Zephyr Energy plc is pleased to announce the results from an updated Competent Person's Report ("CPR") on its assets in the Paradox Basin, Utah, U.S. (the "Paradox project").
The CPR was compiled by Sproule-ERCE International Limited ("Sproule"), a leading independent global energy consulting and advisory firm. The previous CPR on the Paradox project was completed by Sproule in 2022, the results of which were announced on 26 April 2022 (the "2022 CPR").
Zephyr is transitioning the Paradox project from appraisal to development, and the Sproule report reaffirms this transformation. The combined basis of evaluation including the recent well test on the State 36-2 LNW-CC-R well has contributed to significant increases in recoverable reserves across all reserve categories reflecting considerable well productivity, driven by high reservoir pressure, reservoir quality and liquid yields.
Zephyr's Paradox project consists of an operated 46,000-acre leaseholding in Utah. It should be noted that the updated CPR and comparisons to the 2022 CPR are limited solely to the Cane Creek reservoir on 20,000 acres held within the Company's White Sands Unit (the "WSU") and which is currently covered by the Company's 3D seismic coverage.
In their NPV-10 calculations, Sproule used the 1 September 2025 strip prices, resulting in average prices of US$62.50 per barrel of oil and US$3.50 per MMBTU of gas.
Highlights
· A 93-fold increase in Proved Recoverable Reserves (1P Reserves) from the 2022 CPR, demonstrating the scale and immediate production potential of the Cane Creek reservoir:
o 14.8 million net barrels of oil equivalent ("boe") proved recoverable reserves, an increase from 0.16 million net boe in the 2022 CPR
o Forecast to generate undiscounted free cash flows, net to Zephyr, in excess of US$115 million, with a current NPV-10 of circa US$36 million (an increase from US$2.1 million in the 2022 CPR)
o Seven well locations granted classification as Proved Recoverable Reserves
· A 25-fold increase in Proved & Probable Reserves (2P Reserves) from the 2022 CPR, highlighting the Paradox project's maturation from appraisal towards production and wider Cane Creek reservoir field development:
o 35.3 million net boe, an increase from 1.4 million net boe in the 2022 CPR
o Forecast to generate undiscounted free cash flows, net to Zephyr, of circa US$400 million, with a current NPV-10 of circa US$101 million (an increase from US$10.8 million in the 2022 CPR)
o Twelve well locations classified as Proved + Probable Recoverable Reserves
· A 3.5-fold increase in Total Recoverable Resources, representing full field development of the Cane Creek reservoir within the WSU (see Table 2 below), a significant increase in the total net resource estimate:
o 74.2 million net boe, compared with 21.4 million net boe in the 2022 CPR
o Forecast to generate undiscounted free cash flows, net to Zephyr, in excess of US$880 million, with a current NPV-10 of circa US$158 million (an increase from circa US$88 million in the 2022 CPR)
· Net Prospective Resources (2U Resources) (unrisked)
o 270 million net boe, compared with 203 million net boe in the 2022 CPR, encompassing the as-yet-untested overlying reservoirs. The WSU prospective resources have not been reassessed as part of the CPR, and the increase in 2U resources since the 2022 CPR reflects Zephyr's increased ownership in the Paradox project since the 2022 CPR was completed.
Additional details and the estimates by Sproule are summarised further below.
Colin Harrington, Chief Executive of Zephyr, said: "We are delighted with the results of the CPR which clearly demonstrate the excellent progress made at the Paradox project through our successful operations.
"I am particularly pleased to see the substantial movement of the Paradox project barrels from resource to reserve categories, highlighting the evolution of the asset towards commercial production as the project moves up the value chain.
"The CPR further validates the considerable scale of the Paradox project, which is why we have launched a process to identify partners to accelerate drilling and the delivery of value from the asset.
"On that note, I am pleased to report that we have opened a data room with multiple potential partners currently reviewing the project data. The completion of the CPR will now enable more substantive discussions to take place. I feel fortunate that we are bringing the project to development and commercialisation at a time when interest and domestic gas demand is rising in the western markets, and as western seaboard LNG exports begin to ramp up. We believe that the Paradox project compares favourably on production and economic metrics with all of the current crude and natural gas basins in the U.S.
"To date, we have drilled two successful, one-mile horizontal wells utilising different completion technologies and both demonstrated strong deliverability and expanded our completion design options for the greater field development. We have also gathered a substantial amount of data that will help inform future development plans. Furthermore, we have acquired significant infrastructure that will enable us to bring the project into full production, including gas gathering lines, plant infrastructure, permits and future water disposal wells, and we are close to securing gas export capacity. All this has been achieved at low development costs, especially when compared with many other new field startups of a similar size, and this infrastructure should enable accelerated project development once a suitable partner is secured. It should be noted that while acceleration of drilling activity and increased gas processing capacity won't change undiscounted free cash flow totals, they would enhance the current NPV-10 value of the project by bringing forward future cashflows.
"I should also point out that the CPR only assesses the 20,000 acres covered by our 3D seismic in the WSU. Our goal is to continually expand the value of our acreage position, both vertically (through the overlying reservoirs) and horizontally (through the leasing of significant new acreage around our unit and infrastructure). Leased and open acreage without 3D seismic coverage has not been assessed in the CPR and Zephyr's internal analysis indicates considerable potential immediately surrounding the WSU. To that end, we have nominated a significant amount of contiguous acreage with the Bureau of Land Management for inclusion in future Federal lease sales. On top of the proven Cane Creek reservoir potential, the eight overlying prospective reservoirs could all deliver similar recoverable volumes as the Cane Creek within the 3D coverage of the WSU and surrounding acreage nominated for lease sale inclusion, should they prove successful on drilling and testing.
"The completion of the CPR is an exciting moment for the Company as we seek to advance the Paradox project into full commercial production and secure a project partner."
Background and further details
At the request of Zephyr, Sproule audited the crude oil, natural gas, and field condensate reserves and contingent resources and the associated future net revenue attributable to the WSU with an effective date of 30 September 2025.
The scope and nature of Sproule's work was an audit of the specified resource information for the purpose of expressing an opinion as to whether such resource volumes, in aggregate, are reasonable and have been estimated and presented in conformity with generally accepted petroleum engineering and evaluation principles. Sproule conducted certain tests and spot checks to confirm the adherence to the Society of Petroleum Engineers (SPE) Petroleum Resources Management System (PRMS) reserves reporting requirements and that the data flowing into the Company's reserves and contingent resources determination system was consistent with available records provided by the Company.
All estimates were prepared in accordance with generally accepted petroleum engineering and evaluation principles as set forth in the SPE Standards Pertaining to the Estimating and Auditing of Oil and Gas Reserve Information.
Both Zephyr and Sproule identify uncertainties which remain across the areas planned for development by the Company. These include fluid composition and compressibility, water production, and continuity of geomechanical properties across the reservoir and their impact on hydraulic fracture characteristics and stimulated area around a well (well drainage area).
Reserves, Resources and NPV
The Company's net reserves and contingent resources and net present value of the Cane Creek reservoir within the WSU, as estimated by Sproule, are summarised in the tables below.
The evaluation of the WSU Prospective Resources has remained unchanged from the 2022 CPR but the Company Share has increased from 75% WI to 100% WI by way of acquisition, completed in December 2022.