TIDMZPHR
RNS Number : 0661A
Zephyr Energy PLC
21 September 2022
Prior to publication, the information contained within this
announcement was deemed by the Company to constitute inside
information as stipulated under the UK Market Abuse Regulation.
With the publication of this announcement, this information is now
considered to be in the public domain.
21 September 2022
Zephyr Energy plc
("Zephyr", the "Company" or the "Group")
Interim Results for the six months ended 30 June 2022
Zephyr Energy plc (AIM: ZPHR) (OTCQB: ZPHRF), the Rocky Mountain
oil and gas group focused on responsible resource development from
carbon-neutral operations, is pleased to announce its unaudited
interim results for the six months ended 30 June 2022 ("H1
2022").
HIGHLIGHTS
The first six months of the 2022 financial year, and the period
since, were a time of intense activity during which Zephyr
continued to make substantial progress in the development of its
flagship operated project in the Paradox Basin, Utah, U.S (the
"Paradox project") while growing its highly attractive portfolio of
cash-generating non-operated assets in the Williston Basin (the
"Williston assets").
Financial
-- Revenues for H1 2022 were US$25.9 million, driven almost
entirely by the Group's hydrocarbon production from the Williston
assets
-- Adjusted earnings before interest, tax, depreciation,
depletion and amortisation ("DD&A"), unrealised foreign
exchange gains and unrealised losses on hedging contracts (together
"Adjusted EBITDA") for the six months was US$19 million and net
profit after tax for the period was US$17.4 million
-- The Group's gross borrowings at 30 June 2022 were US$28.6
million and net borrowings (gross borrowings less cash and cash
equivalents) were US$18 million. During H1 2022 the Group met all
its financing obligations in respect of its outstanding
borrowings
-- In April 2022, in order to lock in cashflow to develop the
Paradox project and meet the Group's financing commitments, the
Group hedged just under half of its forecast 2022 production at
more than US$98 per barrel of oil. In total the hedging programme
related to 328,000 barrels ("bbls") of oil production from the
Williston assets over the next two years. At 14 September 2022, the
Group had an unrealised gain on its outstanding hedges of US$1.5
million
-- At 3 September 2022, the Group had cash and cash equivalents
of US$12.8 million and gross borrowings of US$24.7 million.
-- During H1 2022 capital expenditure ("CAPEX") across the
Williston assets and the Paradox project totalled US$9.6
million.
Paradox project (operated asset)
-- A Competent Persons Report ("CPR"), compiled by Sproule
International ("Sproule"), highlighted the scale and resource
potential of the Paradox project:
o Net 2P Reserves: Proved Reserves of 2.1 million barrels of oil
equivalent ("boe") net to Zephyr, the Group's first proved reserves
booked in the Paradox Basin
o Net 2C Resources: 27 million boe net to Zephyr, more than
double the 12.3 million boe in the previous CPR prepared in
2018
o Net Prospective Resources from overlying reservoirs: 203
million net unrisked boe net to Zephyr (68 million boe risked with
a weighted-average 33% chance of success)
o Sproule's evaluation took place across 30,700 acres of
Zephyr's Utah assets. Inclusive of Zephyr's recently announced
acquisition, Zephyr will operate 45,000 gross acres in the Paradox
Basin and further evaluation is planned for acreage not yet
included in the CPR
-- Preparations continue for extended production testing of the
State 16-2 LN-CC well, designed to show flow potential and shape
decision making for the longer-term development strategy of the
asset
o Long lead items ordered and all relevant applications
filed
-- Liquid volumes from the initial State 16-2 LN-CC production
test were successfully marketed and sold to refineries in Salt Lake
City, Utah
-- A fully funded, high impact, three-well drilling programme is
expected to commence later this year, and is designed to further
delineate the full potential of the Paradox project:
o The State 36-2 LNW-CC lateral well is set to be the first well
in the upcoming drilling programme, and targets the Cane Creek
reservoir in the southern portion of the Group's operated White
Sands Unit (the "WSU")
o All State permits for the State 36-2 LNW-CC have now been
received and the Federal permit is currently being processed,
which, when issued, will allow for the signing of a rig contract
and subsequent commencement of drilling operations
o Recently acquired contiguous acreage allows for the State 36-2
LNW-CC to be fully completed across a 10,000-foot lateral
length
-- Additionally, Zephyr has entered into a binding agreement to
acquire a separate package of oil and gas assets located on and
around the Paradox project. Assets being acquired include 21 miles
of natural gas gathering lines, the Powerline Road gas processing
plant (not currently in operation), rights of way for additional
gathering lines, active permits, five existing wellbores and
additional acreage partly contiguous to the WSU. The assets being
acquired will allow Zephyr to substantially reduce the capital
required to build the necessary gas export infrastructure for its
forecast gas production from the Paradox project. In addition, one
of the acquired lines passes immediately alongside the site of the
planned State 36-2 well (the first in a series of Paradox wells to
be drilled in the upcoming drilling programme).
