
issued
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
As at 1 January
2022 42,065 52,875 - 89 3,065 (9,779) (57,721) 30,594
Transactions
with owners
in their
capacity
as owners:
Issue of equity
shares 347 17,023 - - - - - 17,370
Exercise of
warrants - - 539 (122) - - 122 539
Expenses of
issue of
equity
shares - (1,461) - - 408 - - (1,053)
Warrant
exercise
extension - (33) - 33 - - - -
Grant of
warrants - (1,557) - 1,557 - - - -
Share-based
payments - - - - 210 - - 210
Transfer to
retained
deficit
in respect of
lapsed
warrants - - - - (387) - 387 -
Transfer to
retained
deficit
in respect of
expired
warrants - - - - (12) - 12 -
Total
transactions
with owners
in their
capacity
as owners 347 13,972 539 1,468 219 - 521 17,066
Profit for the
period - - - - - - 19,271 19,271
Other
comprehensive
income:
Currency
translation
differences - - - - - (6,205) - (6,205)
Total other
comprehensive
income for the
year - - - - - (6,205) - (6,205)
Total
comprehensive
income for the
year - - - - (6,205) 19,271 13,066
As at 31
December
2022 42,412 66,847 539 1,557 3,284 (15,984) (37,929) 60,726
ZEPHYR ENERGY PLC
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the six months ended 30 June 2022 (Unaudited)
Share-based
Share payment Cumulative
Share premium Warrant reserve translation Retained
capital account reserve reserve deficit Total
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
As at 1
January
2022 42,065 52,875 89 3,065 (9,779) (57,721) 30,594
Transactions
with
owners in
their
capacity as
owners:
Issue of
equity
shares 347 15,465 1,558 - - - 17,370
Expenses of
issue
of equity
shares - (1,461) - 408 - - (1,053)
Transfer to
retained
deficit in
respect
of lapsed
options - - - (387) - 387 -
Share-based
payments - - - 212 - - 212
Total
transactions
with owners
in
their
capacity
as owners 347 14,004 1,558 233 - 387 16,529
Profit for the
period - - - - - 17,414 17,414
Other
comprehensive
income:
Currency
translation
differences - - - - (5,504) - (5,504)
Total other
comprehensive
income for
the
period - - - - (5,504) - (5,504)
Total
comprehensive
income for
the
period - - - - (5,504) 17,414 11,910
As at 30 June
2022 42,412 66,879 1,647 3,298 (15,283) (39,920) 59,033
ZEPHYR ENERGY PLC
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
For the six months ended 30 June 2023
Unaudited Unaudited Audited
six months six months year ended
ended 30 ended 30 31 December
June June
2023 2022 2022
US$'000 US$'000 US$'000
Operating activities
(Loss)/profit before taxation from
continuing operations (3,166) 17,414 21,226
Adjustments for:
Finance income - - (3)
Finance costs 1,550 1,110 2,236
Unrealised (gain)/loss on derivative
contracts (132) 440 (1,308)
Depreciation and depletion of property,
plant and equipment 5,609 5,440 12,668
Share-based payments 6 212 210
Unrealised foreign exchange loss/(gain) 2,615 (5,571) (5,672)
Operating cash inflow before movements
in working capital 6,482 19,045 29,357
Decrease/(increase) in trade and other
receivables 1,035 (5,631) (3,028)
(Increase)/decrease in prepayments
and accrued income (934) (286) 178
Increase in trade and other payables 736 628 723
Cash generated from operations 7,319 13,756 27,230
Income tax paid - - -
Net cash generated from operating
activities 7,319 13,756 27,230
Investing activities
Additions to exploration and evaluation
assets (11,813) (1,007) (13,297)
Business combination - - (37,880)
Acquisition of oil and gas properties - (36,000) (3,362)
Additions to oil and gas properties (8,444) (8,640) (10,482)
Deposits paid - 3,000 -
Proceeds on disposal of oil and gas 2,262 - -
properties
(Decrease)/increase in capital expenditure
related payables (3,068) (2,269) 9,300
Grant funds received 302 - -
Interest received - - 3
Net cash used in investing activities (20,761) (44,916) (55,718)
Financing activities
Net proceeds from issue of shares 3,692 16,317 16,317
Exercise of warrants - - 539
Proceeds from borrowings 10,000 28,000 30,500
Repayment of borrowings (2,058) (3,078) (8,931)
Interest and fees paid on borrowings (1,003) (1,223) (2,218)
Increase in prepayments and deposits - 50 -
Net cash generated from financing
activities 10,631 40,066 36,207
Net (decrease)/increase in cash and
cash equivalents (2,811) 8,906 7,719
Cash and cash equivalents at beginning
of period 8,996 1,811 1,811
Effect of foreign exchange rate changes 3 (130) (534)
Cash and cash equivalents at end of
period 6,188 10,587 8,996
ZEPHYR ENERGY PLC
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL
STATEMENTS
For the six months ended 30 June 2023
1. ACCOUNTING POLICIES
Basis of preparation
This report was approved by the Directors on 29 September
2023.
