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.

29 September 2021

Zephyr Energy plc

(the "Company" or "Zephyr")

Zephyr commences 100% carbon-neutral operations

Zephyr Energy plc (AIM: ZPHR) (OTCQB: ZPHRF), the Rocky Mountain oil and gas company focused on responsible resource development, is pleased to announce it has successfully commenced 100% carbon neutral operations ahead of its 30 September 2021 target. This leading initiative is designed to ensure that all hydrocarbons produced by the Company from this point forward have a "net-zero" operational carbon impact.

Over the last four months, Zephyr worked with the Prax Group ("Prax") - a British multinational independent oil refining, trading, storage, distribution and retail conglomerate dealing in crude oil, petroleum products and bio-fuels - to prepare for the commencement of this initiative. Prax, which has trading offices in London, Singapore and the U.S., helped Zephyr measure and mitigate the Company's greenhouse gas ("GHG") emissions, with mitigation efforts primarily focused on the purchase of Verified Emission Reductions (or "VERs") from reputable pre-vetted developers of sustainable projects. Emissions to be mitigated include those from Zephyr's current corporate carbon footprint, its non-operated production assets in the Williston Basin, and from its operated project in the Paradox Basin.

The cost to purchase the appropriate number of VERs to offset Zephyr's growing operational footprint currently averages under $1 per barrel of oil equivalent produced, although the net cost to Zephyr may be considerably less given the potential to sell oil volumes at a premium as a result of the anticipated "net-zero" operational carbon status of those volumes. Zephyr has further entered into an agreement in which Prax will be responsible for marketing the oil produced from its Paradox project, with the purchase of the VERs offset from revenue payments due to Zephyr.

Zephyr's work to establish a carbon-zero footprint has been focused on its Scope 1 GHG impacts1, which cover all direct emissions from Zephyr-owned or controlled sources - from the drilling and production of operated and non-operated hydrocarbons through to transport to the refinery, as well as all other corporate emissions.

Zephyr's Board also understands that mitigating the Company's operational CO2 impact is only a first step - emissions from the ultimate end-use of produced volumes have a significant CO2 impact as well. Going forward, Zephyr pledges to work with potential end-users of its products to explore routes to more fully offset its product CO2 (Scope 3 Emissions1) to the greatest extent possible.

Colin Harrington, Chief Executive of Zephyr, said:

"I am delighted we've now achieved our ambitious target to commence carbon-neutral operations this year. This groundbreaking initiative is a tangible demonstration of our determination to deliver on our core values of being both responsible stewards of our investors' capital and responsible stewards of the environment. It's also work that will continue as we grow the Company.

"From an operational standpoint, Zephyr is working to increase oil production volumes from our non-operated portfolio as well as finalising preparations to complete and test production from the first well on our flagship Paradox project. With this new phase comes an increased carbon impact, which is why the timing is absolutely right to launch our carbon-neutral initiative.

"Delivering on the target to reach carbon neutrality by the end of September was a challenge, and the work will continue as our volumes increase and the VER market evolves. I am highly grateful for our continued collaboration with Christopher Dillman and his team at the Prax Group for their overall assistance, especially regarding our measurement, mitigation and marketing efforts.

"Zephyr's Board is unanimous in its belief that good environmental & operational performance + good governance = superior investor returns. Today's announcement is illustrative of our determination to embed these key principals at the very heart of the Company."

Contacts:

About the Prax Group: Headquartered in the UK, the Prax Group is a British multinational independent oil refining, trading, storage, distribution, and retail conglomerate dealing in petroleum products and biofuels. The Group has established principal offices in London, Houston and Singapore, and additional satellite offices across the world.

Footnotes:

1. Scope 1 emissions are reported as Direct GHG emissions from equipment or other sources owned (partly or wholly) and / or operated by the company. For increased clarity when reporting Direct GHG emissions, those Scope 1 emissions associated with energy sold to others can be reported separately as Direct emissions from exported energy.

Where an operation purchases energy already transformed into electricity, heat or steam, the GHGs emitted to produce this energy are Scope 2 and reported as Indirect GHG emissions from imported energy. The 2015 update of the GHG Protocol distinguishes between two calculation approaches, 'location' and 'market based' for Scope 2 emissions and it is helpful for companies using this standard to highlight which method is used in their reporting.

You can report Scope 3 emissions as Other indirect emissions, which refer to GHG emissions related to your company's value chain (see Module 1 Reporting process). The GHG Protocol supplemented its standard with its 2011 publication of the Corporate Value Chain (Scope 3) Accounting and Reporting Standard [10]. Of the 15 categories of Scope 3 emissions defined in this standard, Category 11 'Use of sold products' is the most relevant to the oil and gas industry. There is a growing stakeholder interest related to Scope 3 disclosures. In 2016, IPIECA published Estimating petroleum industry value chain (Scope 3) greenhouse gas emissions [11] to provide additional oil industry methodology guidance for the 15 categories.

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Definitions are taken from sustainability reporting guidance for the oil and gas industry. IOGP Report 437. 4th Edition 2020. www.ipieca.org