o Once the acquisition is completed, Zephyr will operate 45,000
gross acres in the Paradox Basin, the majority in which the Group
holds a 75% or greater working interest
Williston assets (non-operated assets)
-- Zephyr continues to deliver on its strategy to acquire
working interest positions in value accretive, high-quality,
high-margin production assets with significant near-term growth
potential in the Williston Basin
-- H1 2022 revenues from the portfolio totalled US$25.8 million,
net to Zephyr, up from US$0.9 million in the six months ended 30
June 2021 ("H1 2021")
-- H1 2022 sales volumes averaged 1,729 barrels of oil equivalent per day ("boepd")
-- H1 2022 gross profit was US$21.8 million (after taxes, lease
operating expenses, and gathering and marketing fees and excluding
DD&A) demonstrating the high margins realised from the produced
barrels
-- At the end of H1 2022, 195 wells in Zephyr's portfolio were available for production
o An estimated 30 additional wells in which Zephyr will have
working interests are forecast to be brought on production by the
end of 2022, which will help to decrease standard portfolio decline
rates
-- Net working interests across the Williston Basin non-operated
portfolio now average 7.1%, equivalent to approximately 15 gross
wells
-- Zephyr reiterates its previously released 2022 production and
revenue guidance of an expected US$35-40 million in non-operated
revenue, net to Zephyr, for FY 2022 based on a forecast production
range of 500,000 to 550,000 boe for the year
Corporate
-- In February 2022, the Company raised US$17.4 million (before
expenses) through the placing of new Ordinary Shares in the
Company, and secured US$28 million of senior bank debt. The net
proceeds from these debt and equity instruments were used to
complete the Group's US$36 million acquisition of non-operated
assets in the Williston Basin and to fund further drilling activity
across the portfolio
-- Zephyr remains carbon neutral on a Scope 1 basis across its
operations, through the purchase of Verified Emission Reduction
credits ("VERs")
-- Panmure Gordon was appointed as Joint Broker to the Company in August 2022
Colin Harrington, Chief Executive of Zephyr, said:
"The first half of 2022 and the period since have been another
transformational time for the Company. We continued to make
significant in-roads across both our Williston assets and the
Paradox project, serving to grow the Group and deliver on our
self-sustaining strategy of using our non-operated, cash generative
portfolio to enable development of the Paradox and, by extension,
to open up the next prolific onshore U.S. oil and gas play.
"The rest of this year promises to be an equally important time
for our Shareholders as we commence the extended production test on
our State 16-2LN-CC well and kick off the proposed three well drill
programme on the Paradox project. In addition, we plan to complete
and fully integrate the acquisition of the infrastructure asset
package in order to substantially reduce the forecast expenditure
needed to bring our Paradox gas production to market. A successful
drilling programme will see the Group further define the project
and materially increase its reserve base in the Paradox, and is
expected to deliver significant cashflows once nearby
infrastructure improvements are completed.
"This year started with our major acquisition in the Williston
Basin, which we expect will enable Zephyr to generate revenues of
between US$35-40 million over the course of 2022, with sufficient
cash flow generated to fuel all envisioned upcoming development
activity.
"I would like to thank our Shareholders and advisers for their
ongoing support. We are excited about the multiple near-term
catalysts in our investment case as we commence an active period
with the drill bit, and we look forward to keeping the market
updated on our progress.
"Our forthcoming activity will be carried out consistent with
our core values of being responsible stewards of investors' capital
and responsible stewards of the environment."
A copy of the interim results report will be available on the
Company's website later today at http://www.zephyrplc.com .
Contacts:
Zephyr Energy plc Tel: +44 (0)20 7225
Colin Harrington (CEO) 4590
Chris Eadie (CFO)
Allenby Capital Limited - AIM Nominated Tel: +44 (0)20 3328
Adviser 5656
Jeremy Porter / Vivek Bhardwaj
Turner Pope Investments - Joint Broker Tel: +44 (0)20 3657
James Pope / Andy Thacker 0050
Panmure Gordon (UK) Limited - Joint-Broker Tel: +44 (0) 20 7886
John Prior / Hugh Rich / James Sinclair-Ford 2500
/ Harriette Johnson
Celicourt Communications - PR
Mark Antelme / Felicity Winkles Tel: +44 (0) 20 8434
2643
ZEPHYR ENERGY PLC
INTERIM REPORT FOR THE SIX MONTHS TO 30 JUNE 2022
The Board is pleased to present Zephyr's unaudited interim
report for the six-month period to 30 June 2022.
CHIEF EXECUTIVE'S STATEMENT
OVERVIEW
The period under review was an active time for Zephyr as the
Group continued to deliver on its strategic objectives and further
consolidate its position as a cash generative Group with assets
across two established oil producing basins in the U.S.
The Board remains fully committed to the primary goal of opening
up the next prolific onshore U.S. oil and gas play through the
systematic development of our flagship Paradox project.
The remainder of 2022 promises to be an equally exciting time
for our Shareholders as we progress the extended well-test on our
State 16-2LN-CC well and commence our proposed three well drill
programme on the Paradox project. A successful drilling programme
will see the Group further define the Paradox project and has
potential to deliver significant cashflows and materially increase
its reserve base.
Our Paradox activity is expected to be funded by cashflows from
our Williston assets, which saw continued growth during the period
under review.
A summary of the Group's activity in the period under review is
outlined below.
PARADOX PROJECT
Competent Persons Report ("CPR")
Following the successful completion of the State 16-2LN-CC well
in late 2021, Zephyr commissioned the independent reserve
consulting firm Sproule International ("Sproule") to complete a CPR
to assess the Group's reserves across both the Cane Creek reservoir
and the eight overlying reservoirs in order to help determine and
demonstrate the potential size and scale of the Paradox
project.
Sproule audited the crude oil, natural gas, and field condensate
reserves and contingent resources and the associated future net
revenue attributable to the Group's White Sands Unit ("WSU") and
Cane Creek DSU ("CC DSU") with an effective date of March 31, 2022.
Sproule also conducted an audit of the Prospective Resources
attributable to the WSU on the same date.
The Board was delighted with the conclusions drawn by Sproule,
which both demonstrate the impact of our recent drilling success
and which further highlight the substantial potential scale and
profitability of the Paradox project.
The key findings from the CPR were as follows:
-- Net 2P Reserves: Proved Reserves of 2.1 million barrels of
oil equivalent ("boe") net to Zephyr, the Group's first proved
reserves booked in the Paradox Basin.
-- Net 2C Resources: 27 million boe net to Zephyr, more than
double the 12.3 million boe in the previous CPR prepared in
2018.
