Grant funding from U.S. DOE & drilling update

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.

29 May 2024

Zephyr Energy plc

(the "Company" or "Zephyr")

Award of additional grant funding from U.S. Department of Energy; and,

State 36-2R well drilling update

Zephyr Energy plc (AIM: ZPHR) (OTCQB: ZPHRF), the Rocky Mountain oil and gas company focused on responsible resource development and carbon-neutral operations, is pleased to announce the receipt of additional grant funding from the U.S. Department of Energy (the "DOE") for upcoming operations on the State 36-2R LNW-CC well (the "State 36-2R well") at its project in the Paradox Basin, Utah (the "Paradox project"). The Company also provides a further update on current drilling operations on the State 36-2R well.

Grant Funding from U.S. Department of Energy

Following similar U.S. government grants awarded to the Company in the past, Zephyr has obtained an incremental US$250,000 non-dilutive research grant from the DOE to support well testing activity on the State 36-2R well. This brings the total DOE grant funding made available to the Company to US$3.65 million in recent years.

The grant is administered by the University of Utah's Energy & Geoscience Institute ("EGI"). Zephyr's technical team continues to work closely with the EGI, the Utah Geological Survey (the "UGS") and other Utah-based partners in utilising DOE research funds to fully evaluate the potential overall productivity of the Paradox Basin.

The objective of the incremental grant is to fund a detailed evaluation of the State 36-2R production data from the forthcoming State 36-2R well production test.

State 36-2R well drilling operations update

Drilling operations continue to proceed safely and in line with management's expectations. The 8 ½ inch section is currently drilled to a depth of 9,940 feet, with the planned section total depth of 10,075 feet to be reached imminently.  After reaching the section total depth, a casing string will be set and cemented in place, just above the final Cane Creek reservoir target.

After casing and cementing, drilling will re-commence on the final reservoir section of the State 36-2R well.  The objective for this short section is to safely and successfully land the well within the Cane Creek reservoir (the "Cane Creek") and drill approximately 270 feet horizontally to intersect the productive natural fracture system encountered in the original well. After reaching planned final total depth and setting a production liner, the drilling rig will be demobilised, and the well will be prepared for production testing.  

Across current operations on the 8 ½ inch section of the State 36-2R well, Zephyr's team has utilised sophisticated MagTraC ranging equipment to ensure that the State 36-2R well intersects the Cane Creek reservoir as close as possible to the State 36-2 LNW-CC well (the "original well"). At the most recent range measurement taken at 9,800 feet measured depth, the State 36-2R well was only seventeen feet from the original wellbore, with ultimate intersection on track for less than ten feet of range between the wells. While this ranging and steering process resulted in slower drilling over the last ten days, Zephyr's operations team is pleased with the precision of the targeting of the upcoming intersection with the reservoir.

Colin Harrington, Zephyr's Chief Executive, said: "We are incredibly grateful to the DOE and our Utah research partners for their ongoing support, both financially and in terms of our broader collaboration as we jointly seek to understand and optimise the full potential of the Paradox project.

"I would like to thank the DOE, the EGI and the UGS for their continued focus and investment in the Paradox, and we are excited to be even further aligned with their respective organisations. We feel their involvement is a strong endorsement of the Paradox project and of the professional. detailed way in which we are operating in Utah.

"I am also highly pleased to report that drilling operations on the State 36-2R well continue safely and with such precision. We will continue to keep our stakeholders fully informed about ongoing drilling operations and the subsequent production test."

Notes to Editors

Zephyr Energy plc (AIM: ZPHR) (OTCQB: ZPHRF) is a technology-led oil and gas company focused on responsible resource development from carbon-neutral operations in the Rocky Mountain region of the United States.  The Company's mission is rooted in two core values: to be responsible stewards of its investors' capital, and to be responsible stewards of the environment in which it works.

Zephyr's flagship asset is an operated 46,000-acre leaseholding located in the Paradox Basin, Utah, 25,000 acres of which has been assessed to hold, net to Zephyr, 2P reserves of 2.6 million barrels of oil equivalent ("mmboe"), 2C resources of 34 mmboe and 2U resources 270 mmboe.

In addition to its operated assets, the Company owns working interests in a broad portfolio of non-operated producing wells across the Williston Basin in North Dakota and Montana. Cash flow from the Williston production will be used to fund the planned Paradox Basin development. In addition, the Board will consider further opportunistic value-accretive acquisitions.

Certain statements in this announcement, are, or may be deemed to be, forward looking statements. Forward looking statements are identified by their use of terms and phrases such as ''believe'', ''could'', "should" ''envisage'', ''estimate'', ''intend'', ''may'', ''plan'', ''potentially'', "expect", ''will'' or the negative of those, variations or comparable expressions, including references to assumptions. These forward-looking statements are not based on historical facts but rather on the Directors' current expectations and assumptions regarding the Company's future growth, results of operations, performance, future capital and other expenditures (including the amount, nature and sources of funding thereof), competitive advantages, business prospects and opportunities. Such forward looking statements reflect the Directors' current beliefs and assumptions and are based on information currently available to the Directors.