Malcy’s Blog: Oil price, Zephyr, Touchstone Exploration, Rockhopper.

WTI (July) $61.84 +95c, Brent (July) $64.90 +81c, Diff -$3.06 -14c.

USNG (July)* $3.56 +2c, UKNG (June) 87.6p -0.9p, TTF (July)* €36.815 +€0.115

*Denotes expiry of June contracts.

Oil price

Oil rallied as sanctions worries outweighed the potential of Opec raising production at the weekend. Markets also rallied after courts blocked some of the Trump tariffs.

A short blog, sort of as I’m in town today, as always any follow up will come tomorrow.

Zephyr Energy

Zephyr has provided initial post-well evaluation results from the State 36-2R LNW-CC-R well at the Company’s flagship project in the Paradox Basin, Utah, U.S.   In addition, the Company also provides initial results related to hydrocarbon production in the first quarter of 2025 from its non-operated asset portfolio in the Williston Basin, North Dakota and Montana, U.S. as well as an update on business development activities in relation to the Williston project.

Colin Harrington, Zephyr’s Chief Executive, said:

“The quality of the data gathered from our recent production test on the State 36-2R well is solid, and the results are robust.  The evaluation confirms 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 substantial increase in our base case recoverable resources which could add tremendous value to the project over time.

“The decision to perform a novel perforation and acidisation completion has been very much vindicated, and the potential for further optimisation of the project is exciting. Our operations team, alongside key service company partners, did an excellent job in delivering this result and I am thrilled with these initial findings.

“There is much still to do, and our team is hard at to work to deliver on our next key objective of delivering first gas.

“While the results announced today focus solely on the Cane Creek reservoir, it should be remembered that there are eight other overlying reservoir zones with core data that compares well with the Cane Creek B reservoir zone. This highlights the further substantial potential of our project acreage that is yet to be tested.  The scale of the project has the potential to grow considerably and we look forward to sharing further information with both the market and potential partners as work continues.

“I am also pleased to be able to announce our initial Q1 results from the Williston project which continues to perform as a cash generating engine for the wider group.  Work at our Zephyr Hawk subsidiary has also commenced with a strong level of initial deal flow being evaluated.”

 This is another fantastic announcement from Zephyr with the flowtest details being much higher than even I had expected. As the management continue to over deliver and using novel and state of the art engineering concepts at all stages of the well progress and the Cane Creek now looks likely to be a fantastic reservoir with much more potential in the B zone.

I will add much more after I have had time to speak to Colin but shareholders should now be really pleased with the potential from the Paradox and now looking likely to be much higher than original expectations, the shares have massive upside from here so today’s initial move just show quite how ignorant and shortsighted markets can be, there is significant value here.

State 36-2R well evaluation

The Zephyr team has conducted an integrated post well evaluation incorporating all geological, geophysical and engineering data gathered from the State 36-2R well and from the greater field area. The key results from the evaluation are set out below.

·    Management estimates of gas estimated ultimate recovery (EUR) for the State 36-2R well range from 4-6 billion cubic feet (“BCF”) (0.9 to 1.3 BCF/1000 feet (‘) of perforated interval) and between 160,000 and 240,000 barrels of condensate, equivalent to a total range of 0.827 to 1.24 million barrels of oil equivalent (“boe”) for the well. The internal technical evaluation of this well is now largely complete, prior to further review by a third party.

·   These results can be scaled to longer lateral lengths (e.g. 10,000′ to 15,000′ laterals) for the purpose of field development planning, with potential gas EURs ranging from 9 to 37.5 BCF per well (dependent upon completed lateral length, location on structure, expected reservoir and fluid properties).  Although well lengths will be constrained by the structural form of the reservoir, as observed from the 3D seismic data and by the overall well bore geometry proposed, the proposed conceptual development wells consist of predominantly 10,000 feet to 15,000-feet horizontal wells. While drilling and completing longer horizontal wells has not been undertaken in the Paradox previously, the use of longer 2 and 3 mile laterals is widespread in other U.S. resource plays and extends to 4 mile laterals in some locations.

·    The overall liquid yield development over the life of the well is expected to deliver valuable condensate volumes ranging between 60-130bc/mmscf (barrels of condensate per million standard cubic feet of gas) at initial reservoir conditions. Over the estimated 20-year life of the well, total liquid yield estimates of 20-60bc/mmscf are expected as reservoir pressure drops.

The estimated normalised gas EUR/1000′ lateral length forecast for the 36-2R well (0.8-1.3 BCF/1000′) and across the greater development area (0.8-2.5 BCF/1000′) suggest potential well performance that is comparable to the top six per cent of hydraulically stimulated horizontal gas wells across all the key lower 48 onshore US plays, based on production, well data and EUR assessment from the Enverus Prism database.*

·      These single well assessments can also be applied to a conceptual full field development plan to understand the larger potential resource range of the Cane Creek reservoir with 3D seismic coverage and which is under lease by Zephyr. This conceptual development plan suggests the potential for a further 20 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 174 – 341 – 501 BCF and 3.5 – 15.7 – 29mmbc of recoverable condensate (and set out in the table below).

·      Initial management estimates of net ultimate recoverable resources range from 137 – 271 – 399 BCF and 2.7-12.5-23.1 mmbc (26-58-90 mmboe net recoverable resources) (and are set out in the table below). These estimates are interim and have been developed solely to illustrate the potential recoverable resource of the Cane Creek reservoir under lease. Further field development planning work and economic analysis will be completed prior to the completion of a revised Competent Persons Report on the Paradox project.

