Auctus Advisers Research Note, 15th February 2023

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High production and income in the Williston

• 4Q22 sales volumes averaged 1,192 boe/d, resulting in 1,490 boe/d over FY22, which is near the top end of the FY22 sales guidance and in line with our forecasts. This was achieved despite the fact that number of Zephyr’s existing production wells were temporarily shut-in during 4Q22 due to “frac-protect” procedures while new nearby wells were stimulated and completed.
• FY22 revenue is estimated at US$42.9 mm, in line with the upgraded guidance of US$40-45 mm. FY22 operating income is estimated at US$35.7 mm, in line with our expectations.
• The FY23 production guidance of 1.55-1.75 mboe/d net production in the Williston Basin has been re-iterated.
• Pending the flow test results of the State 36-2 LNW-CC well, we re- iterate our target price of £0.20/sh. The ongoing programme has an unrisked value of £0.15/sh just based on the contingent resources in the Cane Creek reservoir on Zephyr acreage (39.25 mmboe net). Success in the C-9 reservoir around YE23 could add a further £0.12/sh.