Turner Pope Research Note, 18 October 2023
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| Zephyr has provided an update on its State 36-2 well, along with details of a farm-in agreement in the proven Salt Wash Field in Grand County, Utah. Further to January’s well control incident, recent operations at State 36-2 have not resulted in what the Board considers to be sufficient recoveries of damaged tubing to justify continuation of the ongoing well work costs versus those estimated to instead redrill. Having already considered such an outcome, discussions had commenced with its insurer some weeks back to assess the multiple alternative options for realising the significant potential productivity of the reservoir at this location. Following a detailed review, management has now elected to proceed with a ‘twinned’ well from an adjacent location on the same drilling pad. Importantly, Zephyr has a pre-existing approved permit for such work, which will be amended to target the same natural fracture network; it also retains full well control insurance coverage through which it expects to recover substantially all costs associated with the well control incident, including those related to the redrill. With preparations underway, focus will be on maximising efficiencies and leveraging knowledge gleaned from the State 36-2 well. Recognising that the goal of securing recurring revenues from Paradox has now slipped into the New Year, a redrill target date of Q1 2024 suggests revenues could still be delivered by early summer. In conjunction with this, the Group’s new farm-in (the ‘Farm-in’) to the Salt Wash Field, for which it has long studied the potential to redevelop its proven reserves, further increases its footprint across its primary play close to existing operations. 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. |
