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.

 

30 June 2025

 

Zephyr Energy plc

("Zephyr", the "Company", or the "Group")

 

Full Year Results for the year ended 31 December 2024

Notice of AGM

 

The Board of Zephyr Energy plc (AIM: ZPHR) (OTCQB: ZPHRF) is pleased to announce the Group's audited results for the year ended 31 December 2024.

 

Rick Grant, Zephyr's Non-Executive Chairman, said:

 

"On behalf of the Company's Board of Directors, I am pleased to share the Company's results for the 2024 financial year, a period of continued progress as the Company works to unlock what we believe to be the next prolific onshore oil and gas play in the U.S. The results reflect the ongoing efforts and commitment of the Zephyr team, who are working to build a Company of which all stakeholders can be proud.

 

"During the period we have continued to deliver on our dual-strategy of building an income-generating non-operated asset portfolio in the Williston Basin, U.S. (the "Williston project") in parallel with the pursuit of increased value through our development of the project in the Paradox basin, Utah, U.S. (the "Paradox project").

 

"This is a pivotal time in the evolution of the Paradox project, and we believe that the fundamental pieces are in place to drive the project forward to first gas and commercial production. The Paradox project is on the cusp of realising its potential as a project of substantial scale, and we will be working tirelessly to deliver this value over the next period.

 

"On the Williston project, our recent fundraise will enable us to complete our proposed acquisition which is expected to be accretive to both earnings and reserves, as well as provide strategic entry into key areas and enhance our competitive position in core Rocky Mountain oil and gas producing basins.

 

"It is anticipated that there will be considerable newsflow as we progress through the next phase in our development and we look forward to keeping Shareholders updated on our progress. 

 

"I would like to express my appreciation to our team for their dedication in helping us deliver on our vision. My thanks also go to my fellow Board members, the leadership team, our advisers, and, above all, our shareholders for their continued trust and support.

 

"The Board looks forward to the coming months with confidence, as we continue to open up the next prolific oil and gas basin in the U.S."

 

Notice of AGM and posting of annual report

 

The Annual General Meeting of the Company (the "AGM") will be held at 11 a.m. on 30 July 2025 at the offices of Haynes and Boone CDG LLP, 1 New Fetter Lane, London, EC4A 1AN.

 

A copy of the Company's annual report and accounts, and the notice of AGM, will shortly be available on Zephyr's website, http://www.zephyrplc.com, and will be posted to Zephyr's shareholders today.

  

Contacts

 

Zephyr Energy plc Colin Harrington (CEO) Chris Eadie (Group Finance Director and Company Secretary)	Tel: +44 (0)20 7225 4590
Allenby Capital Limited - AIM Nominated Adviser Jeremy Porter / Vivek Bhardwaj	Tel: +44 (0)20 3328 5656
Turner Pope Investments - Joint Broker James Pope / Andy Thacker	Tel: +44 (0)20 3657 0050
Canaccord Genuity Limited - Joint Broker Henry Fitzgerald-O'Connor / Charlie Hammond	Tel: +44 (0)20 7523 8000
Celicourt Communications - Public Relations Mark Antelme / Ali AlQahtani	Tel: +44 (0) 20 7770 6424

 

Qualified Person

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.

 

Notes to Editors

Zephyr Energy plc (AIM: ZPHR) (OTCQB: ZPHRF) is a technology-led oil and gas company focused on responsible resource development 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. 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. 

 

CHAIRMAN'S STATEMENT

 

OVERVIEW

 

On behalf of the Company's Board of Directors (the "Board"), I am pleased to share the Company's results for the 2024 financial year, a period of continued progress as the Company moves ever closer to unlocking what we believe to be the next prolific onshore oil and gas play in the U.S. The results reflect the ongoing efforts and commitment of the Zephyr team who have been working to build a Company of which all stakeholders can be proud.

 

Over the last five years, the Company has grown from a circa US$2 million market capitalisation using a dual strategy of:

1.     Acquisitions: We built an income-generating non-operated asset portfolio in the Williston Basin, U.S. (the "Williston project") to drive long-term value and capital growth. To date, we have completed 14 acquisitions, are expecting to close on the next acquisition in the near term, and have moved from zero production to approximately 1.5 million net barrels of oil equivalent ("boe") produced from 2021 to 2024; and

2.     Value creation via drilling activity: We reinvested capital from our non-operated assets to advance the Company's flagship project in the Paradox Basin, Utah, U.S. (the "Paradox project"). The Paradox project is an underexplored basin where modern oil and gas technology has yet to be fully applied. To date, we have drilled three wells with significant hydrocarbon presence, demonstrated strong test results, secured a large contiguous acreage position, and acquired critical data and infrastructure to support the full development of the Paradox project.

 

During the period under review, we continued to deliver on this dual strategy, and will continue building on this solid platform by growing both our non-operated portfolio and utilising the resulting cashflow and our partnerships to deliver first gas and commercial production from the Paradox project.

 

We are supported by a capable team and strong partnerships, and I remain confident that this foundation allows us to execute our strategy and deliver sustainable growth and value for our Shareholders.

 

The health, safety, and wellbeing of our team and contractors continues to be a core priority. We maintain a zero-harm safety culture, with a strong focus on continuous improvement to ensure a safe and injury-free workplace. The Board is pleased to note that there were no Lost Time Injuries ("LTIs") recorded during the period.

 

The Board remains committed to aligning its actions and investment decisions with our core values -namely, acting as responsible stewards of both Shareholder capital and of the environment. This includes a continued focus on minimising our environmental footprint through proactive measures and safeguarding the ecosystems in which we operate.

 

OPERATIONAL ACTIVITY

Paradox project

 

Zephyr has made excellent progress in driving the Paradox project forward, culminating in the recent production test on the State 36-2 LNW-CC-R well (the "State 36-2R well").

 

The test achieved a peak flow rate of 2,848 boe with no material drop in bottom hole pressure, and without the use of any fracture stimulation, suggesting that the well ranks in the top 6% of gas wells across the Lower 48 (the U.S. excluding Alaska and Hawaii), and further demonstrating the potential of the Paradox project.

