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Auctus Advisers Research Note, 15th November 2022

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Solid 3Q22 Financial Update. Raising FY22 revenue gudance

  • 3Q22 sales volumes were 1,313 boe/d (1,208 boe/d production). This is very close to our forecast of 1,423 boe/d.
  • 3Q22 revenue was US$9.6 mm, also very close to our expectations of US$10.6 mm. Operating income for the period was US$7.9 mm (we expected US$8.9 mm).
  • 3Q22 production was marginally impacted by temporary shut-ins due to planned frac-protect procedures on existing wells while new nearby wells were completed. 26 additional wells are forecast to be brought on production over the next six months, which will help to decrease typical Williston Basin portfolio decline rates.
  • Zephyr is upgrading its FY22 revenue forecast to US$40-45 mm (US$35- 40 mm previously – we forecast US$45 mm) with the FY22 production guidance of 0.50-0.55 mmboe unchanged.
  • The upcoming 3 well drilling programme could take our Core NAV to £0.25/sh. A successful well test at State 36-2 LNW-CC well would confirm the commerciality of up to 32 mmboe net contingent resources (unrisked NAV of £0.11 per share). The second well of the campaign (State 36-3 LN-C9) would derisk a further ~25 mmboe net resources in a different reservoir. We reiterate our target price of £0.16 per share.

Auctus Advisers Research Note, 15th November 2022