WTI (Nov)* $83.94 -$1.42, Brent (Nov) $90.62 -$1.38, Diff -$6.68 +41c.

USNG (Oct) $7.72 -3c, UKNG (Oct) 330.0p +60.0p, TTF €204.0 +€26.64.

*WTI October expiry

Oil price

Oil drifted yesterday ahead of the Fed news expected today at 7pm UK time. Today however it has rallied by nearly three bucks as President Putin makes a bold statement about Ukraine etc. More on oil tomorrow.

Zephyr Energy

Zephyr has announced its unaudited interim results for the six months ended 30 June 2022.


The first six months of the 2022 financial year, and the period since, were a time of intense activity during which Zephyr continued to make substantial progress in the development of its flagship operated project in the Paradox Basin, Utah, U.S. while growing its highly attractive portfolio of cash-generating non-operated assets in the Williston Basin.


  • Revenues for H1 2022 were US$25.9 million, driven almost entirely by the Group’s hydrocarbon production from the Williston assets
  • Adjusted earnings before interest, tax, depreciation, depletion and amortisation, unrealised foreign exchange gains and unrealised losses on hedging contracts (together “Adjusted EBITDA”) for the six months was US$19 million and net profit after tax for the period was US$17.4 million
  • The Group’s gross borrowings at 30 June 2022 were US$28.6 million and net borrowings  were US$18 million. During H1 2022 the Group met all its financing obligations in respect of its outstanding borrowings
  • In April 2022, in order to lock in cashflow to develop the Paradox project and meet the Group’s financing commitments, the Group hedged just under half of its forecast 2022 production at more than US$98 per barrel of oil. In total the hedging programme related to 328,000 barrels of oil production from the Williston assets over the next two years. At 14 September 2022, the Group had an unrealised gain on its outstanding hedges of US$1.5 million
  • At 3 September 2022, the Group had cash and cash equivalents of US$12.8 million and gross borrowings of US$24.7 million.
  • During H1 2022 capital expenditure across the Williston assets and the Paradox project totalled US$9.6 million.

Paradox project (operated asset)

  • A Competent Persons Report, compiled by Sproule International, highlighted the scale and resource potential of the Paradox project:
    • Net 2P Reserves: Proved Reserves of 2.1 million barrels of oil equivalent net to Zephyr, the Group’s first proved reserves booked in the Paradox Basin
    • Net 2C Resources: 27 million boe net to Zephyr, more than double the 12.3 million boe in the previous CPR prepared in 2018
    • Net Prospective Resources from overlying reservoirs: 203 million net unrisked boe net to Zephyr (68 million boe risked with a weighted-average 33% chance of success)
    • Sproule’s evaluation took place across 30,700 acres of Zephyr’s Utah assets. Inclusive of Zephyr’s recently announced acquisition, Zephyr will operate 45,000 gross acres in the Paradox Basin and further evaluation is planned for acreage not yet included in the CPR
  • Preparations continue for extended production testing of the State 16-2 LN-CC well, designed to show flow potential and shape decision making for the longer-term development strategy of the asset
    • Long lead items ordered and all relevant applications filed
  • Liquid volumes from the initial State 16-2 LN-CC production test were successfully marketed and sold to refineries in Salt Lake City, Utah
  • A fully funded, high impact, three-well drilling programme is expected to commence later this year, and is designed to further delineate the full potential of the Paradox project:
    • The State 36-2 LNW-CC lateral well is set to be the first well in the upcoming drilling programme, and targets the Cane Creek reservoir in the southern portion of the Group’s operated White Sands Unit
    • All State permits for the State 36-2 LNW-CC have now been received and the Federal permit is currently being processed, which, when issued, will allow for the signing of a rig contract and subsequent commencement of drilling operations
    • Recently acquired contiguous acreage allows for the State 36-2 LNW-CC to be fully completed across a 10,000-foot lateral length
  • Additionally, Zephyr has entered into a binding agreement to acquire a separate package of oil and gas assets located on and around the Paradox project. Assets being acquired include 21 miles of natural gas gathering lines, the Powerline Road gas processing plant (not currently in operation), rights of way for additional gathering lines, active permits, five existing wellbores and additional acreage partly contiguous to the WSU. The assets being acquired will allow Zephyr to substantially reduce the capital required to build the necessary gas export infrastructure for its forecast gas production from the Paradox project. In addition, one of the acquired lines passes immediately alongside the site of the planned State 36-2 well (the first in a series of Paradox wells to be drilled in the upcoming drilling programme).
    • Once the acquisition is completed, Zephyr will operate 45,000 gross acres in the Paradox Basin, the majority in which the Group holds a 75% or greater working interest

Williston assets (non-operated assets)

