Auctus Advisers Research Note, 29 May 2025

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Zephyr Energy PLC (AIM:ZPHR)

Paradox Resources boost following interpretation of well test

• The analysis of the well test result at well 36-2R suggests recoverable resources of 0.84-1.24 mmboe for the 4,000 feet lateral. The reservoir characteristics are consistent across the length of the lateral with consistent contribution from the reservoir matrix to the flow rate. Extrapolating these results across a longer lateral of 10,000 to 15,000 feet suggests recoverable volumes per well of 9 bcf to 37.5 bcf with a condensate yield of 20-60 bbl/mmcf. The base case is 15-17 bcf (plus condensates) for a well with a 11,000 feet lateral. The high end of the range (37.5 bcf) is comparable to the recoverable volumes of an offshore well.
• Assuming US$14 mm drilling and completion cost, the drillex would be below US$5.6/bbl in the base case with initial production of 5-10 mmcf/d (plus condensates).
• Overall, Zephyr estimate recoverable resources across the Cane Creek reservoir of 32.5-112.5 mmboe including 3.5 – 29 mmbbl of condensates (mid case of 72.5 mmboe). Net of royalties, this equates to 25.6-89.5 mmboe (mid case of 57.7 mmboe). A new CPR incorporating the well test result is expected to be published by early 4Q25 and we anticipate a material increase to the previous estimate of 34 mmboe 2C contingent resources. The flow test results enhance the profile of Zephyr with regards to potential partners.
• First gas (~5 mmcf/d gross) is now expected around YE25. Gas production is expected be transported through the existing Enbridge pipeline but we anticipate additional routes to earlier production may be explored.
• We have increased our target price from £0.15/sh to £0.18/sh to incorporate the greater resources estimates in the Paradox. In addition, there are eight overlying reservoirs above the Cane Creek with similar reservoir characteristics on the licence.