 

The test results indicate that 10,000-foot lateral wells drilled on the Paradox project could achieve a P50 individual well performance of 3.6 million boe, affirming that the Cane Creek reservoir is a highly productive and valuable asset, on par with some of the leading oil and gas plays in the U.S.

 

If these single-well metrics are applied across a potential 20 well programme, the Company estimates potential P50 recoverable resources of circa 72.5 million boe across the Cane Creek reservoir alone. Furthermore, it is worth noting that there are eight additional overlying reservoirs offering exploration upside and further resource expansion potential.

 

In summary, the Paradox project is on the cusp of realising its potential as a project of substantial scale, and we will work to deliver this value over the next period.

 

Our next steps include commissioning an updated Competent Person's Report ("CPR"), continuing to engage with farm-in and strategic partners to help in the funding for the large-scale development of the project, finalising the gas marketing agreements and completing the build out of our gas processing plant infrastructure.

 

In parallel, we will also be looking at opportunities to continue to expand the Paradox project through additional lease acquisitions or by further delineating the additional potentially productive zones overlying the Cane Creek reservoir.

 

This is an exciting time in the evolution of the Paradox project, and the Board believes that the fundamental pieces are in place to drive the Paradox project forward to first gas and commercial production - and in doing so, to further unlock the value of the project for our Shareholders.

 

Williston project

 

Our cash generative non-operated asset portfolio with low operating risk continues to perform in line with our expectations, enabling us to proceed with our ongoing Paradox project development.

 

We continue to appraise, acquire and manage high-return non-operated assets in core Rocky Mountain basins, U.S., resulting in a growing and diverse base of assets with low maintenance capital expenditure ("CAPEX"), significant free cashflow and plenty of potential future drilling upside.

 

The non-operated portfolio is currently made up of over 200 developed producing wells. In 2024, the wells produced 1,052 barrels of oil equivalent per day ("boepd ") with associated revenues of over US$24 million, net to Zephyr, and a net revenue interest average of 5.1 per cent.

 

We continue to look at a number of opportunities to increase the scale of our Williston project and are excited by two recent developments that will potentially have a substantive impact to the portfolio.

 

In May 2025, we announced our US$100 million strategic partnership with a major U.S.-based capital provider focused on the energy sector (the "investor"). The combination of Zephyr's regional expertise and the investor's financial strength is designed to accelerate the Company's non-operated growth, enhance consolidated cashflow, and drive attractive project returns.

 

Under the terms of the partnership, the investor will provide up to US$100 million to fund 100% of the CAPEX related to the drilling, completing, and equipping of newly acquired assets. Zephyr will be responsible for any acquisition costs and will retain a right (but not an obligation) to co-fund up to 33% of pro rata CAPEX to maximise returns. We will utilise Zephyr Hawk LLC, a subsidiary company of Zephyr, to serve as the acquisition vehicle for the purposes of the partnership.

 

We also announced the proposed acquisition of accretive, mature non-operated production assets located across core Rocky Mountain basins, and on attractive financial terms. For an acquisition price of US$7.3 million, Zephyr will acquire circa 400 boepd of existing production. The proposed acquisition also offers significant further drilling opportunities, including up to 13 new wells to be drilled with CAPEX envisioned to be funded by our strategic partnership.

 

Following the announcement of the result of the Company's oversubscribed placing on 25 June 2025, the proposed acquisition is expected to complete by the end of July 2025, with an effective date of 1 June 2025, and is forecast to add operating income of US$4 million over the next 12 months (based on strip prices at 29 May 2025) and add approximately 600,000 boe of producing well ("PDP") reserves along with the potential proved but undeveloped well ("PUD") upside.

 

Overall, the proposed acquisition is expected to be accretive to both earnings and reserves, strengthen the balance sheet, provide strategic entry into key areas, and enhance our competitive position in core Rocky Mountain oil and gas producing basins.

 

ENVIRONMENTAL, SOCIAL AND GOVERNANCE ("ESG")

 

Followers of Zephyr will be familiar with our commitment to stewardship of both the natural environment and of shareholder capital. Prudent cash management and careful development of the asset base were key operating principles throughout the period

 

We believe good environmental and operational performance, supported by the appropriate levels of governance, is the optimal way to drive superior investor returns.

 

As Zephyr continues to grow, we remain committed to fostering a safe working environment and maintaining strong engagement with the communities in which we operate. Supporting these communities through responsible environmental practices, social engagement, and sound corporate governance is a natural extension of our mission and reflects our commitment to making a lasting, positive impact.

 

There are many stakeholders who work alongside our people and support the Company. Sturdy relationships, formed over the years of working with multiple state and federal regulators, proved of great benefit during our recent drilling programme on the State 36-2R well.

 

Our relationship and knowledge-sharing partnership with the U.S. Department of Energy and the University of Utah continues to benefit all parties.

 

I am also pleased to report the continued progress in our pursuit of carbon-neutral status as an oil and gas producer. Through our Verified Emission Reduction credits ("VERs") programme - administered by Prax Group, a leading UK-based energy trading firm - we aim to offset all Scope 1 carbon emissions from both our operated and non-operated assets.

 

FINANCIAL

 

For the 2024 financial year, the Group reported revenues of US$24.3 million (2023: US$25.2 million), a gross profit of US$7.2 million (2023: US$7.2 million), and a net loss after taxation of US$19.6 million (2023: US$3.5 million). The net loss after taxation includes a US$14.5 million non-cash, accounting impairment charge in respect of the Williston project, which is primarily as a result of lower commodity prices at 31 December 2024 compared to the prior year.

 

These results were in line with our forecasts and reflect the lower oil price environment over the period.

 

The Group reported Adjusted EBITDA of US$10.9 million for the year ending 31 December 2024 (2023: US$11.8 million). (Adjusted EBITDA represents loss before tax adjusted for DD&A, ECL, impairment, share-based payments, unrealised foreign exchange gains/losses, net finance costs and unrealised losses on derivative contracts).

 

Production increased over the year, which was the result of the Group's wells operated by Slawson Exploration Company ("Slawson") being online for much of the financial year ended 31 December 2024 ("FY 2024"), offset by the natural decline of the portfolio.