-- Net Prospective Resources from overlying reservoirs: 203
million net unrisked boe net to Zephyr (68 million boe risked with
a weighted-average 33% chance of success).
-- Sproule's evaluation took place across 30,700 acres of
Zephyr's Utah assets. Inclusive of Zephyr's recently announced
acquisition, Zephyr will operate 45,000 gross acres in the Paradox
Basin and further evaluation is planned for acreage not yet
included in the CPR.
Combined with Zephyr's Williston Basin non-operated portfolio,
Zephyr's total 2P Proved Reserves had an estimated net present
value at a ten per cent discount rate ("NPV-10") of over US$111
million with significant additional upside potential from success
cases related to its contingent and prospective resources.
Due to the early-stage nature of the Paradox Basin resource
play, the range of potential outcomes for Zephyr's Utah assets
remains large. Both Zephyr and Sproule identified uncertainties due
to limited data across the areas planned for development by the
Group. These include fluid composition and compressibility, water
production, continuity of geomechanical properties across the
reservoir and their impact on hydraulic fracture characteristics,
and stimulated area around a well (well drainage area). The Group
plans to utilise data from its upcoming three well drilling
campaign, in additional to existing well data from the five
wellbores acquired as announced in September 2022, to further
quantify both the risks and upside presented by these
uncertainties.
Acquisition of additional acreage
In August 2022, the Group announced the acquisition of an
additional 1,920 acres (the "new acreage") in the Paradox Basin.
Acquiring this new acreage, adjacent to WSU, was a critical step in
the future development of the Paradox project and the new acreage
is deemed by the Group to have immediate development potential.
The key benefits of the new acreage are as follows:
-- Optimal Location. The new acreage is directly contiguous to
the Zephyr-operated WSU, with the potential to be added to the Unit
acreage subject to approval from the U.S. Bureau of Land Management
(the "BLM").
o The acquired acreage is largely covered by Zephyr's existing
3D seismic, and directly borders the Zephyr lease on which the
planned State 36-2 LNW-CC and 36-3 LN-C9 well pad is located.
o The new acreage is close to pre-existing surface
infrastructure in the form of a six-inch gas pipeline which
traverses the leasehold, infrastructure which Zephyr subsequently
announced an agreement to acquire in September 2022.
-- Immediate drilling benefits. By adding the new acreage, the
proposed State 36-2 LNW-CC can be fully completed across a planned
10,000-foot lateral length, subject to final regulatory approval.
This increased completion length is expected to further enhance the
well's forecast economics and estimated ultimate recovery.
o In conjunction with the acquisition, Zephyr recently amended
its BLM application for a permit to drill (an "APD") for the State
36-2 LNW-CC well to reflect the enhanced completion design.
-- Increased overall resources and drilling locations. Based on
modelling results of the recently drilled State 16-2LN-CC well,
modelling for the upcoming State 36-2 LNW-CC well, and production
data from the nearby vertical Federal 28-11 well, Zephyr's
technical team estimates that the acquisition adds over 4 million
barrels of oil equivalent of additional 2C net Contingent Resources
to Zephyr's Paradox Basin position with the following additional
benefits:
o The acquisition substantively increases the Group's Working
Interest in an estimated 4 Cane Creek reservoir well locations,
adding an estimated 2.4 net wells assuming 2-mile lateral well
lengths.
o It adds unrisked net present value at a ten per cent. discount
rate ("NPV-10)", net to Zephyr, of approximately US$40 million from
the Cane Creek reservoir, based on estimated economics for 2-mile
laterals. This estimate assumes success case outcomes from State
16-2 LN-CC flow testing and State 36-2 LNW-CC drilling and
testing.
o It delivers access to acreage that may host liquid yields
similar to those observed at the nearby vertical Federal 28-11 well
and higher than those at the recently tested State 16-2 LNW-CC
well.
o It provides additional potential in the overlying shallow clastic zones.
The acquisition of the new acreage is part of the Group's
ongoing portfolio management of its Paradox Basin position. This
active land management strategy has resulted in a defensible and
growing portfolio of development opportunities which Zephyr's Board
believes is increasingly difficult to replicate in today's
regulatory and political environment.
State 16-2LN-CC production test
Following on the successful drilling, completion and production
test of the State 16-2 LN-CC well in 2021, Zephyr will shortly
commence an extended production test of the same well. The primary
aim of the production test is to further demonstrate the well's
flow potential, which internal modelling suggests could see
potential flow rates of 2,100 boepd once the well is no longer
rate-constrained as it was during the initial testing phase. The
well test will also add production data for use in surface
infrastructure development decisions, and will test and develop
flow assurance processes for the well.
Preparations for the extended well test have commenced, with
long lead items ordered and all necessary permit applications
filed.
In conjunction with the production test, and as announced in
June 2022, Zephyr considered selling a small portion of gas
produced from the State 16-2 LN-CC to a crypto-mining facility to
be co-located on the well pad. Due to continued volatility in the
crypto-currency markets, Zephyr's Board elected to further monitor
pricing of crypto-mining equipment and facilities prior to
proceeding with a co-located facility and prior to committing to
any related investment. To date, no Zephyr funds have been expended
on crypto-mining equipment or facilities. In parallel, Zephyr
continues to focus on commercial efforts regarding the acceleration
of gas sales into nearby existing gas infrastructure.
Forthcoming drilling programme
Following the successful completion of State 16-2LN-CC well test
and after taking into account the conclusions of the CPR, the Board
approved a high impact three-well drilling programme to commence
later this year to further delineate the scale of the project. This
will include:
-- one delineation/development well targeting the Cane Creek
reservoir in the southern portion of Zephyr's 25,000-acre WSU (the
"State 36-2 LNW-CC" well);
-- one exploration well, located on the same pad in the WSU,
which is planned to target Clastic 9 - an overlying reservoir which
has previously demonstrated evidence of hydrocarbon presence (the
"State 36-3 LN-C9 well); and
-- one delineation/development well in the historically
prolific, liquid rich Cane Creek Field (acreage south of the
WSU).
