Auctus Advisers Research Note, 18 October 2023

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Adding a helium asset in the Paradox

• Zephyr is acquiring a minimum of 75% WI in a 1,047-acre leasehold
  position in the Salt Wash field which lies three miles to the south of the
  company’s WSU. Salt Wash was discovered in 1961 and produced 1.65
  mmbbl from a 15 feet oil rim and 11.7 bcf of natural gas. Above the oil
  rim is a 500 feet gas column consisting of 72% of nitrogen, 22% of
  hydrocarbon and 1.4-1.7% of helium.
• In the context of helium prices of up to ~US$1,000/mcf, the estimated
  0.07-0.19 bcf of discovered helium plus 0.04-0.66 bcf of prospective
  resources could be very valuable. Using our valuation for the Topaz
  helium project (Pulsar Helium), the unrisked value of 0.13 bcf of helium
  at Salt Wash could be ~US$60 mm (~£0.03/sh). Many nearby Paradox
  Basin operators are already producing co-mingled helium in commercial
  quantities, and there is an active local offtake market for helium.
• The Cane Creek reservoir is also present at Salt Wash and the Upper
  Leadville formation (the historical production comes from the Leadville)
  is a secondary target.
• The consideration for acquiring 100% WI in Salt Wash consists of two
  payments of US$0.3 mm each due within 30 days and 60 days of the
  transaction and the drilling of one well (US$6 mm) to be spudded in
  1H24 and targeting the three plays (Cane Creek, helium and U. Leadville.
  The seller has the option to back-in for 25% after the well is drilled.
• Zephyr will redrill Well 36-2 where the tubing is stuck. The insurance is
  expected to bear the cost of twinning the well in 1Q24. The 36-2 wellbore
  may have future re-use potential such as a vertical host for a new target.
• We have incorporated the helium discovered resources in our valuation
  and re-iterate our target price to £0.16/sh in line with our ReNAV.