Zephyr Energy Regulatory News (ZPHR)

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.

18 August 2021

Zephyr Energy plc

(the "Company" or "Zephyr")

Positive results from the analysis of the State 16-2LN-CC well log data;

initiation of diagnostic fracture injection test;

 and next steps

Zephyr Energy plc (AIM: ZPHR) (OTCQB: ZPHRF), the Rocky Mountain oil and gas company focused on responsible resource development and carbon-neutral operations, provides an update on its flagship project in the Paradox Basin, Utah, U.S.A.

The Company recently drilled the State 16-2LN-CC well to a Total Depth ("TD") of 14,370 feet ("ft"), at which point a full suite of wireline logs was run and production casing was set. During drilling operations, the Cane Creek reservoir target indicated hydrocarbon charge across its entirety based on wireline logs, cuttings and mud gas readings. Multiple overlying reservoirs also indicated hydrocarbon charge.

The Company is now pleased to report that the initial analysis of wireline log and other data from the State 16-2LN-CC has been completed.

Highlights

· The horizontal portion of the well penetrated 4,555 ft of the Cane Creek reservoir. Wireline log data suggests a high percentage of the lateral portion of the well (approximately 85 per cent) can be completed for production.

· The State 16-2LN-CC well drainage area from the Cane Creek reservoir is estimated to hold a potential 1.2 to 4.5 million barrels of oil equivalent ("mmboe") of hydrocarbons in place.

· Ultimate well performance and recoverable oil and gas will be determined by matrix permeability, reservoir pressure, the level of moveable water in the reservoir and the degree of successful stimulation:

o Primary reservoir facies show average porosity of approximately 7 per cent, rising to approximately 12 per cent in places. Porosity is comparable with earlier core results from the State 16-2 vertical well.

o Analysis indicates good matrix permeability for a Hydraulically Stimulated Resource Play ("HSRP") development, based on State 16-2 core permeability measurements and correlation with core porosity.

o Initial well production rates and recoverable resources will be estimated following the injection test and selection of an optimal completion method as detailed below.

· In addition, mass spectrometry of the well's mud gas from the Cane Creek reservoir indicated the following:

o The presence of oil, gas and condensate and

o Low water saturation

Based on the positive analysis to date, the excellent positioning of the lateral portion of the well within the Cane Creek reservoir, and the potential to utilise the State 16-2LN-CC completion as a proof of concept well for wider development of the Paradox asset base via hydraulic stimulation, the Company has opted to initiate a diagnostic fracture injection test ("DFIT") on the well.

The DFIT operation will commence on site today. Results from the DFIT, in combination with the reservoir analysis detailed above, will allow Zephyr to finalise the method for optimal well completion in the near term, with production testing commencing immediately after a successful completion of the well.

Colin Harrington, Zephyr's Chief Executive, said: "As announced last week, the State 16-2LN-CC landed successfully in the Cane Creek reservoir with excellent positioning throughout the horizontal portion of the well. I'm now pleased to report that our analysis suggests that up to 85 per cent of the lateral has the potential to be completed for well testing and production. I'm also pleased to see porosity and permeability estimates equivalent to other producing basins with prolific HSRP development, as well as mud gas mass spectrometry evidence for the presence of oil, gas and condensate with corresponding apparent low water saturations.

"Based on the preponderance of positive data received, we elected to initiate a DFIT to provide additional insight into the potential for successful hydraulic stimulation on our acreage position. As the State 16-2LN-CC is the first horizontal well in this part of the Paradox Basin, the ability to develop a strong understanding of reservoir mechanical properties is crucially important as we assess the series of options for wider potential development. It's also important to note that if the HSRP completion route is selected, we believe it could allow for a simpler surface footprint and more predictable well patterns, including the grouping of multiple wells from a single pad, thereby maximising resource efficiency and project economics while minimising environmental and surface disruption.

"The current wellbore provides an excellent platform from which to assess these development options prior to production testing the well. We expect DFIT operations and monitoring to progress over the course of the next week, after which a final decision regarding selection of method for well completion will be made. Completion operations and production testing will begin as soon as possible thereafter, and we look forward to keeping Shareholders informed as more milestones are reached."

Contacts:

Dr Gregor Maxwell, BSc Hons. Geology and Petroleum Geology, PhD, Technical Adviser to the Board of Zephyr Energy plc, who meets the criteria of a qualified person under the AIM Note for Mining and Oil & Gas Companies - June 2009, has reviewed and approved the technical information contained within this announcement.

Estimates of resources and reserves contained within this announcement have been prepared according to the standards of the Society of Petroleum Engineers. All estimates are internally generated and subject to third party review and verification.

Glossary of Terms

Hydrocarbon Initially In Place (HCIIP) - Quantity of hydrocarbon that is estimated, as of a given date, to be contained in known accumulations before production. HCIIP may be subdivided into commercial, sub-commercial, and the portion remaining in the reservoir as unrecoverable.