The Group continues with its extensive preparatory work related
to the upcoming drilling programme.
The State 36-2 LNW-CC well, with a 10,000-foot lateral well
targeting the Cane Creek reservoir, has been designated as the
first of the three wells planned to be drilled. As previously
noted, the Group updated its application to drill ("APD") with the
BLM to reflect the extended lateral.
Zephyr will proceed with drilling operations upon receiving
Federal approval and securing a rig contract. All State level
approvals related to the State 36-2 LNW-CC well have been
received.
Acquisition of infrastructure assets
In September 2022, the Group announced that it has entered into
a binding agreement (the "Agreement") to acquire a package of oil
and gas assets located on and around the Group's Paradox
project.
Under the terms of the Agreement, Zephyr will acquire 21 miles
of natural gas gathering lines, the Powerline Road gas processing
plant (not currently in operation) (the "Plant"), rights of way for
additional gathering lines, active permits, five existing wellbores
and additional acreage (the "New Acreage") which is contiguous to
the WSU.
The Agreement will allow Zephyr to substantially reduce the
capital required to build the necessary gas export infrastructure
for its forecast gas production from the Paradox project.
The consideration for the asset package is US$750,000 and will
be satisfied by a payment from Zephyr's existing cash resources.
The acquisition is expected to complete by 7 October 2022.
Once the acquisition is completed, Zephyr will operate 45,000
gross acres in the Paradox Basin, the majority in which the Group
holds a 75% or greater working interest.
WILLISTON ASSETS
In 2021, Zephyr stated that one of its key objectives was to
establish production and positive cashflow either through its
existing portfolio (the Paradox project), via acquisition, or
through a combination of both. In the period since, the Group has
delivered on this goal and following a series of discrete
acquisitions, the Group now has a non-operated portfolio that
delivered sales of over 1,729 boepd, net to Zephyr, in H1 2022,
with corresponding revenues of US$25.8 million for the six
months
The establishment of the non-operated portfolio began in March
2021, during a period of lower commodity prices, and with the
integration of a recent US$36 million acquisition (completed in
February 2022), the non-operated portfolio is expected to have a
turnover of US$35-40 million in 2022, based on a forecast
production range of 500,000 to 550,000 barrels of oil equivalent
("boe") for the year, providing the Group with free cash flow to
support the Paradox project development plans.
At the end of H1 2022, 195 wells in Zephyr's portfolio were
available for production. An estimated 30 additional wells in which
Zephyr will have working interests are forecast to be brought on
production by the end of 2022, which will help to decrease standard
portfolio decline rates.
FINANCIAL REVIEW
The financial information is reported in United States Dollars
("US$").
Income Statement
The Group reports revenues for H1 2022 of US$25.9 million (30
June 2021: US$0.9 million). Revenues largely relate to the Group's
hydrocarbon production from the non-operated Williston assets.
Adjusted earnings before interest, tax, depreciation, depletion
and amortisation ("DD&A"), unrealised foreign exchange gains
and unrealised losses on hedging contracts (together "Adjusted
EBITDA") for the six months was US$19 million.
In H1 2022, there is a DD&A charge of US $5.4 million (30
June 2021: US$77,000). This accounting charge is in respect of the
resource depletion of the Williston assets over the period.
In H1 2022, there is an unrealised loss on the Group's
outstanding hedging contracts of US$0.4 million. In April 2022, in
order to lock in cashflow to develop the Paradox project and meet
the Group's financing commitments, the Group hedged just under half
of its forecast 2022 production at more than US$98 per barrel of
oil. In total the Company has hedged 328,000 barrels ("bbls") of
oil production from the Williston assets over the next two years.
Due to the volatile nature of oil prices, the unrealised position
of the Group's outstanding hedging contracts will fluctuate and on
14 September 2022, the Group had an unrealised gain on its
outstanding hedges of US$1.5 million.
Net profit after tax for the period was US$17.4 million or a
profit of 1.16 US cents per share for the six months ended 30 June
2022 (30 June 2021: net loss after tax of US$1.0 million or a loss
of 0.1 US cents per share).
Net profit was enhanced by foreign exchange differences which
arise on the restatement of the Company's sterling loans to its
subsidiaries and resulted in an unrealised gain of US$5.4 million
for the six months ended 30 June 2022 (30 June 2021: unrealised
gain of US$0.5 million). The unrealised gain in this period is the
result of the weakening of sterling against the U.S. dollar.
Administrative expenses for the six months ended 30 June 2022
were US$2.2 million (30 June 2021: US$1.2million). The increase in
administrative expenses mirrors the Group's growth over the last
twelve months as it emerged from a significant corporate
retrenchment in response to the global pandemic, in addition to the
increase in its asset portfolio and significantly enhanced
corporate and operational footprint. Costs continue to be closely
controlled and monitored regularly by executive management and is a
continuing priority of the Board. It is recognised by the Board,
however, that additional technical, legal and other costs were
justified to help deliver the acquisitions which the Group has
secured over the period under review.
There is no Federal tax charge in the Income Statement for the
period. The Group continues to utilise its historical Federal tax
losses to offset profits realised from its operations. A full-year
Federal tax assessment will be carried out after the year-end and
any charges will be reflected in the 2022 Annual Report.
Balance Sheet
Exploration and evaluation assets at 30 June 2022 were US$23.8
million (30 June 2021: US$16 million) which reflects the Group's
ongoing investment into the Paradox project.