Further observations on the State 36-2R well include the following:

The well is producing along the entire length and from all three reservoir zones of the Cane Creek reservoir, and predominantly from the Cane Creek B reservoir zone. This is due to the fact that the well was mostly drilled and completed in the Cane Creek B reservoir zone. The near wellbore area shows increased permeability that is most likely caused by the successful acid stimulation. The well was not hydraulically fractured during perforation or acidisation.

The reservoir matrix permeability also appears to be as good, or better, than the Company’s pre-drill, base case estimate of reservoir permeability, a key driver for the estimated improvement in the resource base.

The novel completion technology deployed has been very successful both in terms of accessing the reservoir but also enabling the assessment of the matrix permeability and potential exists to further improve completion effectiveness during future development.

Reservoir properties were determined from the well test results using an analytical model. The resulting properties were then used to build a numerical model to generate production forecasts. Both models were consistent with the geological interpretation of the well and regional geologic data gathered previously.

*Sample size used is the top 6,900 wells out of a total of 116,000 gas wells, as defined by Enverus.

** Estimated Ultimate Recovery has no economic limit applied and is used here to illustrate the technical potential of the well and field area.

Williston Project and Zephyr Hawk update

The Company also reports initial Q1 results related to hydrocarbon production from the Company’s Williston project.

·      Q1 production averaged 756 boepd, net to Zephyr, versus an average production in the fourth quarter of 2024 (“Q4”) of 829 boepd, net to Zephyr. Both Q4 and Q1 were impacted by operator induced downtime, and the Company expects the production impacts to be temporary.

·      At 31 March 2025, 228 wells in Zephyr’s portfolio were available for production (versus 229 wells at the end of Q4).

·      Net working interests across the Zephyr portfolio now average 7% per well (equivalent to 16.0 net wells).

·      The Company hedged a total of 18,000 barrels of oil (“bbls”) in Q1. These were hedged at a weighted average price of price US$68.68 per barrel of oil (“bbl”).

In respect of the Company’s newly formed acquisition vehicle Zephyr Hawk, as announced on 13 May 2025, the Company is pleased to report it is in the process of assessing approximately US$30 million of sourced drilling opportunities which have the potential to be funded through the Company’s new US$100 million strategic partnership. The Company will provide further updates to investors as and when individual transactions are finalised.

Touchstone Exploration

Yesterday I managed to spend some time with Touchstone CEO Paul Baay to chat about the closure of the Shell acquisition of the Central Block in Trinidad. The link is here.

Core Finance CEO Interview: Paul Baay of Touchstone Exploration

Rockhopper Exploration

Rockhopper has announced its audited results for the year ended 31 December 2024.

2024 AND POST PERIOD HIGHLIGHTS

Sea Lion Development

Financing

·    Lead technical and lending bank mandate signed

·    Financing plan now includes senior bank debt

·    Positive initial feedback from potential providers of capital to the financing

·    New timing for Final Investment Decision (“FID”) expected H2 2025 to allow for bank to complete due diligence (“DD”)

Resources

·    Updated independent report commissioned by Navitas*

o  Gross 917 mmbbls 2C with additional upside (Rockhopper 35% working interest)

o  Phased development

o  5 phases

o  2 FPSOs

o  First 2 phases developed via a single FPSO with 2 drilling campaigns

·    Rockhopper commissioned independent resource update to be published shortly

Corporate and Financial

·    US$20.9 million cash and term deposits at 31 December 2024

·    Share Purchase Agreement (“SPA”) signed to dispose of Italian business

o  Awaiting consents from Falkland Islands Government (“FIG”) and the Italian regulators

·    Cost control remains a focus

Ombrina Mare Arbitration Award

·    No outcome of annulment to date

·    Monetisation of the Award with a regulated specialist fund (“Specialist Fund”)

o  Completion and First Tranche payment received, €19 million retained

o  If successful in defending annulment, Second Tranche payment of €65 million due from Specialist Fund

·    Insurance in place to ensure minimum of €31 million even in the event of annulment

Sam Moody, Chief Executive of Rockhopper Exploration, commented:

“This has been a very important period for Rockhopper and an exciting time for the Company and its shareholders as we continue to work with operator Navitas in moving the Sea Lion project towards FID. With work on financing for the development beginning to gather pace and continued progress on the technical side, we look forward to providing the market with further updates.”

These results are historic and with so much excitement returning to the Falklands in general and Sea Lion in particular most of the action is post these numbers. Navitas has been indicating that FID may be achieved during the summer and they are in an increasingly strong position right now. 

With the Ombrina Mare arbitration award due anytime and a Rockhopper commissioned independent resource update to be published shortly I am increasingly excited about life at the company, readers will remember how long I have carried the torch for Sea Lion, to before Premier days so it will be worth watching. 

* Rockhopper is not an addressee and has not been party to the production of the March 2025 NSAI Independent Report. The March 2025 NSAI Independent Report has been produced to PRMS standards. The last independent resource report commissioned directly by Rockhopper was the ERCE 2016 Report which had an estimated 2C value of 517 mmbbls. Rockhopper has commissioned it’s own independent resource update to be published shortly