 

The 2024 financial year was a tumultuous time geopolitically, with significant volatility in global commodity prices. These events have carried over into 2025 with continued oil price volatility due to ongoing geopolitical tensions. We expect this volatility to continue over the coming months, and we continually review how fluctuating commodity prices could potentially impact our operations. To mitigate this, over the last few years we have managed a hedging programme to protect the Group against potential downside risks. This hedging programme is a key tool in helping the Group meet its ongoing funding obligations. The Group has a policy of layering on hedges to take advantage of spikes in the oil price and has a broad policy of looking to hedge a significant portion of its forward non-operated production.

 

In December 2024, the Group announced that it had secured US$7.5 million to fund all expected drilling and completion costs for the drilling of the lateral extension on the State 36-2R well. The funding was provided by a U.S. based industry investor in exchange for a 50% non-operated working-interest in the 36-2R well.

 

On 25 June 2025, the Company announced that it has raised approximately US$13.5 million (£9.8 million) (before expenses) through the placing of 326,666,667 new Ordinary Shares of 0.1 pence each in the Company to new and existing institutional and professional investors at an issue price of 3 pence per new Ordinary Share (the "issue price"). In addition, certain Directors, management and their affiliates intend to subscribe for 23,333,333 new Ordinary Shares at the issue price raising a further US$0.9 million (£0.7 million) for the Company, after publication of the Company's audited results for the year ended 31 December 2024, subject to the passing of certain resolutions to be put to Shareholders at a general meeting of the Company to be held on 14 July 2025.

 

CONCLUSION

 

I would like to express my appreciation to our team and contractors for their dedication in helping us deliver our vision. My thanks also go to my fellow Board members, the leadership team, our advisors, and, above all, our Shareholders for their continued trust and support.

 

The Board looks forward to the coming months with confidence, as we continue to progress the opening-up of the next prolific oil and gas basin in the U.S.

 

RL Grant

Chairman

27 June 2025

 

CHIEF EXECUTIVE OFFICER'S REPORT AND OPERATING REVIEW

 

PRINCIPAL OBJECTIVES AND STRATEGIES

 

Zephyr Energy plc is an oil and gas exploration and production group operating in the Rocky Mountain region of the U.S. The Group's mission is to unlock the next prolific onshore U.S. oil and gas play through the development of our flagship Paradox project. Zephyr is committed to being a responsible steward of both investors' capital and the environment.

 

To achieve this mission, the Group continues to prioritise:

 

·      Building and strengthening a high-calibre team with significant U.S. oil and gas sector expertise, particularly in operations, development, governance, finance, M&A, and turnarounds. Following several key hires and internal promotions during 2024, Zephyr entered the new financial year ending 31 December 2025 with an enhanced operational platform to support delivery in 2025 and beyond;

·      Maintaining a clear and disciplined strategic focus on responsible exploration and production within the Rocky Mountain region;

·      Developing a cash-generative, non-operated portfolio to provide capital for reinvestment into the Paradox project, reinforcing the Group's self-sustaining dual strategy;

·      Embedding ESG at the core of operations, including robust corporate governance practices, a commitment to operational carbon neutrality, and ongoing, proactive engagement with the local communities;

·      Leveraging strategic partnerships (such as the U.S. Department of Energy, regional operators, debt providers, asset level investors and Shareholders) to support long-term value creation;

·      Advancing a technology-driven acquisition framework to enable the rapid assessment and execution of new opportunities, whether through acquisition, farm-in agreements, or joint ventures; and

·      Maintaining rigorous financial discipline and prudent cash management to ensure capital efficiency across the business.

 

REVIEW OF OPERATIONS AND FUTURE DEVELOPMENTS

Overview

 

The 2024 financial year, and the period since, were dominated by the ongoing operational activity at the Paradox project and, in particular, operations on the State 36-2R well.

 

The period began with the planning and preparations for the State 36-2R well, which was then successfully drilled along with the subsequent lateral extension, and culminated in the recent production test on the State 36-2R well, which included a peak flow rate of 2,848 boe (achieved with no material drop in bottom hole pressure and without fracture stimulation) and which suggests that that the well ranks in the top 6% of gas wells across the Lower 48 in the U.S.

 

The test results suggest that 10,000-foot lateral wells drilled at the Paradox project could potentially achieve a P50 individual well performance of 3.6 million boe. The Group's P50 estimate of gross ultimate recoverable resources in the Cane Creek reservoir is 72.5 million boe, with eight additional overlying reservoirs offering meaningful exploration upside and further resource expansion potential.

 

In summary, our recent work has confirmed the substantial scale and potential value of the Paradox project and our key operational focus for the next period is to begin to unlock this value for our Shareholders.

 

Our income generating non-operated Williston assets continue to deliver strong cashflows, enabling us to progress ongoing development at the Paradox project.

 

Over the last four years we have built a highly experienced operations team which is well positioned to appraise, acquire and manage high-return non-operated assets in core Rocky Mountain basins, resulting in a growing and diverse base of assets with low maintenance CAPEX, significant free cashflow and plenty of potential future drilling upside. The portfolio is currently made up of over 200 developed producing wells.

 

In addition to our existing production, two recent developments will potentially make a meaningful impact to the future growth of the Williston project.

 

Firstly, we have entered into a US$100 million strategic partnership with a major U.S.-based capital provider focused on the energy sector to help us drive forward the Williston project. The combination of Zephyr's regional expertise and the investor's financial strength will accelerate the Group's non-operated growth, enhance consolidated cashflow, and drive attractive project returns. Under the terms of the partnership, the investor will provide up to US$100 million to be used to fund 100% of the CAPEX related to the drilling, completing and equipping of newly acquired assets.

 

Secondly, and following the announcement of our fundraise in June 2025, we are proposing to complete an acquisition of mature non-operated production assets located across core Rocky Mountain basins on attractive financial terms. For an acquisition price of US$7.3 million, Zephyr will acquire circa 400 boepd of existing PDP production and further potential PUD upside. We will soon receive 13 AFEs to be drilled with CAPEX envisioned to funded by our strategic partnership.