Property, plant and equipment at 30 June 2022 were US$52.2
million (30 June 2021: US$6.5 million) which reflects the Group's
ongoing investment in its non-operated portfolio of oil and gas
properties.
Cash and cash equivalents at 30 June 2022 were US$10.6 million
(30 June 2021: US$9.2 million). Responsible cash management remains
a key priority of the Board.
During H1 2022 CAPEX across the Williston assets and the Paradox
project totalled US$9.6 million.
At 3 September 2022, the Group had cash and cash equivalents of
US$12.8 million and gross borrowings of US$24.7 million.
The Group's gross borrowings at 30 June 2022 were US$28.6m and
net borrowings (total borrowings less cash and cash equivalents)
were US$18 million. During H1 2022 the Group met all its funding
obligations in respect of the outstanding borrowings.
ENVIRONMENTAL, SOCIAL AND GOVERNANCE ("ESG")
The Board is unanimously committed to ensuring that every action
and investment decision the Company makes is in line with our core
values. This includes the following points of focus:
-- to protect the Group, safeguard its existing asset base and
position it for attractive growth opportunities;
-- to seek creative and beneficial funding opportunities in an
effort to unlock value from our existing asset portfolio;
-- to adopt a disciplined focus on growth via the acquisition of
producing or near-term development opportunities in the Rocky
Mountain region. Even in this unusual economic environment, we
believe opportunity exists to acquire additional accretive asset
portfolios;
-- we will continue with our programme of tight financial
controls and cash preservation which will enable the Group to
continue trading effectively; and
-- ensure management and the Board are aligned with our
Shareholders through significant ownership of shares.
CONCLUSION
I am proud of how we have conducted our operations in the period
under review and we will continue to adhere to our core values of
being responsible stewards of investors' capital and being
responsible stewards of the environment in which we work.
Finally, I would like to extend my heartfelt gratitude to the
Company's Shareholders and advisers for their ongoing support. We
are delighted to be invested alongside you, and we look forward to
keeping you updated as we progress through these exciting
times.
Colin Harrington
Chief Executive Officer
21 September 2022
ZEPHYR ENERGY PLC
CONDENSED CONSOLIDATED INCOME STATEMENT
For the six months ended 30 June 22
Unaudited Unaudited Audited
six months six months year ended
ended 30 ended 30 31 December
June June
2022 2021 2021
Notes US$'000 US$'000 US$'000
Revenue 25,948 917 6,005
Operating and transportation expenses (2,055) (118) (396)
Production taxes (2,048) (75) (543)
Depreciation, depletion and amortisation (5,439) (77) (1,755)
Gross profit 16,406 647 3,311
Administrative expenses (2,193) (1,164) (2,687)
Share-based payments (212) (73) (93)
Foreign exchange gains/(losses) 5,431 (377) 461
Loss on hedging contracts 3 (908) - -
Finance costs (1,110) (1) (144)
Profit/(loss) on ordinary activities
before taxation 17,414 (968) 848
Taxation charge - (7) -
Profit/(loss) for the period attributable
to owners of the parent company 17,414 (975) 848
Profit/(loss) per Ordinary Share
Basic, cents per share 4 1.16 (0.10) 0.08
Diluted, cents per share 4 1.09 (0.10) 0.07
ZEPHYR ENERGY PLC
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the six months ended 30 June 2022
Unaudited Unaudited Audited
six months six months year ended
ended 30 ended 30 31 December
June June
2022 2021 2021
US$'000 US$'000 US$'000
Profit/(loss) for the period attributable
to owners of the parent company 17,414 (975) 848
Other comprehensive income
Items that may be subsequently reclassified
to profit or loss
Foreign currency translation differences
on foreign operations (5,504) 333 (554)
Total comprehensive profit/(loss)
for the period attributable to owners
of the parent company 11,910 (642) 294
ZEPHYR ENERGY PLC
CONDENSED CONSOLIDATED BALANCE SHEET
As at 30 June 2022
Unaudited Unaudited Audited
as at as at as at
30 June 30 June 31 December
2022 2021 2021
Notes US$'000 US$'000 US$'000
Non-current assets
Exploration and evaluation assets 5 23,762 15,962 22,773
Property, plant and equipment 6 52,162 6,462 11,156
Hedging contracts 50 - -
75,974 22,424 33,929
Current assets
Trade and other receivables 6,845 392 1,263
Prepayments and deposits 855 469 3,573
Cash and cash equivalents 10,587 9,216 1,811
18,287 10,077 6,647
Total assets 94,261 32,501 40,576
Current liabilities
Trade and other payables (3,837) (3,163) (5,414)
Borrowings 7 (15,740) - (4,060)
Hedging contracts (490) - -
(20,067) (3,163) (9,474)
Non-current liabilities
Provisions (2,321) (67) (508)
Borrowings 7 (12,840) - -
(15,161) (67) (508)
Total liabilities (35,228) (3,230) (9,982)
Net assets 59,033 29,271 30,594
Equity
Share capital 8 42,412 42,045 42,065
Share premium account 66,879 51,787 52,875
Warrant reserve 1,647 136 89
Share-based payment reserve 3,298 4,581 3,065
Cumulative translation reserves (15,283) (8,892) (9,779)
Retained deficit (39,920) (60,386) (57,721)
Equity attributable to owners
of the parent company 59,033 29,271 30,594
ZEPHYR ENERGY PLC
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the six months ended 30 June 2022 (Unaudited)
Share-based
Share payment Cumulative
Share premium Warrant reserve translation Retained
capital account reserve reserve deficit Total
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
As at 1 January
2022 42,065 52,875 89 3,065 (9,779) (57,721) 30,594
Transactions with
owners in their
capacity as owners:
Issue of equity
shares 347 15,465 1,558 - - - 17,370
Expenses of issue
