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9 December 2022

Zephyr Energy plc

(the "Company" or "Zephyr")

Award of Grant Funding

Additional $1m from U.S. Department of Energy

to further develop understanding of Cane Creek and overlying reservoirs

Zephyr Energy plc (AIM: ZPHR) (OTCQB: ZPHRF), the Rocky Mountain oil and gas company focused on responsible resource development and carbon-neutral operations, is pleased to announce the signing of an amended cooperation agreement detailing an additional US$1.0 million in non-dilutive research grant funding for the Company.  These funds will be utilised for data gathering purposes during the ongoing drilling of Zephyr's State 36-2 LNW-CC well (the "well") in the Paradox Basin, Utah, U.S. (the "Paradox project").

Zephyr initially received a total of US$2.1 million in U.S. government-backed research grant funding for operations at its State 16-2 well in 2020 and 2021 (as first announced by the Company on 2 September 2020).  Since then, Zephyr's technical team has worked closely with the research project team which is led by the University of Utah's Energy & Geoscience Institute ("EGI") in collaboration with the Utah Geological Survey (the "UGS") and other Utah-based partners. The project funding continues to be sponsored by the U.S. Department of Energy and its National Energy Technology Laboratory (the "DOE").

The objective of the additional funding is to acquire further geological data to assist in the understanding of the Cane Creek reservoir and of the additional reservoirs overlying the Cane Creek reservoir. 

The following is a summary of the main objectives related to the additional grant monies:

·    To fund a Distributed Acoustic Sensor (DAS) fibre in the lateral portion of the well in order to evaluate the stimulation and any post-stimulation fluid production. This will assist Zephyr and the EGI with understanding frac geometry and will latterly measure inflow rates along the horizontal part of the well.

·  To deploy QuadCombo and lithoscanning logging tools, to further evaluate the shallow Paradox Formation, and the C9 clastic zone in particular.

·    To obtain additional cuttings for use in fracture analysis.

Zephyr will acquire the data during the ongoing drilling operations on the well and will have full access to the results of the research project, which are expected to provide significant insight into both the Cane Creek and overlying reservoirs.

The Board hopes the results will materially assist Zephyr in its efforts to maximise the chance of success and optimise efficiencies with future well planning and drilling operations, especially in relation to planned exploration drilling in the overlying Paradox Formation exploration zones and the C9 reservoir zone in particular.

Colin Harrington, Zephyr's Chief Executive, said: "I am delighted to announce the award of this incremental research funding, the results of which are expected to further enhance our technical understanding of the Cane Creek and overlying reservoirs. The expected output from this analysis will assist with future well planning and drilling operations, particularly in relation to the C9 overlying reservoir, as we look to unlock further value from our Paradox project.

I would like to thank the DOE, the EGI and the UGS for their continued focus and investment in the Paradox, and we are excited to be further aligned with their respective organisations.

We look forward to keeping our stakeholders updated with the results from this research and from our ongoing drilling and production test operations."

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 45,000-acre leaseholding located in the Paradox Basin, Utah, 25,000 acres of which has been assessed by third party consultants Sproule International to hold, net to Zephyr, 2P reserves of 2.1 million barrels of oil equivalent ("mmboe"), 2C resources of 27 mmboe and 2U resources 203 mmboe. Following the successful initial production testing of the recently drilled and completed State 16-2LN-CC well, Zephyr has planned a three well drilling program - commencing in 2022 with the State 36-2 LNW-CC well - to further delineate the scale and value of the project.

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. 

The Williston portfolio currently consists of working-interests in over 200 modern horizontal wells which are expected to provide US$40-45 million of revenue, net to Zephyr, in 2022.  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.