Turner Pope Research Note, 27 July 2026
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| Zephyr has announced the signing of a non-binding Letter of Intent (the ‘LOI’) with Atlas Oil Company (‘Atlas’). Subject to definitive terms, the LOI provides for up to US$15m in non-dilutive pre-production financing based on a proposed Prepaid Commodity Purchase Agreement (the ‘CPA’) and the sale of hydrocarbon marketing rights for a specified term at Zephyr’s project in the Paradox Basin, Utah (the ‘Paradox project’). Securing such financing prior to achieving steady gas production clearly reduces project execution risk, on the basis of Atlas being compensated and repaid only from production sales proceeds. Coming with zero equity dilution and no asset-level working interest loss, we believe such a trade-off of future cashflow for midstream capex should be considered a particularly shareholder-positive means by which to accelerate Zephyr’s passage toward commercial production and cash generation. It is also worth noting that while continuing its farm-out process with different interested parties, should bids be considered unsatisfactory to the Board, Zephyr retains a viable means by which to independently undertake initial Paradox infrastructure development. This, of course, strengthens its negotiating position and provides options to ensure the most value-accretive outcome. Assuming the final terms (including interest rate equivalents, marketing fee percentages, tranche conditions, etc.) are commercial and reasonable, execution of the CPA (expected late-Q3 or early Q4 2026) should represent a further important step toward unlocking the economic value of the Group’s flagship asset. We would draw your attention to the various disclaimers in the document both at the beginning and at the end of the note. Retail clients (as defined by the rules of the FCA) must not rely on the research document. In particular you should note that the research document is a non-independent marketing communication. The analyst who has prepared the research is aware that TPI provides research to Zephyr Energy plc. Accordingly the research has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibitions on dealing ahead of its dissemination. The information in the document is published solely for information purposes and is not to be construed as a solicitation or an offer to buy or sell any securities or related financial instruments. The material contained in the document is general information intended for recipients who understand the risks associated with equity investment in smaller companies. It does not constitute a personal recommendation as defined by the FCA or take into account the particular investment objectives, financial situation or needs of individual investors nor provide any indication as to whether an investment, a course of action or the associated risks are suitable for the recipient. |