of equity shares - (1,461) - 408 - - (1,053)
Transfer to retained
deficit in respect
of lapsed options - - - (387) - 387 -
Share-based payments - - - 212 - - 212
Total transactions
with owners in
their capacity
as owners 347 14,004 1,558 233 - 387 16,529
Profit for the
period - - - - - 17,414 17,414
Other comprehensive
income:
Currency translation
differences - - - - (5,504) - (5,504)
Total other
comprehensive
income for the
period - - - - (5,504) - (5,504)
Total comprehensive
income for the
period - - - - (5,504) 17,414 11,910
As at 30 June
2022 42,412 66,879 1,647 3,298 (15,283) (39,920) 59,033
ZEPHYR ENERGY PLC
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2021 (Audited)
Share-based
Share payment Cumulative
Share premium Warrant reserve translation Retained
capital account reserve reserve deficit Total
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
As at 1 January
2021 41,221 39,638 227 3,762 (9,225) (60,085) 15,538
Transactions with
owners in their
capacity as owners:
Issue of equity
shares 816 14,679 - - - - 15,495
Expenses of issue
of equity shares - (1,442) - 616 - - (826)
Transfer to retained
deficit in respect
of exercised warrants - - (138) (629) - 767 -
Share-based payments 28 - - 65 - - 93
Transfer to retained
deficit in respect
of expired options - - - (749) - 749 -
Total transactions
with owners in
their capacity
as owners 844 13,237 (138) (697) - 1,516 14,762
Profit for the
year - - - - - 848 848
Other comprehensive
income:
Currency translation
differences - - - - (554) - (554)
Total other
comprehensive
income for the
year - - - - (554) - (554)
Total comprehensive
income for the
year - - - - (554) 848 294
As at 31 December
2021 42,065 52,875 89 3,065 (9,779) (57,721) 30,594
ZEPHYR ENERGY PLC
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the six months ended 30 June 2021 (Unaudited)
Share-based
Share payment Cumulative
Share premium Warrant reserve translation Retained
capital account reserve reserve deficit Total
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
As at 1 January
2021 41,221 39,638 227 3,762 (9,225) (60,085) 15,538
Transactions
with
owners in their
capacity as
owners:
Issue of equity
shares 824 14,332 - - - - 15,156
Expenses of
issue
of equity
shares - (2,183) - 1,357 - - (826)
Transfer to
retained
deficit in
respect
of exercised
warrants - - (91) (583) - 674 -
Share-based
payments - - - 45 - - 45
Total
transactions
with owners in
their capacity
as owners 824 12,149 (91) 819 - 674 14,375
Loss for the
period - - - - - (975) (975)
Other
comprehensive
income:
Currency
translation
differences - - - - 333 - 333
Total other
comprehensive
income for the
period - - - - 333 - 333
Total
comprehensive
income for the
period - - - - 333 (975) (642)
As at 30 June
2021 42,045 51,787 136 4,581 (8,892) (60,386) 29,271
ZEPHYR ENERGY PLC
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
For the six months ended 30 June 2022
Unaudited Unaudited Audited
six months six months year ended
ended 30 ended 30 31 December
June June
2022 2021 2021
US$'000 US$'000 US$'000
Operating activities
Profit/(loss)/profit before taxation
from continuing operations 17,414 (968) 848
Adjustments for:
Finance costs 1,110 1 144
Unrealised loss on hedging contracts 440 - -
Depreciation and depletion of property,
plant and equipment 5,440 96 1,778
Share-based payments 212 45 93
Unrealised foreign exchange (gain)/loss (5,571) 308 (451)
Operating cash inflow/(outflow)
before movements in working capital 19,045 (518) (2,412)
Increase in trade and other receivables (5,631) (616) (1,079)
Increase in prepayments and deposits (286) - (572)
Increase in trade and other payables 628 1,913 172
Cash generated from operating activities 13,756 779 933
Income tax paid - (2) -
Net cash inflow generated from
operating activities 13,756 777 933
Investing activities
Additions to exploration and evaluation
assets (1,007) (4,116) (9,083)
Acquisition of oil and gas properties (36,000) (5,927) (5,443)
Additions to oil and gas properties (8,640) - (7,031)
Deposits paid 3,000 - (3,000)
(Decrease)/increase in capital expenditure
related payables (2,269) - 2,773
Additions to plant and machinery - - (4)
Grant funds received - 200 290
Net cash used in investing activities (44,916) (9,843) (21,498)
Financing activities
Net proceeds from issue of shares 16,317 14,330 14,669
Proceeds from borrowings 28,000 - 4,060
Repayment of borrowings (3,078) - -
Interest and fees paid on borrowings (1,223) - (124)
Repayment of lease liabilities - (8) (8)
Increase in prepayments and deposits 50 - (50)
Net cash inflow generated from
financing activities 40,066 14,322 18,547
Net increase/(decrease) in cash
and cash equivalents 8,906 5,256 (2,018)
Cash and cash equivalents at beginning
of period 1,811 3,940 3,940
Effect of foreign exchange rate changes (130) 20 (111)
Cash and cash equivalents at end
of period 10,587 9,216 1,811
ZEPHYR ENERGY PLC
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL
STATEMENTS
For the six months ended 30 June 2022
1. ACCOUNTING POLICIES
Basis of preparation
This report was approved by the Directors on 20 September
2022.
The financial statements have been prepared in accordance with
UK-adopted International Accounting Standards and with the
requirements of the Companies Act 2006 as applicable to companies
reporting under those standards.
The condensed consolidated interim financial statements are
presented in United States Dollar ("US$"). All amounts have been
rounded to the nearest thousand unless otherwise indicated.
The Company is domiciled in the United Kingdom. The Company's
shares are admitted to trading on the AIM market in the UK and the
OTCQB Venture Market ("OTCQB") in the U.S.