  • Zephyr continues to deliver on its strategy to acquire working interest positions in value accretive, high-quality, high-margin production assets with significant near-term growth potential in the Williston Basin
  • H1 2022 revenues from the portfolio totalled US$25.8 million, net to Zephyr, up from US$0.9 million in the six months ended 30 June 2021
  • H1 2022 sales volumes averaged 1,729 barrels of oil equivalent per day
  • H1 2022 gross profit was US$21.8 million (after taxes, lease operating expenses, and gathering and marketing fees and excluding DD&A) demonstrating the high margins realised from the produced barrels
  • At the end of H1 2022, 195 wells in Zephyr’s portfolio were available for production
    • An estimated 30 additional wells in which Zephyr will have working interests are forecast to be brought on production by the end of 2022, which will help to decrease standard portfolio decline rates
  • Net working interests across the Williston Basin non-operated portfolio now average 7.1%, equivalent to approximately 15 gross wells
  • Zephyr reiterates its previously released 2022 production and revenue guidance of an expected US$35-40 million in non-operated revenue, net to Zephyr, for FY 2022 based on a forecast production range of 500,000 to 550,000 boe for the year


  • In February 2022, the Company raised US$17.4 million (before expenses) through the placing of new Ordinary Shares in the Company, and secured US$28 million of senior bank debt. The net proceeds from these debt and equity instruments were used to complete the Group’s US$36 million acquisition of non-operated assets in the Williston Basin and to fund further drilling activity across the portfolio
  • Zephyr remains carbon neutral on a Scope 1 basis across its operations, through the purchase of Verified Emission Reduction credits
  • Panmure Gordon was appointed as Joint Broker to the Company in August 2022

Colin Harrington, Chief Executive of Zephyr, said:

“The first half of 2022 and the period since have been another transformational time for the Company. We continued to make significant in-roads across both our Williston assets and the Paradox project, serving to grow the Group and deliver on our self-sustaining strategy of using our non-operated, cash generative portfolio to enable development of the Paradox and, by extension, to open up the next prolific onshore U.S. oil and gas play.

“The rest of this year promises to be an equally important time for our Shareholders as we commence the extended production test on our State 16-2LN-CC well and kick off the proposed three well drill programme on the Paradox project. In addition, we plan to complete and fully integrate the acquisition of the infrastructure asset package in order to substantially reduce the forecast expenditure needed to bring our Paradox gas production to market. A successful drilling programme will see the Group further define the project and materially increase its reserve base in the Paradox, and is expected to deliver significant cashflows once nearby infrastructure improvements are completed.

“This year started with our major acquisition in the Williston Basin, which we expect will enable Zephyr to generate revenues of between US$35-40 million over the course of 2022, with sufficient cash flow generated to fuel all envisioned upcoming development activity.

“I would like to thank our Shareholders and advisers for their ongoing support. We are excited about the multiple near-term catalysts in our investment case as we commence an active period with the drill bit, and we look forward to keeping the market updated on our progress.

“Our forthcoming activity will be carried out consistent with our core values of being responsible stewards of investors’ capital and responsible stewards of the environment.”

Again like others, these interims are only historic figures of course as are the confirmation of announcements made since the period end date. However they do show how much of a game-changing position Zephyr has assumed in only a year. 

 Revenue of $25.9m vs $0.9m and net profits of $17.4m against a loss of $1m in last year’s Q1 numbers show what a difference a year makes. Indeed my contention that it is the management of this company that stands out as it was able to deliver the Zephyr that you see today. 

The Paradox Basin project was an inspired selection, it has brought to the company a genuinely material asset that I think will in due course become a very substantial one, something that will provide hydrocarbons in great quantities for years to come. 

CEO Colin Harrington here confirms what we knew already, that the extended production test on the State 16-2LN-CC well will start before long as will the three well programme on the project which will galvanise the situation dramatically.

The most recent acquisition, which followed the Williston assets purchases, which were done to ensure financial stability and in order to fund the independence of the Paradox, will now be assimilated and integrated so that the infrastructure is ready and waiting to bring the gas to market. 

So, my point about the material change that has occured at Zephyr and in such a short space of time reflects just that, a potentially world class development could be just around the corner. If the drilling programme is successful, cashflows arrive and of course potentially substantial increases in reserves are booked, this year will be seen to have been to have been one of significance and the share price will respond accordingly. 

Prospex Energy

Prospex has noted an announcement made by Po Valley Energy Limited released on the ASX on Monday 19 September 2022 and provides an update on the Podere Gallina Licence located in the Po Valley onshore in northern Italy, in which lies the Selva gas field within the Selva Malvezzi Production Concession.  The Company holds a 37% working interest in the Podere Maiar licence with the Operator holding the remaining 63%.


·    Po Valley has approved all payments to secure ownership of the land for its Podere Maiar well site in Italy’s Selva gas field

·    Italy’s Institute of Services for the Agricultural Food Market (‘ISMEA’) has accepted Po Valley’s application to obtain the well site land ownership

·    All materials relating to the 1 km gas pipeline have arrived on site including the steel pipe

·    Expenditure relating to land titles and pipeline remain within budget

·    Podere Maiar is on track for first gas in early Q2 of 2023

Po Valley announced Monday that it is on track for first gas from the Podere Maiar-1 well in Italy’s Selva gas field after ISMEA accepted the Company’s application to land titles for the well site.

