Zephyr Energy PLC's (AIM:ZPHR, OTCQB:ZPHRF) recently completed acquisition in the US Rocky Mountains has prompted upbeat assessments from sector analysts, who see material growth potential and a near-term news flow pipeline that could help re-rate the company’s share price.
The deal, worth $7.3 million, brought in mature, high-margin production assets while expanding Zephyr’s footprint in its long-standing core area.
The transaction was quickly followed by a $1.5 million divestment of a small operated package to a neighbouring firm, a move that removed $0.82 million of near-term abandonment liabilities and delivered $0.68 million in cash.
Turner Pope said the acquisition gives Zephyr a foothold in new basins, including the Powder River, while boosting its proved reserves base.
The production impact is modest but accretive, the analyst explained, with net output expected to increase by around 388 barrels of oil equivalent per day.
The analysts also noted that the deal delivered a competitive cost per barrel of $12.37, which they compared favourably with prior transactions.
Crucially, the new assets have opened the door to early deployments under Zephyr’s $100 million Hawk joint venture.
Management, meanwhile, confirmed that the new inventory includes 18 potential non-operated drilling locations, up from 13 previously. First wells are expected imminently, with Auctus Advisors anticipating several JV-funded drilling approvals in the short term.
Auctus Advisors, in a note, highlighted the potential valuation upside. A target price of 15p share, that's five times the current price, is pegged to 'base case' assumptions. And, the analyst's assessment does not factor in upside from new wells in the non-operated portfolio.
Longer term, the Auctus view gives unrisked NAV rising to £0.81 per share, once it includes shallower horizons from the Paradox project and additional acreage.
Turner Pope Investments separately pointed to upcoming catalysts, including Q2 results from the non-operated production in the Williston Basin, along with a Competent Person’s Report for the Paradox project.
The CPR is expected to significantly upgrade Zephyr’s 2C resource estimate, according to the note, with the number currently standing at 34 million barrels of oil equivalent.
Analysts at both houses emphasised the strategic value of the recent acquisition as well as the timing of the transaction.