Zephyr Energy : Turner Pope Research Note, 20th January 2023

Turner Pope Research Note, 20th January 2023

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Zephyr yesterday provided an operational update on its State 36-2 LNW-CC well ('the Well') at the Group's flagship project in the Paradox Basin, Utah, USA, noting that substantial hydrocarbon flow had been encountered by intersecting an apparent major natural fracture network in the reservoir. As a result, the Board is now evaluating various revised completion options. These may include running production casing and completing the Well without drilling the remainder of the planned lateral, given the significant apparent volumes and that the hydraulic stimulation originally proposed is now unlikely to be required. While assessments remain at an early phase, this suggests potential improvement to Well economics via reduced completion costs, noting that historic Paradox wells that successfully intersect natural fractures have been prolific, enjoying high immediate production rates along with substantial ultimate oil recoveries. Given that the Group's recently acquired gas infrastructure is seen accepting sales volumes at some point in 2H 2023, while the current drilling programme remains amply funded through c.US$18.5m of liquidity available as of 10 Nov 2022, projected medium term cash flows still appear sufficient to support exploitation of its existing inventory, which includes 2U potential of over 200 million boe across the Paradox. This of course remains key to Zephyr closing in on its ultimate goal of unlocking the next reat 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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