The current and comparative periods to June have been prepared
using the accounting policies and practices consistent with those
adopted in the annual financial statements for the year ended 31
December 2021, and with those expected to be adopted in the Group's
financial statements for the year ending 31 December 2022.
Comparative figures for the year ended 31 December 2021 have
been extracted from the statutory financial statements for that
period which carried an unqualified audit report, did not contain a
statement under section 498(2) or (3) of the Companies Act 2006 and
have been delivered to the Registrar of Companies.
The financial information contained in this report does not
constitute statutory financial statements as defined by section 434
of the Companies Act 2006, and should be read in conjunction with
the Group's financial statements for the year ended 31 December
2021. This report has not been audited or reviewed by the Group's
auditors.
During the first six months of the current financial year there
have been no related party transactions that materially affect the
financial position or performance of the Group and there have been
no changes in the related party transactions described in the last
annual financial report.
Having considered the Group's current cash forecast and
projections, the Directors have a reasonable expectation that the
Company and the Group have, or have access to, sufficient resources
to continue operating for at least the next 12 months. Accordingly,
the Directors continue to adopt the going concern basis in
preparing the financial statements.
The principal risks and uncertainties of the Group have not
changed since the publication of the last annual financial report
where a detailed explanation of such risks and uncertainties can be
found.
2. DIVIDS
The Directors do not recommend the payment of a dividend for the
period.
3. LOSS ON HEDGING CONTRACTS
During the period, the Group entered into hedging transactions
to mitigate its exposure to fluctuations in commodity prices. The
net change in these contracts resulted in a realised net loss of
US$0.5 million and an unrealised net loss of US$0.4 million for the
period to 30 June 2022.
4. PROFIT/(LOSS) PER ORDINARY SHARE
Basic profit/(loss) per Ordinary Share is calculated by dividing
the net profit/(loss) for the period by the weighted average number
of Ordinary Shares in issue during the period. Diluted
profit/(loss) per Ordinary Share is calculated by dividing the net
profit/(loss) for the period by the weighted average number of
Ordinary Shares in issue during the period, adjusted for the
dilutive effect of potential Ordinary Shares arising from the
Company's share options and warrants.
Due to the losses incurred in the period ended 30 June 2021,
there was no dilutive effect from the share options or
warrants.
At 30 June 2022, 2.8 million share options and 89.6 million
warrants were excluded from the diluted number of shares as they
were anti-dilutive.
The calculation of the basic and diluted profit/(loss) per
Ordinary Share is based on the following data:
Unaudited Unaudited Audited
six months six months year ended
ended 30 ended 30 31 December
June June 2021
2022 2021 US$'000
US$'000 US$'000
Profits/(losses)
Profits/(losses) for the
purpose of basic and diluted
profit/(loss) per Ordinary
Share being net profit/(loss)
for the period 17,414 (975) 848
Number Number Number
'000 '000 '000
Number of shares
Weighted average number
of shares for the purpose
of basic profit/(loss)
per Ordinary Share 1,505,017 939,631 1,116,414
Number of shares
Weighted average number
of shares for the purpose
of basic profit/(loss)
per Ordinary Share 1,505,017 939,631 1,116,414
Dilutive share options 42,528 - 42,510
Dilutive warrants 55,730 - 100,033
Weighted average number
of shares for the purpose
of diluted profit/(loss)
per Ordinary Share 1,603,275 939,631 1,258,957
Profit/(loss) per Ordinary
Share
Basic, cents per share 1.16 (0.10) 0.08
Diluted, cents per share 1.09 (0.10) 0.07
5. EXPLORATION AND EVALUATION ASSETS
US$'000
Cost
At 1 January 2021 13,914
Additions 2,338
Grant funds (290)
At 30 June 2021 15,962
Additions 6,811
At 31 December 2021 22,773
Additions 989
At 30 June 2022 23,762
Carrying amount
At 30 June 2022 23,762
At 30 June 2021 15,962
At 31 December 2021 22,773
6. PROPERTY, PLANT AND EQUIPMENT
Oil and Plant and Right-of-use
gas properties machinery assets Total
US'000 US'000 US'000 US'000
Cost
At 1 January 2021 - 129 57 186
Additions 6,530 - - 6,530
Exchange differences - 2 1 3
At 30 June 2021 6,530 131 58 6,719
Acquisitions 5,443 - - 5,443
Additions 929 2 - 931
De-recognition - (106) (57) (163)
Exchange differences - - (1) (1)
At 31 December 2021 12,902 27 - 12,929
Acquisitions 36,000 - - 36,000
Additions 10,447 - - 10,447
Exchange differences - (1) - (1)
At 30 June 2022 59,349 26 - 59,375
Accumulated depreciation,
depletion and amortisation
At 1 January 2021 - 117 41 158
Charge for the period 77 3 16 96
Exchange differences - 2 1 3
At 30 June 2021 77 122 58 257
Charge for the period 1,678 4 - 1,682
De-recognition - (106) (57) (163)
Exchange differences - (2) (1) (3)
At 31 December 2021 1,755 18 - 1,773
Charge for the period 5,439 1 - 5,440
At 30 June 2022 7,194 19 - 7,213
Carrying amount
At 30 June 2022 52,155 7 - 52,162
At 30 June 2021 6,453 9 - 6,462
At 31 December 2021 11,147 9 - 11,156
7. BORROWINGS
Unaudited Unaudited Audited
six months six months year ended
ended 30 ended 30 31 December
June June 2021
2022 2021 US$'000
US$'000 US$'000
Bridge loan facility 1,687 - 4,060
Term loan 16,937 - -
Revolving credit 9,956 - -
28,580 - 4,060
Maturity analysis
Amounts due within one year* 15,740 - 4,060
Amounts due 1 year to 2 years 4,384 - -
Amounts due 2 years to 4 years 8,456 - -
28,580 - 4,060
In February 2022, the Group signed a bank facility with First
International Bank & Trust ("FIBT") in the U.S., consisting of
a Term loan of US$18 million and a Revolving credit facility of
US$10 million.
