WTI $60.97 +$2.41, Brent $64.57 +$2.62, Diff -$3.60 +21c, NG $2.56 -1c, UKNG 47.3p -0.1p

Oil price

As per my comments on Friday the roller coaster week ended with a no score draw, WTI was down 45 cent and Brent up 4c. So much for the virus v Suez, long term v short term fight for supremacy…Actually even though the Evergiven has been refloated this morning it will take a while to move it out and then there are upwards of 300 ships waiting to clear the canal. If your Amazon delivery didnt come at the weekend it will soon because not much oil goes through it but some products like LNG do.

As for the virus there is little doubt that this has been the dampener on the party spirit built up by those in the ‘vaccine trade’ which has been hit by the incompetence of the EU in getting its jabs in, it is their tourist business that will suffer most this summer…

Remember the name, Archegos Capital Management was what caused the sell-off on the Street after the over-leveraged Hedge Fund had a ‘once in a decade’ fires sale of US and Chinese media stocks. Readers of the G Sachs bid and offer list first thing saw huge lumps of these stocks and one could even tell who might have lent them the money.

Go to Bloomberg to get the low down on Bill Hwang who having been a ‘Tiger Cub’ then got on the wrong side of the law which didn’t stop him. Nine stocks bore the brunt of the selling: online and entertainment companies ViacomCBS, Discovery and Shopify Inc.; Chinese firms Tencent Music, Baidu, GSX, iQiyi Inc., Vipshop Holdings Ltd.; and U.K. online retailer Farfetch Ltd.

Zephyr Energy

Zephyr has announced a placing and subscription of 500,000,000 new ordinary shares of 0.1 p each in the Company at a price of 2.0p per Placing Share, to raise £10 million before expenses. The Placing has been supported by new and existing institutional investors, family offices, Zephyr Board members and other investors which is more positive news as this fast-moving company grows. 

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.

Of the funds raised in the Placing, £6 million is conditional, inter alia, on the approval by the Company’s Shareholders of resolutions to provide authority to the Directors to issue and allot further ordinary shares of 0.1p each (“Ordinary Shares”) on a non-pre-emptive basis, which will be sought at a General Meeting to be held on 16 April 2021, further details of which are set out below.

The Placing was carried out at an impressive  2.5% discount to the Company’s closing price of 2.05p per share on Friday 26 March 2021, Zephyr shares have been as low as 0.55p in recent weeks and had run to around 3.0p as shareholders waited for future plans, they aren’t waiting any more. 

The Placing will fully fund the $3.5 million State 16-2 CC LN lateral appraisal well drilling programme targeting the Company’s first production from its Paradox project. It gets better..

The Placing also allows the Company to proceed with the proposed acquisition, and to fund associated capital expenditure, of highly economic working interests in currently producing and near-term production wells in the Bakken Formation, North Dakota, USA (the “Acquisition” or the “Bakken project”). 

Production from the Acquisition will provide the Company with immediate oil production and the substantial cashflows expected to be generated from the Bakken project have the potential to fund multiple additional Paradox wells over the next 12 months.   The Company will also be able to utilise its historical tax losses of more than $16 million to offset federal income taxes due on profits from the Acquisition. 

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.”

I really like this company and this statement contains all I need at this stage of the company’s development. Most of the really good pointers are in the CEO statement above as he, and the other members of the board explain the modus operandi. ‘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’. 

Shareholders have unsurprisingly been more than happy to subscribe for this issue done at a nil discount to the bid price and at 4x the last raise for the Paradox success. But this raise puts Zephyr into a very strong position indeed, with commodity prices high and costs still at a low historical level, indeed they are getting the rig for the upcoming Paradox drill at a lower level at less than the December drill.

With plenty of sellers of acreage and production around this is no time for caution, for ZPYR it is time to be bold and opportunistic and with the deal in the Bakken giving both production and multiple well options and bring substantial cashflows expected to be generated from the Bakken project have the potential to fund multiple additional Paradox wells over the next 12 months.

And Paradox is a real gem, and will take advantage of this raise by drilling the lateral in July all going well and this will bring more data along with that from the Bakken. The shares have risen 9% on the day of a raise which isn’t always the case, those who took part in the raise and those that did before, have and will continue to make money from one of the best possible managements in the business. Watch out for lots of newsflow from both the Paradox and the Bakken with producing wells on the way.

Angus Energy

Angus has announced that, further to the commitments of between £8 and £9 million communicated on 22 February 2021, it has been advised by Aleph Energy Limited that they have received additional commitments of £3 million on the same terms as those advised in that earlier RNS which would, in total, now meet the £12 million funding amount sought.

‘The commitments are conditional upon there being no material adverse change and the satisfactory execution of all legal and security documents, which are, for the most part, in near final form.  The exception being an Intercreditor Agreement and Security Agency Agreement governing the relationship between all of the Lenders.  Further soft commitments and expressions of strong interest advised mean that the Facility is oversubscribed and a short period of agreeing allocations will also be needed.

The Loan Facility terms remain substantially unchanged from those advised in our RNS of 30 November 2020.  Angus is preparing charges to be registered and working to satisfy the conditions precedent set out in the Loan Facility Agreement in view of signing the Agreements and receiving the funds in the near term.

In the interim we have progressed the procurement of further elements of the gas processing package and continue our development programme in order to achieve first gas later this year’.

KeyFacts Energy Industry Directory: Malcy's Blog