 

The proposed acquisition is expected to complete by the end of July 2025, with an effective date of 1 June 2025, and is forecast to add operating income of US$4 million over the next 12 months (based on strip prices at 29 May 2025) and will add approximately 600,000 boe of PDP reserves (along with the significant PUD upside previously mentioned).

 

Paradox project - operated asset

 

Background

 

Zephyr holds operated leases over more than 46,000 gross acres in the Paradox Basin. Of this acreage, 25,000 acres are contiguous and largely covered by modern 3D seismic data - these acres have previously been assessed by third-party consultant Sproule International ("Sproule") to contain, net to Zephyr, 2P reserves of 2.6 million barrels of oil equivalent ("mmboe"), 2C contingent resources of 34 mmboe, and net unrisked 2U prospective resources of 270 mmboe.

 

Following the successful recent drilling programme, and subsequent production test, on the State 36-2R well, a revised CPR will be prepared for the Paradox project in the second half of 2025 and the Group expects to see a significant rise in potential recoverable resources from the Paradox project, above and beyond the previous Sproule CPR.

 

The Group's proactive land management strategy has resulted in a robust and expanding acreage position - one which the Board believes is increasingly difficult to replicate given today's evolving regulatory and political landscape.

 

State 36-2R well

 

In February 2024, the Group announced that it had received the regulatory approvals and permits required to proceed with the drilling of the State 36-2R well and in March 2024, Zephyr announced that it had signed a rig contract with Helmerich & Payne to drill the State 36-2R well.

 

The key objectives of the State 36-2R well were:

·      To successfully complete drilling operations to total depth safely and without harm to people, the environment or equipment;

·      To successfully twin the previously drilled State 36-2 LNW-CC well (the "State 36-2 well") and intersect the same Cane Creek reservoir natural fracture system identified by it;

·      To confirm the presence of hydrocarbons as found by the State 36-2 well, and further appraise the Cane Creek reservoir at Zephyr's federal White Sands Unit ("WSU"); and

·      Should the original well result be replicated, to assess the reservoir productivity by flow testing the new well.

 

In April 2024, the Group announced that full drilling operations had commenced and, in June 2024, Zephyr announced that the State 36-2R well had been completed safely and successfully, with the State 36-2R well drilled to a total depth of 10,290 feet (measured depth) where it intersected the same Cane Creek reservoir within 15 feet of the State 36-2R well.

 

Analysis from the drilling indicated that the State 36-2R well, like the State 36-2 well, penetrated a folded and naturally fractured section of the Cane Creek reservoir. The well encountered drilling mud gas shows of a similar magnitude to the State 36-2 well and pore pressure analysis suggested formation pressures estimated at approximately 9,300 pounds per square inch (which is broadly consistent with previously drilled offset wells).

 

The State 36-2R well further confirmed the presence of hydrocarbons within a structural compartment, within Zephyr's acreage and 3D seismic coverage.

 

Following the successful drilling operation, Zephyr proceeded with the production tests on the State 36-2R well to determine reservoir pressure, fluid composition, well flow rate, bulk reservoir permeability and deliver an early estimate of the overall potential recoverable resources.

 

It is worth noting that the Group recovered substantially all costs associated with the drill under the well control insurance policy it had in place following the well control issue on the State 36-2 well. In total, the Group received US$19.3 million under the State 36-2 well control insurance policy.

 

State 36-2R initial production tests and decision to proceed with the extended lateral

 

In July 2024, the Group announced that it had successfully completed the initial phase of the well production test on the State 36-2R well, in which the State 36-2R well was tested at multiple rates and choke settings to ascertain its production potential. Initial production test observations were encouraging, including:

 

·      High reservoir deliverability and high initial reservoir pressures;

·      Peak production rates achieved during the production test were 1,350 boepd, at which level the well was still choked back and constrained; and

·      Significantly higher condensate-yield than Zephyr's previously drilled Paradox project well (with more than a three-fold increase in condensate rate versus that from the State 16-2LN-CC well).

o  Condensate yield peaked at over 600 barrels of condensate per day. Condensate produced had an average American Petroleum Institute gravity of 58 degrees, making it a highly desirable barrel for Utah's refinery market. The condensate produced from the well to date was sold to a Utah refinery at a price close to current WTI crude oil prices (inclusive of trucking costs).

o  The elevated liquid yield had potential to be a significant driver of improved project economics.

o  Almost zero evidence of water production, another potential boost to the well's economics by reducing the need for water disposal.

 

While the initial test was successful on multiple fronts, there was also evidence that the natural fracture network was partly disconnected from the greater reservoir at this well location. A decision was therefore made to acidise the well to further remove any drilling mud emulsions from the natural fracture network and maximise the well's connectivity with the larger reservoir.

 

In September 2024, following the completion of the acidisation process and the follow up testing, the Group announced the following results from the second production test:

 

·      Peak production rates achieved during the second test were over 2,100 boepd, a significant production rate for an onshore U.S. well with only 130 feet of completed reservoir interval;

·      The acidisation operation successfully removed any remaining near-wellbore formation damage and generated very high reservoir deliverability, with a notable improvement to near-wellbore reservoir permeability after each acid treatment. As such, the operation not only removed damage but also enhanced reservoir productivity;

·      This was the first known example of acidisation stimulation in the Paradox Basin, and the result was highly positive for the development of the Paradox project, with the potential for substantially reduced reservoir risk and removal of the need for costly hydraulic stimulation as used in other U.S. onshore resource plays; and

·      Continued evidence of almost zero water production, another potential boost to the well's economics by material reducing the need for expensive water disposal.

 

Results from the second test had multiple positive implications. In addition to cleaning up any remaining formation damage, the acidisation appeared to have had the unanticipated benefit of significantly enhancing near-wellbore reservoir quality (by dissolving calcite and dolomite minerals known to exist in the reservoir, creating higher porosity and permeability where those minerals have been dissolved away). The Group had previously observed widespread minor fracturing in the reservoir cores of the State 16-2 well and other Cane Creek wells. The analysis suggested that acidisation could materially enhance the permeability of the overall reservoir matrix, including the minor fracturing (which may be present across the Group's entire Paradox project acreage position) as well as any major fracture networks encountered.

