Zephyr Energy : Turner Pope Research Note, 6 June 2023

Turner Pope Research Note, 6 June 2023

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Zephyr confirms it has raised £3.15m (gross) through an equity placing priced at 3.5p/share that was supported by existing institutional and other investors, resulting in roughly 5% dilution for current shareholders. Utilising existing share authorities, in the near-term this new funding is designed to bridge a gap resulting from both unexpected delays in building-out surface facilities at its recently acquired, Slawson Exploration-operated Williston Basin interests ('the Slawson acquisition'), plus working capital required to complete the State 36-2 LNW-CC production test following April's well control incident. In the longer term, the funding will be utilised to accelerate the Paradox infrastructure build-out. It will enable Paradox project development to remain on schedule as the comprehensive insurance reimbursement process gets underway, and while also waiting for initial production from the Slawson well (which has now slipped to October 2023, some three-six months behind the original schedule). Preparatory well work at the State 36-2 well remains on track with a production test expected in June, albeit timing will be dictated by operational and safety considerations. While the well control incident resulted in delays to the initial production test, the goal remains for both it and the State 16-2 LN-CC well to be brought into full production before the year end. In the meantime, the 36-2's pressures and hydrocarbon potential remain substantial. Given the Group's commitment to continue accelerating the Paradox development and the large potential scale of the project, various alternatives, including partnership, joint-venture ('JV') and farm-in structures, will be explored in the coming months. 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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