Zephyr Energy PLC (AIM:ZPHR, OTCQB:ZPHRF) said it has agreed to acquire the remaining 25% interest in the Paradox basin in Utah, USA, and also, in parallel, has opted to expand its non-operated exposure to production in the Williston Basin in North Dakota.
"I am delighted that we are able to announce these two acquisitions which have been secured on attractive commercial terms for the company and which, I believe, are substantial building-blocks for our future development and growth,” Zephyr chief executive Colin Harrington said in a statement.
"The acquisitions are immediately accretive to our shareholders, given the increase in the company's reserves and resources, and they also provide the company with increased flexibility and optionality in terms of the future development," he added.
One deal sees the company acquire the interests in the Paradox project of Rockies Standard Oil Company LLC, taking up the stake as the partner is unable to meet funding obligations for underway drilling operations and infrastructure development.
Zephyr is to pay US$3mln, in shares (to be issued at 6.05p each), to acquire the interests with the equity released in tranches tied to project development milestones. The incremental near-term capex additions to the Paradox project are estimated at around US$5mln as Zephyr becomes the 100% owner of the project.
The transaction adds to Zephyr’s inventory some 450,000 barrels of proved and probable (2P) reserves, 7mln barrels of contingent resources and some 67mln barrels of estimated prospective resources.
"To be able to consolidate our working-interest in the Paradox Project is a hugely positive step for Zephyr,” Harrington noted.
Elsewhere, in the Williston deal, Zephyr is to pay US$2.9mln to add working interests in six additional wells to its portfolio. The wells are in the vicinity of Zephyr's other non-operated well interests.
In addition to the acquisition cost, the company will also fund some US$8.9mln of capex as the new wells are brought into production
The investments are expected to deliver a near-term production boost - the wells were drilled in November and the first wells are due online during the first quarter of 2023 – and as a result the company is now upgrading its guidance for 2023 production to 1,550-1,750 barrels of oil equivalent per day covering in aggregate its expanded interests in the Williston.
To help fund the acquisitions and capex, the company said it has secured a US$8mln bridge loan facility, on what it said are “favourable terms”, and it confirmed there would be no equity component to this facility.
Operationally, the company noted that production testing is currently underway for the State 16-2 LN-CC’s production test, at the Paradox project, and rates are described as “stable and increasing in a measured and planned process”.
It intends to release production data from the test upon its conclusion, which is expected in early January.
At Paradox, the company’s 2023 production guidance envisages a production run-rate of some 3,300 barrels oil equivalent per day (boepd).
Altogether that pitches the company’s envisaged 2023 exit rate at some 4,800 boepd which would represent a 200% increase from current levels – it noted that the acquisitions detailed today would account for a 60% increase from the previous estimate of 3,000 boepd.
Harrington commented: “Having announced the acquisitions today, it is our intention to provide the market with a full update of our investment plans for 2023 early in the New Year.
"2022 has been another year of transformation for Zephyr and the acquisitions being announced today are a great way for us to end this year and to set up for the next. 2023 promises to be an exciting time for the company as we continue with the development of our asset portfolio.”