Zephyr Energy Plc (LON:ZPHR) has raised £10mln of new equity and struck a deal to acquire a package of producing wells in the Bakken Formation, in North Dakota, USA.
Some US$3.5mln of proceeds will, meanwhile, fund the drilling of the proposed State 16-2 CC LN lateral appraisal well, designed to establish production in the Paradox basin portfolio, in Utah.
The company is issuing 500mln new shares to new and existing institutional investors, family offices, Zephyr board members and other investors.
New shares are priced at 2p each, marking only a 2.5% discount to Friday’s closing share price on Friday.
Zephyr highlighted that the funding and acquisition will transform the company into a self-sustaining platform for organic growth, with a diverse portfolio of production assets in two established basins.
“Today’s developments mark a truly ground-breaking moment for the company,” said Colin Harrington, chief executive.
“Following the completion of this ambitious fundraise, Zephyr is poised to transform itself into a well-capitalised, self-sustaining platform with a financial flexibility that will enable the company to pursue – on an independent basis – the significant upside potential which exists in our Paradox project.”
Harrington added: “The key benefit of our proposed Bakken project acquisition is its potential to generate substantial cashflows which can be reinvested into our Paradox project.
“This, combined with the funding secured to drill the company’s first production target in the Paradox later this year, means we have taken a massive step towards unlocking the substantial potential value from the Paradox project on a timeline and in a manner that is now within our control.”
The Zephyr chief described the Bakken assets as “a perfect addition” and an “ideal complement” to the Paradox base.
He highlighted that the company had negotiated the acquisition on highly favourable economic terms.
The asset package comprises non-operated interests in five wells – a producer and four presently uncompleted wells – operated by Whiting Petroleum. The producer has been online since March 2020 and the four remaining wells are slated to be completed in May with production revenues anticipated by August.
The assets are described as ‘low-risk’ with substantial near-term cash flow expected.
Zephyr had previously agreed the headline terms of the deal at a time when crude oil prices were marked at around US$45 per barrel.
“The next few months will see a flurry of corporate and operational activity – including the completion of the acquisition, first Bakken oil production and revenues for the company, the Bakken well completions, the drilling of the State 16-2 lateral well targeting our first production in the Paradox and the release of additional analysis of the overlying reservoir zone in the Paradox,” Harrington said.
“The team has shown fantastic energy and resilience to get the company to this position, and we look forward to continuing delivering on these key objectives for our shareholders.”