Malcy's Blog10 Oct 2024 18:21
Https://www.malcysblog.com/2024/10/oil-price-zephyr-energy-and-finally-2/
Things are going very well for Zephyr who in my view have firstly, taken the correct and probably only course of action to drill the lateral and once this financing became a live option it was a no-brainer to kick on with that route. The funder is a US based investor and whilst it is a non-binding LOI, it is for 100% of the 5,500feet well, a cost of some $7m in the next few weeks.
The next move is to secure a rig contract and advance equipment with the hope of commencing drilling by the end of this year or early 2025. I. also like the way that the deal is structured, under the proposed terms Zephyr stays as operator, receives a ‘majority’ of the economic benefits from the well and the investor will not get any further interest or option in the Paradox, so just this well.
Finally the company has delivered more good news in that EUR’s are expected to be ‘substantially’ higher once the lateral is completed, maybe by as much as two million boe given the increase in size of the well’s drainage area post-drilling. This is due to the acidisation process, who knew that doing that would be such a good call, and that wellbore productivity was significantly enhanced. With better per well performance over the whole field and with the longer intervals, the whole project economics could benefit by improved EUR’s from fewer wells needed and thus less risk and of course costs.
All of these factors put together make me even more convinced about Zephyr on two fronts, firstly that the Paradox is a high quality asset with robust economics and a great deal of upside. Secondly that the management of the company is undoubtedly amongst the best in the sector, the way it has played the last couple of years has been excellent.
With the opportunities coming its way, Zephyr has every chance to be a multi-bagger from the ludicrously low current share price of 3.54p and not before time.
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