Zephyr Energy, the Rocky Mountain oil and gas company focused on responsible resource development, is pleased to announce a placing and subscription of 500,000,000 new ordinary shares of 0.1 p each in the Company, at a price of 2.0 pence per Placing Share, to raise £ 10 million before expenses. The Placing has been supported by a range of new and existing institutional investors, family offices, Zephyr Board members and other investors, and was conducted by Turner Pope Investments ("TPI") acting as sole broker for the Company.

The proceeds from the Placing will be invested with the objective of transforming the Company into a self-sustaining platform for organic growth with a diverse portfolio of production assets in two established USA oil producing basins.

Colin Harrington, Chief Executive of Zephyr, said: 
"Today's developments mark a truly ground-breaking moment for the Company. Following the completion of this ambitious fundraise, Zephyr is poised to transform itself into a well-capitalised, self-sustaining platform with a financial flexibility that will enable the Company to pursue - on an independent basis - the significant upside potential which exists in our Paradox project.

The key benefit of our proposed Bakken project acquisition is its potential to generate substantial cashflows which can be reinvested into our Paradox project. This, combined with the funding secured to drill the Company's first production target in the Paradox later this year, means we have taken a massive step towards unlocking the substantial potential value from the Paradox project on a timeline and in a manner that is now within our control.

The combination of a funded Paradox drilling programme and a cash generating Bakken project will also give us the capacity to fund any future potential exploration opportunities on the additional 11 reservoirs in the Paradox we have identified above and beyond our main target, the Cane Creek reservoir.

The Bakken project acquisition is a perfect addition to our asset portfolio and is the ideal complement to our Paradox project. Since I joined the Company in mid-2019, we have evaluated over 75 potential acquisitions, and I believe the Bakken project to be the single best opportunity we've identified. We have been able to negotiate the Acquisition on highly favourable economic terms, particularly when taking into account the recent rise in the oil price. The fact that the Bakken project wells have had all drilling risk removed is a major bonus, and the resulting cash flow will enable us to utilise the Company's historical tax losses of more than $16 million.

"The next few months will see a flurry of corporate and operational activity - including the completion of the Acquisition, first Bakken oil production and revenues for the Company, the Bakken well completions, the drilling of the State 16-2 lateral well targeting our first production in the Paradox and the release of additional analysis of the overlying reservoir zone in the Paradox.

The team has shown fantastic energy and resilience to get the Company to this position, and we look forward to continuing delivering on these key objectives for our Shareholders.

"I would like to thank TPI and the rest of our adviser team for the successful execution of the Placing, a fantastic effort and outcome, and I would very much like to take this opportunity to welcome our new Shareholders and institutional investors on board.

"In conclusion, I'd like to note that we are currently operating in particularly exciting and unusual times - times which simultaneously offer strengthening commodity prices as well as reduced drilling and service costs, and times in which opportunistic acquisitions, such as the Bakken project, can be made at highly compelling valuations. Zephyr's Board has elected to be opportunistic in these exceptional times in order to position the Company for significant long-term growth - and that growth now has the potential to be achieved without the need for future external funding while giving the Company autonomy and flexibility to deliver the value from its existing asset portfolio.

"We will be providing regular updates as we progress through this transformational period and in the meantime, we will continue to operate in line with our core values of being responsible stewards of both our investors' capital and of the environment in which we work."

Proposed Bakken project acquisition:

• Acquisition of non-operated working interests in five wells (one producing well and four drilled but uncompleted wells (a "DUC" or "DUCs") in Mountrail County, North Dakota, USA (the "Bakken Interests")
• The Bakken Interests on the five wells range from 16.8% to 37.2%
• The wells are operated by Whiting Petroleum, an active and highly experienced operator in the Bakken region (the "Operator")
• The Company is acquiring the Bakken Interests from a privately owned exploration and production company based in the US (the "Seller") which has not funded any of its historic or future CAPEX obligations on the Bakken Interests
• Zephyr agreed headline terms with the Seller when the oil price was at $45 per barrel of oil ("bo"), subject to further due diligence, funding and final documentation
• The producing well has been on production since March 2020
• The four DUCs are scheduled to be completed in May 2021 and production revenues are targeted to be received by August 2021
• 2P Reserves being acquired are estimated at 449,434 barrels of oil equivalent ("boe") to Zephyr
• The five wells are spread across three separate drilling pads, creating production diversification

Key benefits of the Acquisition:

• A low-risk acquisition with substantial near-term cash flow expected
• No remaining drilling risk - all five wells have been drilled successfully to target depth
• Excellent complement to (and funding source for) the higher risk, higher upside Paradox Basin development
• No federal tax payments will be payable in the short-term as profits can be offset against Zephyr's historic tax losses

KeyFacts Energy Industry Directory: Zephyr Energy