Auctus Advisers Research Note, 15 August 2023

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High sales in the Williston. Progress at Well 36.2 (Paradox) hindered by extreme heat

• 2Q23 sales volumes averaged 1,385 boe/d compared to 1Q23 sales volumes of 1,093 boe/d as more of Zephyr’s existing production wells were changed from temporarily shut-in to producing status during 2Q23. We conservatively forecasted only ~1,050 boe/d for 2Q23.
• The recently acquired Slawson operated wellbore interests are now fully drilled and completed. Production from these working interests continues to be expected to be online by October following completion of surface facilities on the well pad.
• Zephyr has decided to participate in the drilling of 10 new wells in a highly attractive part of the Williston Basin, where the initial two wells drilled by the operator in 2021 have been some of the top performers in Zephyr’s non-operated portfolio, paying out in under six months from first production. The net overall capex is ~US$0.2 mm. The new wells are expected to be on stream before YE23 with first revenues ~150 days later.
• In the Paradox, progress in pulling out the tubing at well 36-2 has been hindered by recent extreme heat with operations limited to nighttime only. The work-over costs have totalled less than U$2 mm so far. All the submitted invoices have been approved by the insurer and reimbursement are regularly received within 30 days of receipt by the insurer.
• Dominion continues to be expected to start delivering gas to Green River in late 3Q23 or early 4Q23, as previously announced.
• We re-iterate our target price of £0.18/sh in line with our ReNAV.