Zephyr Energy : Turner Pope Research Note, 8th April 2022

Turner Pope Research Note, 8th April 2022

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Zephyr has released a production update from its now fully-integrated, non-operated Williston Basin portfolio. Q1 2022 operational production rates averaged 1,643 barrels of oil equivalent per day ('boepd') net to Zephyr, which was comfortably ahead of management's expectations and represented a record-breaking production quarter for the Group. As of end-March 2022, Zephyr had a total of 185 non-operated wells available for production, including 7 wells which came online during the first quarter, plus a further 16 expected over the next six months. As a result, Zephyr received cash flow of c.US$6 million from its non-operated assets in March 2022, being the first month to include contributions from the additional Williston Basin assets ('the Acquisition') that were secured immediately prior to the surge in commodity prices that resulted from the onset of war in Ukraine. With such conditions widely expected to be sustained for some months to come, substantial funds are expected to remain available for ongoing development of the Group's flagship Paradox project ('the Paradox Project'), for which management is planning a three-well drilling programme that will commence in 2H 2022. The Board also expects to be in a position to release results from its much-anticipated Paradox Basin Competent Persons Report ('CPR') in the coming days. Assuming this is delivered in line with expectations, along with the fact that the original economics of the Acquisition now look to have been particularly conservative, there appears to remain fairly substantial upside on the Group's current valuation. We would draw your attention to the various disclaimers in the document both at the beginning and at the end of the note. Retail clients (as defined by the rules of the FCA) must not rely on the research document. In particular you should note that the research document is a non-independent marketing communication. The analyst who has prepared the research is aware that TPI provides research to Zephyr Energy plc. Accordingly the research has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibitions on dealing ahead of its dissemination. The information in the document is published solely for information purposes and is not to be construed as a solicitation or an offer to buy or sell any securities or related financial instruments. The material contained in the document is general information intended for recipients who understand the risks associated with equity investment in smaller companies. It does not constitute a personal recommendation as defined by the FCA or take into account the particular investment objectives, financial situation or needs of individual investors nor provide any indication as to whether an investment, a course of action or the associated risks are suitable for the recipient.

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