Po Valley received an official letter from the General Director of Italy’s ISMEA accepting its application for the land as well as services for the gas pipeline and associated cables.  Payment to secure the land rights is on budget and is being processed immediately (19 September 2022).  Once ISMEA confirms the title, Po Valley will have complete access and control over the land required to construct its gas treatment plant and pipeline at the Podere Maiar-1 well site.

In addition, the 4-inch steel pipe has arrived on site and is being stored in readiness for construction of the 1 km gas pipeline that connects the Podere Maiar-1 well to the National Gas Grid.

Po Valley continues to progress its application to the National Mining Office for Hydrocarbons and Georesources (‘UNMIG’) and to the Fire Department for approval for its operations and plans to request UNMIG approval to commence preliminary works on the well site.

Mark Routh, Prospex’s CEO, commented:

“We are extremely pleased that Po Valley has secured the land ownership at the Podere Maiair-1 well site location and has purchased the land from several different owners under which the 1 km 4-inch gas export pipeline will be installed to connect the well to the National Gas Grid.  Procurement of the steel pipe and related equipment for the tie-in work is complete and all materials are now stored at the well site.

“Pleasingly, Po Valley was able to acquire the land and procure the materials at or below our original cost estimates, ensuring that we’re on schedule and on budget to achieve first gas in the early part of the second quarter of 2023.  This will secure enhanced cash-flows from the sale of gas into a high demand market.  This is clearly very good news for shareholders.”

This is indeed very good news for shareholders and whilst I remain concerned that any process with bureaucratic connotations usually means delays, I think that the  process should give more income from high Italian gas prices.

SDX Energy

SDX has announced that Michael Doyle has informed the Board of his intention to step down as Chairman and leave the Board with immediate effect. Tim Linacre, currently an independent non-executive director has been appointed Interim Chairman effective immediately. Michael will continue to act as a consultant to the Company until 31st January 2023.

The Board is also pleased to announce the appointment of Krzysztof Zielicki as a Non-Executive Director with immediate effect. Krzysztof has over four decades of experience in the oil and gas industry. He has held senior leadership positions in several Energy Majors, including BP, TNK/BP and Rosneft, where he was Vice President for M&A and Strategy.  

A process is underway to appoint a permanent Chairman and an additional  Non-Executive Director to further strengthen the Company’s Board and Governance framework. As part of the review process, the Company will be making several strategic appointments in order to implement its new vision focused on disciplined growth, profitability and cash flow generation through organic and inorganic opportunities, with the support of its new major shareholder Aleph Commodities Limited.

Over the coming weeks the Company will share its strategy and implementation plans to grow production and deliver returns to its shareholders.

Michael Doyle said:

“With a new, long-term, supportive major shareholder now in place the time is right for me to step away from the Board. I wish SDX every success going forward.”

Tim Linacre interim-Chairman of SDX said:

“On behalf of the entire Board I would like to thank Michael for his long years of service and commitment to SDX. He has been unstinting in his efforts and determination to move SDX forward and we have all greatly benefited from his wise counsel over the years of his Chairmanship. I am delighted he has agreed to remain as a consultant to the Company for the next four months to assist with Board transition matters.

I welcome Krzysztof to the Board, he brings a wealth of technical and industry experience and knowledge which will be of great support to SDX as we embark on the next stage of growth.”

Mark Reid, CEO of SDX said:

“I would like to add my personal thanks to Michael for his support and guidance to me and the executive team.

We are now looking to the future, and I am delighted Krzysztof is joining the Board.  We are already working with Aleph on organic and inorganic growth initiatives, and I look forward to updating shareholders on the new vision for SDX and the implementation of our strategy in the coming weeks.”

I don’t normally comment on board changes but this is interesting, for the second time in a week a senior Director of a listed company has left ‘with immediate effect’. People ask why it should raise a flag and comment that it’s never good to read and they are usually right. 

In this case I’m sure that Mr Doyle thinks that it is the right time to go but why without any notice and he is remaining a consultant to the company for 5 months? It means that a NED takes over while the process to replace him is underway but he’s here until January and they are going to hire another NED as well as several ‘strategic replacements. 

It is clear that Aleph Commodities have now started the process of making SDX into what it wants and the ‘implementation of strategy’ mentioned more than once is clearly about to change things dramatically. I would bet a dollar to a wet doughnut that this is not the first C suite executive to walk the plank and where will SDX go to from here, only Aleph know that’s for sure…

And finally…

Yesterday England beat Pakistan in the first of 7 T20 internationals and with Hales on return showing much promise and Luke Wood bowling well on debut there will be some battle for places.

In football it is the ridiculous Nations Cup this week and next, what a bore.