Q1 Williston Basin & State 36-2 LNW-CC Update
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
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Zephyr Energy plc Colin Harrington (CEO) Chris Eadie (CFO)
|
Tel: +44 (0)20 7225 4590 |
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Allenby Capital Limited - AIM Nominated Adviser Jeremy Porter / Vivek Bhardwaj
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Tel: +44 (0)20 3328 5656
|
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Turner Pope Investments - Joint-Broker James Pope / Andy Thacker
Panmure Gordon (UK) Limited - Joint-Broker John Prior / Hugh Rich / James Sinclair-Ford
Celicourt Communications - PR Mark Antelme / Felicity Winkles |
Tel: +44 (0)20 3657 0050
Tel: +44 (0) 20 7886 2500
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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