 

This implied that acidisation, when utilised across a longer lateral, may offer a cost-effective completion technique compared to the hydraulic stimulation operation used in other U.S. resource plays and that this alternative completion technique could also offer a broader and lower risk method for the long-term development of the Paradox project versus solely targeting major natural fracture networks (the historical development approach in this part of the Paradox Basin).

 

Following the production test, the well was temporarily shut in for a brief period of time while all the information gathered from the production tests was evaluated.

 

In October 2024, following a detailed assessment process, the Board approved the drilling of an extended lateral on the well.

 

This decision was based on the following two key factors:

 

·      Estimated Ultimate Recoveries ("EURs") from the well were expected to be substantively higher once the proposed extended lateral was completed; and

·      The acidisation process used in the well production tests was extremely effective and had the benefit of significantly enhancing near-wellbore productivity. The Board believed that the combination of a longer completed interval and subsequent acidisation could potentially be one of the key factors in the successful long-term development of the Paradox project, reducing costs and improving EURs from the well. This could result in significantly reduced project risk and enhanced project economics.

 

Drilling of the extended lateral on the State 36-2R well

 

In December 2024, the Group announced that it had secured US$7.5 million to fund all expected drilling and completion costs from a U.S. based industry investor in exchange for a 50% non-operated working-interest in the single well, and on 23 December 2024, Zephyr announced that it had signed a rig contract with Nabors Drilling USA ("Nabors") to drill the extended lateral.

 

Drilling operations commenced in January 2025 targeting an additional 5,500 feet of the Cane Creek reservoir. Exactly 30 days later, on 20 February 2025, drilling operations were concluded safely and successfully. The well trajectory of the extended lateral section was drilled as planned and correlated with the existing 3D seismic data. 97% of the lateral was drilled within the Cane Creek reservoir section demonstrating the ability to accurately steer within the reservoir across a structurally complex play. Encouragingly, elevated mud gas levels with notable peaks were evident throughout the drilling of the Cane Creek reservoir.

 

Production testing on State 36-2R well following the completion of the extended lateral

 

During the production test, which commenced in April 2025, the well was tested at multiple flow rates in order to gather data to determine the flow capacity of the well, to provide an early estimate of potential resource volumes, and to obtain high quality fluid samples. The production test successfully delivered on all its objectives and delivered results that were at the top end of management expectations.

 

In summary, the test included a peak flow rate of 2,848 boepd, achieved with no material drop in bottom hole pressure and suggested that the well ranks in the top 6% of gas wells across the Lower 48 (despite not using any fracture stimulation) - further demonstrating the potential of the Paradox project. Well test data and interpretation suggest that there is more than sufficient well deliverability for a commercial well.

 

The well test results suggest that the chosen completion strategy (hydra-jet abrasive perforation and matrix acidisation) was highly successful, and it should be noted that no fracture stimulation was performed to achieve this excellent well deliverability result. Management believes that fracture stimulation could offer further upside potential for both the well, and for the broader Paradox project development.

 

As a result of a successful production test from the State 36-2R well, the Group will work to finalise gas processing and related infrastructure requirements for the project, to tie in both the Federal 28-11 well and the State 16-2 LN-CC well as soon as practicable.

 

Potential Paradox development plan

 

Following the analysis of the well test data, management applied the results to a conceptual full field development plan to better understand the potential resource range of the Cane Creek reservoir (under the current 3D seismic coverage).

This conceptual development plan suggests the potential for a further twenty Cane Creek reservoir horizontal wells (plus the previously drilled State 16-2 LN-CC and State 36-2 wells), with preliminary management estimates of gross ultimate recoverable gas in a low-mid-high scenario range of recoverable condensate as set out in the table below.

 

Estimated Ultimate Recovery	LOW	MID	HIGH
Gross Recoverable Gas (BCF)	174.0	341.0	501.0
Gross Recoverable Condensate (MMBC)	3.5	15.7	29.0
Total Gross equivalent (MMBOE)	32.5	72.5	112.5

 

Initial management estimates of ultimate recoverable resources, net to Zephyr are set out in the table below.

 

Estimated Ultimate Recovery	LOW	MID	HIGH
Net Recoverable Gas (BCF)	137.0	271.0	399.0
Net Recoverable Condensate (MMBC)	2.7	12.5	23.1
Total Net equivalent (MMBOE)	25.6	57.7	89.5

 

The test results infer that 10,000-foot lateral wells drilled on the Paradox project could achieve a P50 individual well performance of circa 3.6 million boe an NPV-10 of US$25.2 million.

 

In summary, the evaluation of the production test confirmed that the Cane Creek reservoir is highly productive and potentially ranks alongside some of the most productive oil and gas plays in the U.S. The results also suggest that there may be a considerable increase in the project's recoverable resources.

 

Next steps

 

The Board believes that the fundamental pieces of a significant oil and gas play are present. Over the coming months, there are a number of key deliverables that will enable the Group to move towards the commencement of commercial production from the Paradox project. The next tasks include:

 

·      A new CPR to be commissioned in the second half of 2025;

·      Completion of gas marketing agreements and build out of gas processing plant infrastructure;

·      Completion of contracts with Enbridge Gas Utah, the owner of the operational 16-inch pipeline which runs adjacent to our gas plant, regarding the terms and timetable for the transportation of gas produced from the Paradox project;

·      Structured engagement with potential farm-in, strategic and investment partners to help fund and accelerate a larger scale Paradox project drilling programme;

·      Continued leasing of additional nearby acreage;

·      Acceleration of legacy workovers on existing 28-11 and 16-2 wells to bring online additional production at reduced cost; and

·      Testing of overlying reservoirs (potentially using an existing vertical wellbore).

 

Williston project - non-operated asset

 

Overview

 

Zephyr continues to develop a portfolio of working interest positions in accretive, high-quality, high-margin production assets with significant near-term growth potential in the Williston Basin. 

 

Following 14 discrete acquisitions, the Williston project has generated strong cashflows for the Group, moving from zero production to over 1.5 million boe produced from 2021 to 2024.

 

Over the last four years we built a highly experienced operations team to appraise, acquire and manage high-return non-operated assets in core Rocky Mountain basins, resulting in a growing and diverse base of assets with low maintenance CAPEX, significant free cashflow and plenty of potential future drilling upside.