The financial statements have been prepared in accordance with
UK-adopted International Accounting Standards and with the
requirements of the Companies Act 2006 as applicable to companies
reporting under those standards.
The condensed consolidated interim financial statements are
presented in United States Dollar ("US$"). All amounts have been
rounded to the nearest thousand unless otherwise indicated.
The Company is domiciled in the United Kingdom. The Company's
shares are admitted to trading on the AIM market in the UK and the
OTCQB Venture Market ("OTCQB") in the U.S.
The current and comparative periods to June have been prepared
using the accounting policies and practices consistent with those
adopted in the annual financial statements for the year ended 31
December 2022, and with those expected to be adopted in the Group's
financial statements for the year ending 31 December 2023.
Comparative figures for the year ended 31 December 2022 have
been extracted from the statutory financial statements for that
period which carried an unqualified audit report, did not contain a
statement under section 498(2) or (3) of the Companies Act 2006 and
have been delivered to the Registrar of Companies.
The financial information contained in this report does not
constitute statutory financial statements as defined by section 434
of the Companies Act 2006, and should be read in conjunction with
the Group's financial statements for the year ended 31 December
2022. This report has not been audited or reviewed by the Group's
auditors.
During the first six months of the current financial year there
have been no related party transactions that materially affect the
financial position or performance of the Group and there have been
no changes in the related party transactions described in the last
annual financial report.
Having considered the Group's current cash forecast and
projections, the Directors have a reasonable expectation that the
Company and the Group have, or have access to, sufficient resources
to continue operating for at least the next 12 months. Accordingly,
the Directors continue to adopt the going concern basis in
preparing the financial statements.
The principal risks and uncertainties of the Group have not
changed since the publication of the last annual financial report
where a detailed explanation of such risks and uncertainties can be
found.
2. DIVIDS
The Directors do not recommend the payment of a dividend for the
period.
3. GAIN/(LOSS) ON DERIVATIVE CONTRACTS
During the period, the Group entered into hedging transactions
to mitigate its exposure to fluctuations in commodity prices. The
net change in these contracts resulted in a realised net gain of
US$1.2 million (30 June 2022: net loss of US$0.5 million, 31
December 2022: net gain of US$0.5 million) and an unrealised net
gain of US$0.1 million (30 June 2022: net loss of US$0.4 million,
31 December 2022: net gain of US$1.3 million) for the period to 30
June 2023.
4. (LOSS)/PROFIT PER ORDINARY SHARE
Basic (loss)/profit per Ordinary Share is calculated by dividing
the net (loss)/profit for the period by the weighted average number
of Ordinary Shares in issue during the period. Diluted
(loss)/profit per Ordinary Share is calculated by dividing the net
(loss)/profit for the period by the weighted average number of
Ordinary Shares in issue during the period, adjusted for the
dilutive effect of potential Ordinary Shares arising from the
Company's share options and warrants.
The calculation of the basic and diluted (loss)/profit per
Ordinary Share is based on the following data:
Unaudited Unaudited Audited
six months six months year ended
ended 30 ended 30 31 December
June June 2022
2023 2022 US$'000
US$'000 US$'000
(Losses)/profits
(Losses)/profits for the
purpose of basic and diluted
(loss)/profit per Ordinary
Share being net (loss)/profit
for the period (2,321) 17,414 19,271
Number Number Number
'000 '000 '000
Number of shares
Weighted average number
of shares for the purpose
of basic (loss)/profit
per Ordinary Share 1,558,668 1,505,017 1,533,110
Number of shares
Weighted average number
of shares for the purpose
of basic (loss)/profit
per Ordinary Share 1,558,668 1,505,017 1,533,110
Dilutive share options - 42,528 42,526
Dilutive warrants - 55,730 55,721
Weighted average number
of shares for the purpose
of diluted (loss)/profit
per Ordinary Share 1,558,668 1,603,275 1,631,357
(Loss)/profit per Ordinary
Share
Basic, cents per share (0.15) 1.16 1.26
Diluted, cents per share (0.15) 1.09 1.18
Due to the losses incurred in the period ended 30 June 2023,
there was no dilutive effect from the share options or
warrants.
