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 Market Abuse Regulation No. 596/2014. With the publication of this announcement, this information is now considered to be in the public domain.

14 January 2021

Zephyr Energy plc

(the "Company" or "Zephyr")

State 16-2 Well Update

Drilling & data acquisition completed ahead of schedule;

113 feet of continuous core and open hole logs secured;

 initial indications suggest presence of hydrocarbons across multiple reservoir intervals;

 data evaluation efforts now underway

Zephyr Energy plc (AIM: ZPHR), the Rocky Mountain oil and gas company focused on responsible resource development, provides an update on its project in the Paradox Basin, Utah, U.S. (the "Paradox" or the "Paradox project") and progress with the State 16-2 well.

Zephyr is delighted to announce that the State 16-2 stratigraphic test well was successfully drilled to a measured depth of 9,745 feet total depth ("TD"). Drilling operations were safe and effective, were conducted in accordance with Covid-19 related guidance and restrictions, and were completed well within the Company's forecast timeframe.

Zephyr's primary objective was to drill and set casing at 6,437 feet measured depth in order to provide a host wellbore for a future horizontal side track. The Company achieved this goal within 13 days from spud - and subsequently reached TD within 19 days of spud, a marked improvement over historical drilling efforts in this part of the Paradox Basin. The reduction in drilling time represents a major operational success, and demonstrates that the cost of future development wells can be significantly reduced from earlier estimates, thereby improving the overall potential value of the Paradox project for Shareholders.

Zephyr's secondary objective was to acquire new data to improve the understanding of its Paradox acreage position. The Board of Zephyr is pleased to report that Zephyr's data acquisition programme successfully secured the following:

· Approximately 113 feet of continuous whole core across the historically productive Cane Creek reservoir interval (the "Cane Creek");

· Rotary side wall cores in seven shallower exploration targets; and

· Gamma ray, neutron density, resistivity, formation lithoscanner and sonic wireline log data across the bulk of the Paradox Formation, all of which add significant new petrophysical information to our existing suite of geologic data.

The 113 feet of Cane Creek core, believed to be the first whole core ever retrieved in the northern part of the Paradox Basin, has been shipped from the well site to a laboratory where detailed analysis will now commence.

Initial indications show similar log responses to offset wells, suggesting the presence of hydrocarbons in multiple reservoir intervals. The Company will now begin the work to integrate all log and core data to fully explore the initial findings in these complex reservoirs. The analyses will then be combined with Zephyr's existing 3D seismic data, and Shareholders will be updated with detailed results as they become available over the coming weeks.

Now that drilling and data acquisition operations are complete, the State 16-2 well will be temporarily plugged back at 6,437 feet TD. This provides Zephyr the opportunity to economically re-utilise the existing wellbore as the sidetrack host from which a future horizontal appraisal well can be drilled. Planning for this horizontal lateral is already underway, and it will seek to target a series of features identified by our high-quality 3D seismic data. If successful, the State 16-2 lateral would deliver first commercial production from the Company's Paradox project.

Colin Harrington, Zephyr's Chief Executive, said "This is a fantastic result - we delivered on our two major objectives by successfully drilling to our target depth ahead of forecast, and by collecting significant amounts of reservoir data across multiple zones that suggest hydrocarbon presence.

"Our drilling team and contractors worked diligently to deliver a safe and effective operation - one which reached our Cane Creek target within 19 days from spud. When compared to all historical wells in the vicinity, this was a 50% reduction in time versus the previous record holder, and a 58% reduction in time versus the average of those historical wells. In addition to the rapid drilling results, hole conditions and well stability remained excellent throughout the operations.

"The ability to reduce drilling time is important in many ways. Most significantly, it demonstrates that with a modern drilling rig, advanced tools and an experienced operations team, development of our leasehold may be executed more quickly and at a lower cost than previous estimates, which therefore increases our already bullish view of future project economics and value.

"The securing of the continuous core is also significant. Our State 16-2 drilling operation successfully acquired the first substantive rock samples from the Cane Creek reservoir in this northern part of the Paradox play. In addition, our sidewall coring collected the first rock capable of measurement from seven additional overlying reservoirs. We also gained high quality log data across the majority of the Paradox Formation. The analysis and interpretation of this data has now commenced and will serve to substantially improve our understanding of the geology, the potential upside - and, when integrated with our existing 3D seismic, how best to target and test the natural fractures that exist in the play.

"It's important to bear in mind the relatively untested potential of the Paradox Basin. The Cane Creek reservoir has produced over 10 million barrels of oil to date. However, the US Geologic Survey estimates a basin-wide, mean potential 1.2 billion barrels of oil equivalent in the Cane Creek reservoir alone*, indicating a substantial potential yet to be targeted. Further prospectivity also exists in other overlying reservoirs from which we secured data, and these additional reservoirs also appear to hold the presence of hydrocarbons. The data acquired from the State 16-2, when integrated using modern tools and the resources of our world class academic and industry partners, is a massive step forward in our pursuit to unlock the value which we believe is inherent in our Paradox project and across this Basin.

"I'd like to conclude with a note of gratitude for our team, our partners and our contractors. This well was drilled around the clock in challenging conditions, through snow storms and sub-zero temperatures, and the work kept twenty-two dedicated people away from their families over the holidays. Their collective performance was exemplary, as was their adherence to our COVID-19 protocols. I'd like to thank them all, once again, for their hard work, resilience and professionalism."

*  Whidden, K.J., Anna, L.O., Pearson, K.M., and Lillis, P.G., 2012,

Assessment of undiscovered oil and gas resources in the Paradox Basin Province, Utah, Colorado, New Mexico, and Arizona: U.S. Geological Survey Fact Sheet 2012-3031, 4 p

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.

Background to the 16-2 well

As previously announced, Zephyr has been working with a project team led by the University of Utah's Energy & Geoscience Institute ("EGI"), in collaboration with the Utah Geological Survey (the "UGS") and other Utah-based partners. The project is sponsored by the U.S. Department of Energy and its National Energy Technology Laboratory (the "DOE").

Entitled "Improving Production in Utah's Emerging Northern Paradox Unconventional Oil Play," the project's goal is to assess and perform optimisation analyses for more focused, efficient and less environmentally-impactful oil production strategies in the northern Paradox Basin, particularly in the Pennsylvanian Paradox Formation's Cane Creek shale and adjacent clastic zones.

As part of this study, the EGI and UGS originally planned to drill a vertical stratigraphic test well to gather data to improve the understanding of the Paradox Basin play. It was planned that the proposed well would target the Cane Creek and potentially the C18/19 reservoirs, acquiring both core data and a comprehensive well log suite in order to provide valuable new basin data.

Over a period of several months, the project team analysed multiple potential well locations across the Paradox Basin, and the Company was delighted that the EGI and UGS selected Zephyr's Paradox acreage as the location on which to drill the well.

The Company's location was selected for a number of reasons, including the quality of the Group's underlying 3D seismic data (which can be tied into the well results to build a stronger integrated predictive model) as well as a favourable surface location which will be sited on a pre-existing pad.

After Zephyr's Paradox acreage was selected as the location for the test well, Zephyr worked with its project partners to construct a project plan that maximised opportunity for all parties.

A key part of this plan was to design the well in such a way that it could not only be used to obtain all the data required by the research project, but so that it could also be re-used by the Company in the future as the host for a lateral appraisal well. This approach not only reduces environmental impact but it will also potentially significantly reduce future well costs for the Company.