 

The 2024 financial year was another solid year for the Williston project, with operational performance in line with management expectations. The historical investment in the portfolio continues to compound cashflow which enables Zephyr to pursue the potential of the Paradox project.

 

The financial performance of the Williston portfolio is exposed to fluctuations in commodity prices, albeit the Group's hedging strategy aims to alleviate this exposure. Nonetheless, and primarily as a result of lower commodity prices at 31 December 2024 compared to the prior year, the Directors have recognised a non-cash, accounting impairment provision of US$14.5 million (2023: nil). See note 4. It should be noted that recent rebound in commodity prices have resulted in a rebound in the overall valuation of the Williston project.

 

At 31 December 2024, 229 wells in Zephyr's portfolio were available for production. Net working interests across the Williston Basin non-operated portfolio average 7% per well, equivalent to 16 net wells to Zephyr.

 

2024 sales volumes and production summary

 

FY 2024 sales volumes averaged 1,149 boepd or 420,724 boe for the year, an increase over FY 2023 sales volumes of 1,116 boepd or 407,340 boe for the year.

 

Of the total revenue in FY 2024, 90% comprised crude oil sales, 4% natural gas sales and 6% from natural gas liquid sales.

 

FY 2024 revenues from the portfolio were US$24.3 million, versus FY 2023 revenues of US$25.2 million. The 3.6% year-on-year decline in revenues, despite increased sales and production in FY 2024, was primarily the result of lower commodity prices in FY 2024 compared to the prior year.

 

2024 production from the non-operated portfolio averaged circa 1,052 boepd versus FY 2023 production of 1,040 boepd. The increase in production year-on-year was the result of the Group's wells operated by Slawson being online for much of FY 2024, offset by the natural decline of the portfolio. 

 

Hedging

 

In FY 2024 the Group hedged 103,000 barrels of oil.

 

·      67,500 barrels of oil were hedged at a weighted-average price of US$81.43 per barrel of oil.

·      35,500 barrels of oil were hedged by way of financial collar options which enabled the Group to lock-in a minimum price for these barrels of oil. These collar options gave the Group a weighted average floor price of US$72.73 per barrel of oil and a weighted average ceiling price of US$84.31 per barrel of oil.

 

The Group continues to evaluate its commodity price risk management strategy on a regular basis.

 

Business development

 

There have been two recent developments that will potentially provide significant upside to the Williston project.

 

Strategic partnership

 

In May 2025, Zephyr announced a new US$100 million strategic partnership with a major U.S.-based capital provider focused on the energy sector. The partnership, which will utilise a combination of Zephyr's regional expertise and the investor's financial strength, is designed to accelerate Zephyr's non-operated growth, enhance consolidated cashflow, and drive attractive returns. The Board view this partnership as an excellent way to utilise experienced industry capital to further grow the Group's cash generating foundation.

 

Under the terms of the partnership, the investor will provide up to US$100 million to be used to fund 100% of the CAPEX related to the drilling, completing and equipping of newly acquired assets, which will be contained within a defined geographical area (the "Programme Area").

 

The Programme Area consists of counties located in the Williston Basin, although both parties may consider opportunities in other Rocky Mountain basins upon mutual consent. The Investor may elect to participate in opportunities at its discretion, on a case-by-case basis, after conducting its own financial and technical verification. Zephyr retains the right (but not the obligation) to fund up to 33% of pro rata CAPEX. The Investor will earn a majority of the cashflows generated by its pro rata working interest in each well until an agreed upon initial hurdle rate is met.

 

The partnership agreement is for an initial term of six months. Whilst there can be no guarantee that appropriate opportunities will be forthcoming or lead to funding, Zephyr fully expects that it will be in a position to present a number of opportunities to the Investor over the initial six months from its current and expected pipeline.

 

Proposed acquisition

 

We were also delighted to be able to announce the proposed acquisition of mature non-operated production assets located across core Rocky Mountain basins. For an acquisition price of US$7.3 million, Zephyr will acquire circa 400 boepd of existing production. The proposed acquisition also offers significant further drilling opportunities, with up to 13 new wells to be drilled with CAPEX to be potentially funded by our strategic partnership.

 

Following the announcement of the Company's fundraise in June 2025, the proposed acquisition is expected to complete by the end of July 2025, with an effective date of 1 June 2025, and is forecast to add operating income of US$4 million over the next 12 months (based on strip prices at 29 May 2025) and adds approximately 600,000 boe of PDP reserves (along with the PUD upside previously mentioned).

 

Overall, the proposed acquisition is accretive on both an earnings and reserve basis, will strengthen the balance sheet, offers the Group strategic entry into key areas of interest and enhances our competitive position within core Rocky Mountain basins.

 

Corporate

                                   

Health and safety of our people remains at the top of our priorities, and the Group is pleased to report that no health or safety incidents occurred during FY 2024.

 

In April 2024, the Company granted a total of 61,503,028 share options to Directors, certain employees and consultants to the Company, to reflect awards under the Company's Long-Term Incentive Plan, discretionary bonuses for performance achieved in 2021 and 2022, and discretionary awards in lieu of deferred remuneration and fees from 2020, during the COVID-19 pandemic. See note 27.

 

In May 2024, the Group announced that it had been awarded an additional US$0.25 million of grant funding from the U.S. Department of Energy ("DOE") for operations on the State 36-2R well. This brings the total DOE grant funding made available to the Group to over US$2.7 million in recent years.

 

In May 2024, the Company retired US$3.88 million of existing debt through the issuance of US$3.88 million of equity comprised of 64,045,768 new Ordinary Shares at a price of 4.85 pence per new Ordinary Share. The issue price of the new Ordinary Shares was the undiscounted mid-market closing price of the Company's Ordinary Shares on 2 May 2024. The new Ordinary Shares were issued to SGR Investments LLC ("SGRI"), a US-based institutional investor to repay a portion of the debt SGRI provided to fund the Group's acquisition of the Slawson wells in December 2022.

 

In June 2024, the Group announced a new US$5.6 million term loan. The new term loan amortises monthly over four years and has an interest rate of 10% per annum. Proceeds from the new term loan were used to repay the balance due to SGRI in respect of the Slawson acquisition credit facility, which has now been fully repaid.