At 31 December 2022, 2.4 million (30 June 2022: 2.8 million)
share options and 89.6 million (30 June 2022: 89.6 million)
warrants were excluded from the diluted number of shares bases on
their market share price and exercise price.
5. EXPLORATION AND EVALUATION ASSETS
US$'000
Cost
At 1 January 2022 22,773
Additions 15,213
At 31 December 2022 37,986
Acquisition 1,000
Additions 12,086
Grant funds received (302)
At 30 June 2023 50,770
Carrying amount
At 30 June 2023 50,770
At 31 December 2022 37,986
On 10 February 2023, the Group announced that it had completed
the acquisition of the remaining 25% working interest in the WSU in
the Paradox Basin, Utah from Rockies Standard Oil Company LLC
("RSOC") with the issue of up to 40,449,284 new Ordinary Shares of
0.1 pence at a price of 6.05 pence per new Ordinary Share. On 10
February 2023, 13,483,095 Ordinary Shares were issued to settle the
initial consideration of US$1 million for the acquisition. A
further 26,966,189 new Ordinary Shares will be issued when the
Group makes a final investment decision relating to the processing
plant. See note 8.
6. PROPERTY, PLANT AND EQUIPMENT
Oil and Plant and
gas properties machinery Total
US'000 US'000 US'000
Cost
At 1 January 2022 12,902 27 12,929
Business combination 40,199 - 40,199
Acquisitions 3,362 - 3,362
Additions 9,757 - 9,757
Exchange differences - (3) (3)
At 31 December 2022 66,220 24 66,244
Additions 8,819 - 8,819
Disposal (3,106) - (3,106)
At 30 June 2023 71,933 24 71,957
Accumulated depreciation, depletion
and amortisation
At 1 January 2022 1,755 18 1,773
Charge for the period 12,666 2 12,668
Exchange differences - (2) (2)
At 31 December 2022 14,421 18 14,439
Charge for the period 5,608 1 5,609
Disposal (527) - (527)
At 30 June 2023 19,502 19 19,521
Carrying amount
At 30 June 2023 52,431 5 52,436
At 31 December 2022 51,799 6 51,805
7. BORROWINGS
Unaudited Unaudited Audited
six months six months year ended
ended 30 ended 30 31 December
June June 2022
2023 2022 US$'000
US$'000 US$'000
Bridge loan facility - 1,687 -
Term loan 12,926 16,937 14,957
Revolving credit 20,788 9,956 10,436
33,714 28,580 25,393
Maturity analysis
Amounts due within one year* 24,988 15,740 14,572
Amounts due 1 year to 2 years 4,576 4,384 4,471
Amounts due 2 years to 4 years 4,150 8,456 6,350
33,714 28,580 25,393
First International Bank and Trust ("FIBT")
In February 2022, the Group signed a bank facility with First
International Bank & Trust ("FIBT") in the U.S., consisting of
a Term loan of US$18 million and a Revolving credit facility of
US$10 million, which was increased to US$13 million in October
2022.
Repayment of the Term loan commenced in April 2022 and is
repayable in 48 monthly payments. Interest is charged at a rate of
6.74% per annum.
*The Revolving credit facility was structured with a term of 12
months, and is thereby classified as short-term debt due for
repayment within one year. However, the facility has provisions for
a semi-annual redetermination process, at which time the bank
estimates the value of Zephyr's reserves used as collateral and
renews or revises the amount of available credit provided by the
facility. At 30 June 2023, the full facility of US$13 million had
been drawn and was outstanding. The Group does not expect any
changes to the US$13 million in total availability when the bank's
next redetermination process concludes in October 2023. Interest on
the Revolving credit facility is charged at a rate of 9.74% per
annum.
Loan fees on both the term loan and revolving credit facility
were capitalised against the loan and are being amortised over the
life of the respective loans.
FIBT has a lien on the assets of the Group's U.S. subsidiaries,
Zephyr Bakken LLC and Rose Petroleum (Utah) LLC.
Slawson asset bridge facility
On 19 December 2022, the Group entered into a facility agreement
with an experienced U.S. based institutional investor. Under the
terms of the agreement the Group received a 12-month revolving
credit facility of up to US$8 million, of which US$7.8 million had
been drawn at 30 June 2023.
The facility incurs interest at a rate of 12% and was subject to
an arrangement fee of US$80,000, both of which have been rolled up
into the loan facility.