Repayment of the Term loan commenced in April 2022 and is
repayable in 48 monthly payments. Interest is charged at a rate of
6.74% per annum. At 20 September 2022, the outstanding balance on
the Term Loan was US$16.1 million.
*The Revolving credit facility was structured with an initial
term of 8 months, and is thereby classified as short-term debt due
for repayment within one year. However, the facility has provisions
for a semi-annual redetermination process, at which time the bank
estimates the value of Zephyr's reserves used as collateral and
renews or revises the amount of available credit provided by
facility. At 20 September 2022, US$8 million of the US$10 million
facility was outstanding, with US$2 million of available credit.
The Group does not expect any changes to the US$10 million in total
availability when the bank's next redetermination process concludes
in October 2022. Interest on the Revolving credit facility is
charged at a rate of 6.74% per annum.
Initial loan fees of 1% of the Term loan and the Revolving
credit facility were capitalised against the loans and are being
amortised over the life of the respective loans. FIBT holds
security over the Group's oil and gas properties located in the
states of North Dakota and Montana.
Since the period end, the Group has repaid US$0.8 million in
respect of the bridge loan facility.
8. SHARE CAPITAL
Unaudited Unaudited Audited
as at as at as at
30 June 30 June 31 December
2022 2021 2021
Number Number Number
'000 '000 '000
Authorised
Ordinary Shares of 0.1p each 7,779,297 7,779,297 7,779,297
Deferred Shares of 9.9p each 227,753 227,753 227,753
8,007,050 8,007,050 8,007,050
Unaudited Unaudited Audited
as at as at as at
30 June 30 June 31 December
2022 2021 2021
US$'000 US$'000 US$'000
Allotted, issued and fully paid
1,560,746,001 Ordinary Shares of 0.1p
each (30 June 2021: 1,290,314,182:
31 December 2021: 1,304,746,001) 2,107 1,740 1,760
227,752,817 Deferred Shares of 9.9p
each 40,305 40,305 40,305
42,412 42,045 42,065
The Deferred Shares are not listed on the AIM Market, do not
give the holders any right to receive notice of, or to attend or
vote at, any General Meetings, have no entitlement to receive a
dividend or other distribution or any entitlement to receive a
repayment of nominal amount paid up on a return of assets on
winding up nor to receive or participate in any property or assets
of the Company. The Company may, at its option, at any time redeem
all of the Deferred Shares then in issue at a price not exceeding
GBP0.01 from all Shareholders upon giving not less than 28 days'
notice in writing.
As outlined in the Company's 2021 Annual Report it is the
Company's intention to issue nil-cost options to certain Directors
and employees to compensate them for salaries sacrificed during the
COVID-19 pandemic. It has not been possible to issue these nil-cost
options to date due to the Company's ongoing activity over a long
period of time which has precluded transactions involving the
Company's securities.
ISSUED ORDINARY SHARE CAPITAL
In February 2022, the Company issued 256,000,000 Ordinary Shares
of 0.1p each at a price of 5p per share, raising gross proceeds of
US$17.4 million (GBP12.8 million).
Ordinary Deferred
Shares Shares
Number Number
'000 '000
At 1 January 2021 696,202 227,753
Allotment of shares 594,112 -
At 30 June 2021 1,290,314 227,753
Allotment of shares 14,432 -
At 31 December 2021 1,304,746 227,753
Allotment of shares 256,000 -
At 30 June 2022 1,560,746 227,753
9. POST BALANCE SHEET EVENTS
All matters relating to events occurring since the period end
are reported in the Chief Executive's Statement.
Dr Gregor Maxwell, BSc Hons. Geology and Petroleum Geology, PhD,
Technical Adviser to the Board of Zephyr Energy plc, who meets the
criteria of a qualified person under the AIM Note for Mining and
Oil & Gas Companies - June 2009, has reviewed and approved the
technical information contained within this announcement.
Estimates of resources and reserves contained within this
announcement have been prepared according to the standards of the
Society of Petroleum Engineers. All estimates are internally
generated and subject to third party review and verification.
Glossary of Terms
Reserves : Reserves are defined as those quantities of petroleum
which are anticipated to be commercially recovered from known
accumulations from a given date forward.
1P: proven reserves (both proved developed reserves + proved
undeveloped reserves)
2P: 1P (proven reserves) + probable reserves, hence "proved and
probable"
3P: the sum of 2P (proven reserves + probable reserves) +
possible reserves, all 3Ps "proven and probable and possible"
Contingent Resources : Those quantities of petroleum estimated,
as of a given date, to be potentially recoverable from known
accumulations by application of development projects, but which are
not currently considered to be commercially recoverable due to one
or more contingencies.
Contingent Resources may include, for example, projects for
which there are currently no viable markets, or where commercial
recovery is dependent on technology under development, or where
evaluation of the accumulation is insufficient to clearly assess
commerciality. Contingent Resources are further categorised in
accordance with the level of certainty associated with the
estimates and may be sub-classified based on project maturity
and/or characterised by their economic status.
1C: Low estimate of Contingent Resources
2C: Best estimate of Contingent Resources
3C: High estimate of Contingent Resources
Prospective Resources: Those quantities of petroleum which are
estimated, on a given date, to be potentially recoverable from
undiscovered accumulations.
1U: Low estimate of Prospective Resources
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London Stock Exchange. RNS is approved by the Financial Conduct
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END
IR SEWEESEESESU
(END) Dow Jones Newswires
September 21, 2022 02:02 ET (06:02 GMT)
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