InvestMacro

Source: Stephane Foucaud  (2/16/23)

The 2023 outlook for this energy firm is positive, with production to come from the Williston basin and possibly the Paradox basin, too, noted an Auctus Advisors report.

Zephyr Energy Plc.’s (ZPHRF:OTCMKTS;ZPHR:LSE) full-year 2022 (FY22) production and income were in line with guidance and forecasts, reported Auctus Advisors analyst Stephane Foucaud in a Feb. 15 research note. The oil and gas company is about to start production testing a well in Utah’s Paradox basin.

Potential 228% Return

Auctus has a target price of £0.20 per share on England-based Zephyr. This implies a potential return for investors of 228%, given the energy firm’s current share price is £0.06, noted Foucaud.

“Success in [Cane Creek’s] C-9 reservoir around year-end 2023 could add a further £0.12 per share [to the target price], the analyst added. Cane Creek is in Utah’s Paradox basin.

Strong Production, Revenue

The analyst presented the operational and financial highlights of FY22, all pertaining to work in North Dakota’s Williston basin.

As for Q4/22, Zephyr sold an average of 1,192 barrels of oil equivalent per day (1,192 boe/d). The total average sales volume for FY22 was 1,490 boe/d, which was at the upper end of guidance and met Auctus’ expectations.

“This was achieved despite the fact that [a] number of Zephyr’s existing production wells were temporarily shut in during Q4/22 due to ‘frac-protect’ procedures while new nearby wells were stimulated and completed,” Foucaud explained.

In FY22, Zephyr generated an estimated US$42.9 million (US$42.9M), easily meeting the company’s guidance of US$40–45M. Full-year operating income was as Auctus expected, at US$35.7M.

Work Ahead in Paradox

Looking forward, Zephyr reiterated its guidance for net production in the Williston for 2023, which is 1,550–1,750 boe/d, noted Foucaud.

Also, Zephyr is about to begin production testing of and possibly complete the State 36-2 LNW-CC well in the fractured Cane Creek reservoir interval. The net contingent resource of the part of the reservoir on Zephyr property is 39,250,000 barrels of oil equivalent.

“This is a very important well for the company that could add production and reserves,” commented Foucaud.

Additionally, Auctus expects Cane Creek to generate significant cash flow starting in 2024. The amount will likely equal about 20–40% of Zephyr’s market cap next year and each year thereafter.

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Disclosures For Auctus Advisors, Zephyr Energy Plc.,  February 15, 2023

MiFID II Disclosures: This document, being paid for by a corporate issuer, is believed by Auctus to be an ‘acceptable minor non-monetary benefit’ as set out in Article 12 (3) of the Commission Delegated Act C(2016) 2031 which is part of UK law by virtue of the European Union (Withdrawal) Act 2018. It is produced solely in support of our corporate broking and corporate finance business. Auctus does not offer a secondary execution service in the UK. This note is a marketing communication and NOT independent research. As such, it has not been prepared in accordance with legal requirements designed to promote the independence of investment research and this note is NOT subject to the prohibition on dealing ahead of the dissemination of investment research.

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