 

Outlook

 

2024 was another year of strong progress for the Group, and we continue to build on this momentum into 2025.

 

In recent months we have delivered on both components of our stated dual strategy with operational successes on the Paradox project, our exciting strategic partnership and the proposed acquisition on the Williston project.

 

With our balanced portfolio geared for substantial growth, we are looking forward to the year ahead with confidence.

 

The Directors' statement in respect of going concern can be found in the Directors' Report and Note 3 to the consolidated financial statements.

 

JC Harrington

Chief Executive Officer

27 June 2025

 

FINANCIAL REVIEW

 

The 2024 financial year was characterised by further investment in the Paradox project, and particularly the ongoing activity on the State 36-2R well.

 

The Williston project continued to deliver in line with expectations albeit against a backdrop of lower commodity prices in 2024 compared to the prior year.

 

INCOME STATEMENT

 

During the year ended 31 December 2024, the Group generated revenue of US$24.3 million (2023: US$25.2 million) and reported a gross profit of US$7.2 million (2023: US$7.2 million).

 

The Group reported Adjusted EBITDA of US$10.9 million for the year ending 31 December 2024 (2023: US$11.8 million). (Adjusted EBITDA represents loss before tax adjusted for DD&A, ECL, impairment, share-based payments, unrealised foreign exchange gains/losses, net finance costs and unrealised losses on derivative contracts).

 

Administrative expenses for the year were US$6 million, in line with the prior year (2023: US$6 million).

 

The Group has reported an allowance for expected credit losses of US$1.2 million in accordance with IFRS 9 Financial instruments. See note 16.

 

At 31 December 2024, the Directors identified indicators of impairment in its proved oil and gas properties and carried out an impairment test in accordance with IAS 36 Impairment of assets. The results of the test indicated that a non-cash, accounting impairment charge of US$14.5 million should be recognised (2023: nil). See notes 4 and 14.

 

The Group reports foreign exchange gains of US$1 million for the year (2023: loss of US$2.8 million).

 

Finance charges of US$3.3 million (2023: US$3.5 million) have been charged in respect of interest and associated costs relating to the Group's borrowings and unwinding of discount on decommissioning. See note 7.

 

During the year ended 31 December 2024, the Group has recognised a deferred tax credit, and a corresponding reduction in its net deferred tax liability of US$0.4 million relating to unrelieved tax losses and temporary timing differences arising in the U.S. businesses (2023: US$1.6 million).

 

The Group reports a net loss after tax of US$19.6 million or a loss of 1.13 cents per Ordinary Share for the year ended 31 December 2024 (2023: net loss US$3.5 million or a loss of 0.21 cents per Ordinary Share). The increase in the loss from the prior year is largely the result of the US$14.5 million impairment charge.

 

BALANCE SHEET

 

Total investment in the Group's exploration and evaluation assets as at 31 December 2024 was US$53.2 million (2023: US$50 million) reflecting the ongoing investment in the Paradox project.

 

Total investment in property and equipment as at 31 December 2024 was US$41.8 million (2023: US$50.8 million) reflecting depreciation, depletion and amortisation, decommissioning obligations and a working-interest disposal on the non-operated asset portfolio.

 

The carrying value of the Group's property and equipment, at 31 December 2024, net of the US$14.5m non-cash, accounting impairment provision is US$27.3 million (2023: US$50.8 million).

 

Trade and other receivables decreased by US$5.2 million during the year under review. The decrease is primarily due to a provision at 31 December 2023 of US$2.9 million in respect of insurance recoveries that was settled during the year, together with a provision for expected credit losses of US$1.2 million (2023: nil). See note 16.

 

Cash and cash equivalents as at 31 December 2024 were US$10.3 million (2023: US$3.6 million). Included within cash and cash equivalents is the sum of US$7.4 million (2023: nil) received in exchange for a 50% non-operated working-interest in the State 36-2R well. Use of these funds is restricted to the funding of drilling, completion and production testing costs for the State 36-2R well. See notes 13 and 17.

 

At 31 December 2024, the Group recognised a current liability of US$7.4 million in respect of the advance from our joint partner in respect of its 50% non-operated working-interest in the State 36-2R well. This liability will reduce as the funds are utilised to develop the well.

 

The Group's borrowings as at 31 December 2024 were US$26.3 million (2023: US$35.4 million).

 

In April 2024, the Company granted a total of 61,503,028 share options to Directors, certain employees and consultants to the Company, to reflect awards under the Company's Long-Term Incentive Plan, discretionary bonuses for performance achieved in 2021 and 2022, and discretionary awards in lieu of deferred remuneration and fees from 2020, during the COVID-10 pandemic. See note 27.

 

In May 2024, the Company settled US$3.88 million of existing debt through the issuance of US$3.88 million of equity comprised of 64,045,768 new Ordinary Shares in the Company at a price of 4.85 pence per new Ordinary Share. The issue price of the Ordinary Shares was the undiscounted mid-market closing price of the Company's Ordinary Shares on 2 May 2024.

 

In June 2024, the Group announced that it had fully repaid the remaining US$6 million of the loan that it had with SGRI. This was achieved largely through utilising proceeds from a new US$5.6 million amortising term loan with First International Bank & Trust ("FIBT").

 

GOING CONCERN

 

The Directors' statement in respect of going concern can be found in the Directors' Report and Note 3 to the consolidated financial statements.

 

SUBSEQUENT DEVELOPMENTS

 

In May 2025, the Group announced that it had entered into an agreement with a U.S. based capital provider focused on the energy sector to fund growth in the Williston project. Under the terms of the agreement, Zephyr will be responsible for acquiring non-operated assets and the investor will make available up to US$100 million to fund 100% of CAPEX related to the drilling, completing and equipping of those non-operated assets, which will be contained within a defined geographical area.

 

In June 2025, the Group announced the proposed acquisition of mature non-operated production assets located across core Rocky Mountain basins. For an acquisition price of US$7.3 million, Zephyr will acquire circa 400 boepd of existing production. The proposed acquisition also offers significant further drilling opportunities, with up to 13 new wells to be drilled with CAPEX to be potentially funded by our strategic partnership. The proposed acquisition is accretive on both an earnings and reserve basis, will strengthen the balance sheet and offers the Group strategic entry into key areas of interest and enhances our competitive position within core Rocky Mountain basins.

