Turner Pope Research Note, 26 August 2025
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Zephyr Energy plc has completed its US$7.3m acquisition of working interests in accretive, mature proved developed producing (‘PDP’) production assets located in core Rocky Mountain basins (the ‘Acquisition’). This adds high-margin production and additional proved reserves to the Group’s existing asset base and has also enabled the first potential transactions through its US$100m Zephyr Hawk joint venture. With a view to saving costs that would otherwise be incurred to maintain operatorship in two new jurisdictions, Zephyr has concurrently elected to divest a small package of its newly acquired wells in North Dakota and Wyoming (the ‘divested assets’) to a neighbouring private upstream operator. In exchange Zephyr received total consideration of US$1.5m, comprising US$679,000 in cash and the assumption of US$822,000 in mostly near-term plugging and abandonment liabilities. The immediate production adjustment, however, is modest with the Group projecting a net addition of c.388 barrels of oil equivalent per day (‘boepd’) in the first month (versus an initial, pre- divestiture estimate of 400 boepd). Funded through the £10.5m fundraise (including £0.7m Director subscription) that completed on 25 June 2025, Zephyr has been able to boost its near-term cash flow while continuing to enhance its risked-exploration and development upside. With Q2 2025 results from the Group’s non-operated Williston project expected by the end of September and release of a revised Competent Persons Report (‘CPR’) for the Paradox project also due on a similar time schedule (and confidently expected to substantially hike the current 34mmboe estimate of contingent resources (‘2C’)), there appears to be significant near-term upside to the Group’s present market valuation. 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. |