Zephyr Energy (ZPHR) has announced a £12m equity raise to complete its acquisition of non-operated interests in certain wells within the Williston Basin field in North Dakota.
The exploration and production firm which is focused on targeting and developing oil and gas interests in the Rocky Mountain region of the United States, is issuing 240 million new shares at a price of 5p each, representing a discount to the 5.7p closing price on Tuesday afternoon.
A broker option to raise up to an additional £1.2m has also been put in place to allow existing shareholders who are qualifying investors to participate on the same terms as the placing.
Today, Zephyr explained that the proceeds of the share placing, as well as a new debt facility of $28m, will be used to complete the company’s $36 million Williston Basin acquisition. It added that the money will be used to fund near-term capital expenditure of $6m at the site.
The Group said the expected cash flow from the acquisition, in addition to cash flow from Zephyr's current non-operated portfolio, will be used to accelerate 2022 development in the Company's flagship Paradox Basin project which is located in Utah in the United States.
Zephyr detailed to investors that the acquisition is expected to add a net 2.764 million barrels of oil equivalent ("mmboe") of proven reserves, including a growing production stream of around 1,105 barrels of oil equivalent per day ("boepd") net to the Assets in December 2021.
The funds will also equip the State 16-2 well for production, and fund the development of the surface infrastructure required to enable the sale of gas via the nearby pipeline and/or to a potential 2-megawatt cryptocurrency mining facility development to be co-located on site.
Looking ahead, Zephyr Energy plans to drill three Paradox Basin wells in the second half of 2022. In addition, in the event the 2022 Paradox drilling programme meets expectations, the Company said it anticipates a significantly larger Paradox drilling programme during 2023.
CEO, Colin Harrington, said: "The fundraise announced today and the associated Acquisition are further huge steps forward for Zephyr. After closing this highly accretive acquisition, Zephyr will have nearly tripled its existing non-operated production - and pro forma forecast cash flow per fully-diluted share will have more than doubled through the addition of this high-quality, high-margin production base with significant near-term growth potential.”
He said the resultant cash flows could potentially prompt growth across its broader portfolio.
He commented: “Zephyr plans to financially hedge a substantial portion of the combined non-operated production in order to secure the funding required to accelerate a high impact three-well drilling programme on our operated flagship Paradox project in 2H - which in turn, with success, may lead to a significantly larger Paradox drilling programme in 2023.”
Addressing investors, he said: "The fundraise and the completion of the Acquisition represent a fantastic start for 2022, and we look forward to maintaining our momentum and delivering on our key objective by unlocking significant further upside value from the Paradox project.”
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