 

On 25 June 2025, the Company announced that it has raised approximately US$13.5 million (£9.8 million) (before expenses) through the placing of 326,666,667 new Ordinary Shares of 0.1 pence each in the Company to new and existing institutional and professional investors at an issue price of 3 pence per new Ordinary Share (the "issue price"). In addition, certain Directors, management and their affiliates intend to subscribe for 23,333,333 new Ordinary Shares at the issue price raising a further US$0.9 million (£0.7 million) for the Company, after publication of the Company's audited results for the year ended 31 December 2024, subject to the passing of certain resolutions to be put to Shareholders at a general meeting of the Company to be held on 14 July 2025.

 

KEY PERFORMANCE INDICATORS

 

As part of Zephyr's ongoing development of the Paradox project and the build-out of the non-operated portfolio in the Williston Basin, the Board tracks its performance against indicators that reflect the strategic, operational and financial progress, as well as our impact on society and the environment. These indicators allow the Board, management and stakeholders to compare Zephyr's performance to its goals.

 

Safety performance	Why we measure ·      The Group has a zero-harm safety culture focused on continuous improvement to achieve an injury-free and safe work environment ·      We require employees and contractors to work in a safe and responsible manner and provide them with the training and equipment to do so	Performance ·      There were no reported LTIs during the 2024 financial year (2023: nil)
Adjusted EBITDA Loss before tax adjusted for DD&A, ECL, impairments, share-based payments, unrealised foreign exchange gains / losses, net finance costs and unrealised losses on derivative contracts	Why we measure ·      Indicator of the Group's cash generation to fund expenditures and/or return capital to Shareholders	Performance ·      2024 Adjusted EBITDA was US$10.9 million ·      2023 Adjusted EBITDA was US$11.8 million ·      The difference between the Adjusted EBITDA for 2024 and the prior year was primarily the result of lower commodity prices in 2024
Net sales volumes	Why we measure ·      Indicator of revenue generation potential ·      Measure of progress towards achieving production forecasts and driving profitable production growth	Performance ·      FY 2024 sales volumes of 420,724 boe ·      3% increase in sales from FY 2023 sales volumes of 407,340 boe ·      Increase primarily the result of a full-year of production from the six Slawson wells, offset by standard production decline of the non-operated asset portfolio
Growth of Paradox project reserves / resources	Why we measure ·      Indicator of economic viability and long-term production potential of projects	Performance ·      At 31 December 2024, the Group had Paradox Basin 2P reserves of 2.6 mmboe, 2C resources of circa 34 mmboe and 2U resources of 270 mmboe ·      It is expected that a revised Competent Persons Report on the Paradox project will be prepared in the second half of 2025 following the successful production test of the State 36-2R well
Carbon emissions	Why we measure ·      Zephyr Energy is committed to sustainable and responsible oil and gas production	Performance ·      Pursued Scope 1 carbon-neutrality from both operated and non-operated assets ·      VERs credit partnership with Prax

 

CJ Eadie

Group Finance Director

27 June 2025

 

CONSOLIDATED INCOME STATEMENT
For the year ended 31 December 2024

 

 

	Notes	2024 US$'000	2023 US$'000
Revenue	6	24,279	25,225
Operating and transportation expenses		(5,809)	(6,964)
Production taxes		(2,046)	(1,878)
Depreciation, depletion and amortisation	14	(9,241)	(9,607)
Gain on derivative contracts	18	14	412
Gross profit		7,197	7,188
Administrative expenses		(5,976)	(5,997)
Allowance for expected credit losses	16	(1,226)	-
Impairment of property and equipment	14	(14,541)	-
Share-based payments	27	(3,129)	(6)
Foreign exchange gains/(losses)		1,007	(2,776)
Finance income		2	-
Finance costs	7	(3,303)	(3,472)
Loss on ordinary activities before taxation	8	(19,969)	(5,063)
Taxation credit	11	395	1,560
Loss for the year attributable to owners of the parent company		(19,574)	(3,503)
Loss per Ordinary Share
Basic and diluted, cents per share	12	(1.13)	(0.21)

 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 December 2024

 

		2024 US$'000	2023 US$'000
Loss for the year attributable to owners of the parent company		(19,574)	(3,503)
Other comprehensive (loss)/income
Items that may be subsequently reclassified to profit or loss
Foreign currency translation differences on foreign operations		(1,007)	2,772
Total comprehensive loss for the year attributable to owners of the parent company		(20,581)	(731)

 

CONSOLIDATED BALANCE SHEET
As at 31 December 2024

 

			Notes	2024 US$'000	2023 US$'000
Non-current assets
Exploration and evaluation assets		13		53,236	49,941
Property and equipment		14		27,292	50,840
				80,528	100,781
Current assets
Trade and other receivables		16		2,676	7,897
Cash and cash equivalents		17		10,267	3,611
Derivative contracts		18		3	278
				12,946	11,786
Total assets				93,474	112,567
Current liabilities
Trade and other payables		19		(4,383)	(6,983)
Advance from joint operator		20		(7,394)	-
Borrowings		21		(20,933)	(28,950)
Lease liabilities				(31)	(39)
Derivative contracts		18		(86)	-
Provisions		23		(549)	-
				(33,376)	(35,972)
Non-current liabilities
Borrowings		21		(5,384)	(6,401)
Lease liabilities				(17)	(31)
Deferred tax		22		-	(395)
Provisions		23		(3,560)	(5,067)
				(8,961)	(11,894)
Total liabilities				(42,337)	(47,866)
Net assets				51,137	64,701
Equity
Share capital		24		42,649	42,568
Share premium account		26		74,792	71,735
Warrant reserve		25		1,887	1,557
Share-based payment reserve		26		5,665	3,270
Cumulative translation reserve		26		(14,219)	(13,212)
Accumulated deficit		26		(59,637)	(41,217)
Equity attributable to owners of the parent company				51,137	64,701

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2024