Zephyr Energy PLC (AIM:ZPHR, OTCQB:ZPHRF) told investors in today’s interim results statement that it expects in the coming months to start seeing returns from its active phase for both the Williston Basin assets and the Paradox project.
“We invested significant new capital into both the Williston assets and the Paradox project,” chief executive Colin Harrington said.
“We expect to see initial returns from this investment commencing in Q4 2023 when the Slawson wells come online, and continuing to the point of first sustained revenues from the Paradox project when we complete and tie in our recently drilled wells.”
He added: “Looking ahead, with a diverse portfolio of cash flowing assets, potential for substantial future organic growth, a solid financial footing and a talented and dedicated team of employees, we continue to be extremely optimistic about Zephyr's future."
At Paradox, the progress was impacted by a well control incident on the State 36-2 well which despite delay and impediment also “illustrated the significant and larger production potential of the overall project”, according to Harrington.
Zephyr noted that it has comprehensive well control insurance coverage, and the company expects to recover substantially all costs associated with the incident including any sidetrack or re-drill scenario. To date, it has recovered some US$3.7 million from the insurer.
The company expects to continue work to transform the Paradox project into a revenue-generating development. This work is supported by the recent nearby completion of a third-party pipeline project, which the company expects to gain access to.
At the producing Williston operations, first-half volumes averaged 1,225 barrels of oil equivalent per day and Zephyr’s first-half revenue totalled US$13.4 million.
It made a US$9.6 million gross profit from the operations and the company highlighted that the business demonstrated high margins from its produced barrels.
In total, the Zephyr portfolio at Williston amounted to 223 "available for production" wells at the end of June – and across the portfolio, its net-working interest averaged some 7% per well.
During the period, the company acquired interests in wells being drilled by Slawson and those "fully drilled and completed" wells are due online in the fourth quarter.
The company expects these wells will deliver “a significant” near-term production boost.
Additionally, Zephyr noted that it has now decided to participate in 10 new wells to be operated by Continental Resources. These new wells are described as being in “a highly attractive area” of the basin.
Zephyr reported a US$6.2 million cash balance at the end of June and more recently, as of 5 September, it had US$3.5 million.
Net borrowings stood at US$27.5 million. And the company’s assets had a book value in excess of US$100 million (US$50.8 million of exploration and evaluation assets, plus US$52.4 million of property, plant and equipment).
The company reported a US$2.3 million net loss after tax.