Zephyr Energy : Turner Pope Research Note, 29 September 2023

Turner Pope Research Note, 29 September 2023

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Zephyr has released its interim financial report for the six months ended 30 June 2023. Detailing financials very much in line with expectations, investor focus remains the significant new capital invested both into the Williston assets and the Paradox project during the period. Initial returns from this are expected to be seen in Q4 2023 when the Slawson wells come online for the first time, followed in due course by the Group's first sustained revenues from the Paradox project as it completes and ties-in its recently drilled wells. While progress on the latter has been hindered by State 36-2's well control incident, the Board remains confident that this was in fact an illustration of the overall project's significant and larger production potential. With respect to this, over US$3.7 million has been collected from its insurer to date, with full coverage for potential future work including additional costings for a sidetrack or re-drill of the original well from the same pad. This will all form part of 2024's continuing work to transform the Paradox project into a consistent revenue generating development, which will include export of natural gas volumes through Dominion Energy's recently completed pipeline by tying Zephyr's acreage to the multi-state Williams Northwest Gas Pipeline system. Recognising 36-2's substantial pressures and hydrocarbon potential along with the demonstrated potential of the previously drilled State 16-2 LN-CC well, the scale of the overall project is increasingly clear. In order to ensure its pace of development accelerates while seeking to seize the ultimate goal of opening up the next prolific onshore US oil and gas play, the Board continues to explore various alternatives, including partnership, joint-ventures ('JV') and farm-in structures, in order to deliver the highest, timely returns for its shareholders. 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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