Zephyr Energy : Turner Pope Research Note, 14th September 2022

Turner Pope Research Note, 14th September 2022

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Zephyr has announced its entering into a binding agreement (the 'Agreement') to acquire a package of oil and gas assets located on and around the Group's Paradox project, Utah (the 'Paradox project'). Enabling a substantial reduction in its anticipated forward capital requirements, the Agreement comprises 21 miles of natural gas gathering lines along with the Powerline Road gas processing plant (the 'Plant', which is not currently in operation), rights of way for additional gathering lines, active permits, five existing wellbores and additional acreage (the 'New Acreage') which is partly contiguous to Zephyr's operated White Sands Unit (the 'WSU'). The consideration for the asset package is US$750,000, which will be satisfied by a payment from existing cash resources plus the assumption of all future decommissioning, plugging and abandonment liabilities associated with the assets (estimated at US$2.5 million in today's terms). The Board considers this surface infrastructure will accelerate its move from its current phase of value delineation to a programme of tangible development that will facilitate cashflows from the Paradox project in a more rapid timeframe. Given that a three well drill programme is expected to commence on the Paradox project in 2H 2022 (funding for which is being provided by the Group's Williston Basin non-operated assets), Zephyr looks set to remain highly active in its run-up to 2023. This will be key to the Group closing in on its ultimate goal of unlocking the next great unconventional onshore resource play in the US. 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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