8. SHARE CAPITAL
Unaudited Unaudited Audited
as at as at as at
30 June 30 June 31 December
2023 2022 2022
Number Number Number
'000 '000 '000
Authorised
Ordinary Shares of 0.1p each 7,779,297 7,779,297 7,779,297
Deferred Shares of 9.9p each 227,753 227,753 227,753
8,007,050 8,007,050 8,007,050
Unaudited Unaudited Audited
as at as at as at
30 June 30 June 31 December
2023 2022 2022
US$'000 US$'000 US$'000
Allotted, issued and fully paid
1,686,501,822 Ordinary Shares of 0.1p
each (30 June 2022: 1,560,746,001:
31 December 2022: 1,560,746,001) 2,263 2,107 2,107
227,752,817 Deferred Shares of 9.9p
each 40,305 40,305 40,305
42,568 42,412 42,412
The Deferred Shares are not listed on the AIM Market, do not
give the holders any right to receive notice of, or to attend or
vote at, any General Meetings, have no entitlement to receive a
dividend or other distribution or any entitlement to receive a
repayment of nominal amount paid up on a return of assets on
winding up nor to receive or participate in any property or assets
of the Company. The Company may, at its option, at any time redeem
all of the Deferred Shares then in issue at a price not exceeding
GBP0.01 from all Shareholders upon giving not less than 28 days'
notice in writing.
As outlined in the Company's 2021 Annual Report it is the
Company's intention to issue nil-cost options to certain Directors
and employees to compensate them for salaries sacrificed during the
COVID-19 pandemic. It has not been possible to issue these nil-cost
options to date due to the Company's ongoing activity over a long
period of time which has precluded transactions involving the
Company's securities.
ISSUED ORDINARY SHARE CAPITAL
In February 2022, the Company issued 256,000,000 Ordinary Shares
of 0.1 pence each at a price of 5 pence per Ordinary Share, raising
gross proceeds of US$17.4 million (GBP12.8 million).
On 5 January 2023, the Company issued 22,272,726 Ordinary Shares
of 0.1 pence each in respect of warrants exercised during the year
ended 31 December 2022, at a price of 2 pence per Ordinary Share,
raising gross proceeds of US$0.5 million (GBP0.45 million).
On 10 February 2023, the Company issued 13,483,095 Ordinary
Shares of 0.1 pence each at a price of 6.05 pence per Ordinary
Share, in respect of the initial consideration of US$1 million due
in respect of the acquisition of the remaining 25% working interest
in the WSU in the Paradox Basin, Utah from RSOC.
On 12 June 2023, the Company issued 90 million Ordinary Shares
of 0.1 pence each at a price of 3.5 pence per Ordinary Share,
raising gross proceeds of US$3.9 million (GBP3.15 million).
Ordinary Deferred
Shares Shares
Number Number
'000 '000
At 1 January 2022 1,304,746 227,753
Allotment of shares 256,000 -
At 31 December 2022 1,560,746 227,753
Allotment of shares 125,756 -
At 30 June 2023 1,686,502 227,753
9. POST BALANCE SHEET EVENTS
All matters relating to events occurring since the period end
are reported in the Chief Executive's Statement.
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.
Estimates of resources and reserves contained within this
announcement have been prepared according to the standards of the
Society of Petroleum Engineers. All estimates are internally
generated and subject to third party review and verification.
Glossary of Terms
Reserves : Reserves are defined as those quantities of petroleum
which are anticipated to be commercially recovered from known
accumulations from a given date forward.
1P: proven reserves (both proved developed reserves + proved
undeveloped reserves)
2P: 1P (proven reserves) + probable reserves, hence "proved and
probable"
3P: the sum of 2P (proven reserves + probable reserves) +
possible reserves, all 3Ps "proven and probable and possible"
Contingent Resources : Those quantities of petroleum estimated,
as of a given date, to be potentially recoverable from known
accumulations by application of development projects, but which are
not currently considered to be commercially recoverable due to one
or more contingencies.
Contingent Resources may include, for example, projects for
which there are currently no viable markets, or where commercial
recovery is dependent on technology under development, or where
evaluation of the accumulation is insufficient to clearly assess
commerciality. Contingent Resources are further categorised in
accordance with the level of certainty associated with the
estimates and may be sub-classified based on project maturity
and/or characterised by their economic status.
1C: Low estimate of Contingent Resources
2C: Best estimate of Contingent Resources
3C: High estimate of Contingent Resources
Prospective Resources : Those quantities of petroleum which are
estimated, on a given date, to be potentially recoverable from
undiscovered accumulations.
1U: Low estimate of Prospective Resources
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END
IR SEFEEAEDSEFU
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