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.

3 May 2024

Zephyr Energy plc

("Zephyr" or the "Company")

Debt for equity exchange 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 from carbon-neutral operations, announces that the Company has retired US$3.88 million (£3.11 million) of existing debt ("Repayment Amount") through the issuance of US$3.88 million (£3.11 million) of equity comprised of  64,045,768 new ordinary shares of 0.1 pence ("p") each in the Company ("Repayment Shares"), at a price of 4.85p per Repayment Share (the "Issue Price").  

The Issue Price of the Repayment Shares is the undiscounted mid-market closing price of the Company's shares on 2 May 2024.

The Repayment Shares are being issued to SGR Investments, LLC ("SGRI"), a US-based institutional investor with a 50-year investment track record.  In December 2022, SGRI provided debt funding (the "SGRI loan note") to Zephyr Williston LLC, a subsidiary of the Company, to enable Zephyr's group to acquire a portfolio of Williston Basin wells operated by Slawson Exploration. The obligation to repay the Repayment Amount was novated to the Company prior to the allotment of the Repayment Shares.

The Repayment Shares are being issued using existing share authorities granted to the Board at the Company's annual general meeting held on 26 July 2023.

The residual portion of the SGRI loan note is in the process of being refinanced through the Company's existing commercial banking facilities as part of its regularly scheduled semi-annual redetermination process which is expected to be concluded in May 2024. Post-redetermination, Zephyr's forecast gross debt is expected to be circa US$30 million.

The Repayment Shares represent approximately 3.7 per cent of the enlarged share capital of the Company as enlarged by the issue of the Repayment Shares and will rank pari passu with the existing ordinary shares of 0.1 p each in the Company ("Ordinary Shares").  Accordingly, from Admission (as defined below), SGRI will be a shareholder of approximately 3.7 per cent of the Company's shares.

Application will be made to London Stock Exchange plc for the Repayment Shares to be admitted to trading on AIM ("Admission"). It is anticipated that Admission will become effective at 8.00 a.m. on or around 9 May 2024.

On Admission, the Company will have 1,750,547,591 Ordinary Shares in issue, each with one voting right. There are no shares held in treasury. Therefore, the Company's total number of Ordinary Shares in issue and voting rights will be 1,750,547,591 and this figure may be used by shareholders from Admission as the denominator for the calculations by which they will determine if they are required to notify their interest in, or a change to their interest in, the Company under the FCA's Disclosure Guidance and Transparency Rules.

State 36-2R well update

Following its announcement on 25 April 2024 that the State 36-2 LNW-CC-R well (the "State 36-2R well") had spud, the Company is pleased to report that operations are progressing as expected. On 26 April, the 17-½ inch surface section of the well was completed at a total depth at 1,570 feet, at which point casing was set and cemented prior to the installation of the blowout preventor. Drilling operations have since commenced on the 12-¼ inch intermediate section, with a current hole depth of 3,238 feet.   Drilling is planned to a total depth of 10,362 feet measured depth (9,600 feet true vertical depth) and will incorporate a short, 270-foot horizontal reservoir section.   

Colin Harrington, Chief Executive of Zephyr, said:

"We continue to make good progress on the drilling of the State 36-2R well and remain on track to complete the well within our forecast thirty-day period."

"In the meantime, the debt for equity exchange will further strengthen our balance sheet, with no ancillary fees and at no discount to the current market price, while increasing future cash flows for reinvestment into our growing asset portfolio.  I'm thrilled to welcome SGRI as a cornerstone equity investor as we work to deliver the next phase of Zephyr's growth."

Contacts:

 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.