REG - Zephyr Energy PLC - Q4 & FY 22 results from Williston Basin portfolio

Zephyr EnergyAnnouncement

15/02/2023 07:16

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RNS Number : 9293P  Zephyr Energy PLC  15 February 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.

 

 

15 February 2023

Zephyr Energy plc

("Zephyr" or the "Company")

 

Fourth Quarter and FY 2022 results from Williston Basin portfolio

Year-on-year revenue growth in excess of 600%

Year-on-year production growth of over 500%

FY 2023 production guidance reaffirmed

 

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 fourth quarter 2022 ("Q4") and
full-year 2022 ("FY 2022") results related to hydrocarbon production and
cashflows from its non-operated asset portfolio in the Williston Basin, North
Dakota, U.S (the "Williston project").

 

Q4 2022 and FY 2022 Williston Basin Highlights

 

·    Q4 revenues totalled US$7.4 million, net to Zephyr, giving the
Company total expected revenues for FY 2022 of US$42.9 million (subject to
audit) - representing a seven-fold increase over full-year 2021 ("FY 2021")
revenues of US$6 million and in excess of Zephyr's initial public guidance for
FY 2022 revenues of US$35-US$40 million.

 

·    Q4 sales volumes averaged 1,192 barrels of oil equivalent per day
("boepd"), giving the Company total sales for FY 2022 of 543,948 barrels of
oil equivalent ("boe") - at the high end of the range of Zephyr's guidance for
FY 2022 sales and representing more than a six-fold increase from FY 2021
sales of 88,037 boe.

o  FY 2022 sales volumes averaged 1,490 boepd compared to the FY 2021 sales
volumes average of 263 boepd.

o  The Company hedged 171,000 barrels of oil in FY 2022 at a weighted-average
price of US$98.04 per barrel of oil.

 

·    Q4 operating income was US$6.3 million (after taxes, lease operating
expenses, realised hedging impacts, and gathering and marketing fees).
Operating income for FY 2022 was US$35.7 million.

 

·    At 31 December 2022, 223 wells in the portfolio were available for
production, including 17 wells which came online at some point during the
quarter.

o  Net working interests across the Williston Basin non-operated portfolio
now average 6.3% per well, equivalent to 15 gross wells, all of which utilised
horizontal drilling and modern, hydraulically stimulated completions.

o  An estimated eight additional wells in which Zephyr owns a working
interest are forecast to be brought on production by the end of June 2023, and
these wells are  expected to significantly increase daily production rates
from the Williston portfolio.

o  Zephyr reiterates its previously released guidance of 1,550 to 1,750
boepd, net to Zephyr, for its full-year 2023 ("FY 2023") Williston Basin
production - an estimate which includes contributions from the six recently
acquired Slawson Exploration ("Slawson") operated wellbore interests (as
announced to the market on 21 December 2022).

 

 

Colin Harrington, Chief Executive of Zephyr, said: "I am delighted with the
growth and strong cash flows generated from our Williston portfolio during
2022.  We comfortably exceeded our initial FY 2022 revenue guidance, and
production was within the upper end of the forecast range.  Cash flows
generated from these operations have been reinvested back into both our
operated and non-operated asset portfolios, and we expect continued growth in
2023.  We fully expect this years' Williston project production to exceed
last years' once again.

 

"Our non-operated asset base is a now diverse mix of interests in 223
low-risk, high-margin producing wells with top-tier Williston Basin operators
such as Slawson, the operator of 6 newly drilled wellbores in which we
acquired working-interests in December 2022 and which will be coming online
over the next few months.

 

"We have a busy period ahead and we look forward to keeping Shareholders
regularly updated on our ongoing activities over the coming weeks."

 

Q4 Sales Detail

Zephyr's net sales for Q4 were approximately 109,706 boe.

Q4 product mix was 72% crude oil, 14% natural gas, and 14% natural gas
liquids. The table below provides sales volumes, product mix, and average
sales prices for the quarter:

Oil:                                         79,177
barrels ("bbls") at an average sales price of US$81.55/bbl*

Natural Gas:                       92,952 thousand cubic
feet ("mcf") at an average sales price of US$4.73 /mcf

Natural Gas Liquids:        15,037 bbls at an average sales price
of US$33.67 per bbl

 

*not including hedges

(Note: Fourth quarter production volumes and average sales prices figures
include field estimates in respect of Dec 2022 natural gas and natural gas
liquids sales volumes and are subject to future revision.)

 

During Q4, a number of Zephyr's existing production wells were temporarily
shut-in due to "frac-protect" procedures while new nearby wells were
stimulated and completed.  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. Offset wells are then 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 in the first six months of 2023
given the Company's interests in 18 newly drilled wells which came online
during Q4.

 

Williston Basin production outlook

 

Eight additional producing wells from Zephyr's existing portfolio are expected
to be brought online during the next six months, which will more than mitigate
decline rates typical of Williston Basin production.

 

The Company reiterates its FY 2023 production forecast of 1,550 to 1,750
boepd from the Williston project (net to Zephyr).

 

The Company has hedged 157,000 barrels of oil over the next 15 months
(starting 1 January 2023) at a weighted-average price of US$86.89 per
barrel.  The Company is expecting significant additional production volumes
by the end of March 2023 from new wells coming online and will continue to
evaluate its commodity price risk management strategy on a regular basis.

 

Contacts

 

 Zephyr Energy plc                                                   Tel: +44 (0)20 7225 4590

 Colin Harrington (CEO)

 Chris Eadie (CFO)

 Allenby Capital Limited - AIM Nominated Adviser                     Tel: +44 (0)20 3328 5656

 Jeremy Porter / Vivek Bhardwaj

 Turner Pope Investments - Joint-Broker                              Tel: +44 (0)20 3657 0050

 James Pope / Andy Thacker

 Panmure Gordon (UK) Limited - Joint-Broker                         Tel: +44 (0) 20 7886 2500

 John Prior / Hugh Rich / James Sinclair-Ford / Harriette Johnson

 Celicourt Communications - PR

 Mark Antelme / Felicity Winkles                                    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.

 

The Williston portfolio currently consists of working-interests in over 200
modern horizontal wells which are expected to provide production of 1,550 -
1,750 barrels of oil equivalent per day, net to Zephyr, in 2023.  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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