A flash blog today, I’m in the smoke at meetings.

Zephyr Energy

Zephyr has provided an update on the Company’s proposed farm-in to a minimum 75 per cent working interest in a 1,047-acre leasehold position in the Salt Wash Field, a previously producing asset with proven oil, gas and helium reserves located three miles to the south of Zephyr’s Paradox project in Utah, U.S.

As announced on 18 October 2023, the Salt Wash Field has a thin (15 feet) oil rim, above which is an inert gas cap (approximately 500 feet of gas column) which consists of approximately 72% nitrogen 22% hydrocarbon gases, and 1.4% to 1.7% helium content. The field historically produced 1.65 million barrels of oil and 11.7 billion cubic feet (“BCF”) of gas prior to its abandonment in 2014, at which time the oil rim was largely produced and the market for natural gas and helium was not supportive of continued development.

The decision to farm-in to the Salt Wash Field was undertaken to increase the Company’s oil and gas resource potential, and to achieve exposure to the U.S. industrial helium market (which has seen recent helium prices rising up to US$1,000 per million square cubic feet (“mscf”)).  The field has an already discovered, proven helium resource in the Leadville Formation, with further opportunity for upside through three deeper helium exploration targets which have been successfully proven in other nearby fields in the Paradox Basin. The Company’s board of directors (the “Board”) notes recent market interest in helium-related companies and believes that the economics for the Salt Wash project are attractive for the helium content alone, notwithstanding further upside from oil and gas development.

The Company’s management forecasts the Salt Wash project to include:

·    Net helium discovered resource potential of 0.07 to 0.19 BCF (Leadville Formation only)

·    Net helium un-risked, prospective resource of a further 0.04 to 0.66 BCF (including exploration targets)

·    An estimated net present value at a ten per cent discount rate (“NPV-10”) of circa US$58m with the risked upside case having an NPV-10 of circa US$120m (using $650/mscf and $750/mscf pricing, respectively)

As per the terms of the farm-in agreement, the Company confirms that the two initial payments of US$300,000 each (totaling US$600,0000) were made to the incumbent leaseholder  and that it is the Company’s intention that the dual-purpose Leadville Formation delineation well (the “Commitment Well”) will be drilled.  The Commitment Well would also test the three additional helium exploration targets and other potential hydrocarbon bearing reservoirs.

The Agreement includes a provision that the Commitment Well is to be spudded before 30 June 2024. The Board believes the Company can begin initial drilling operations to fulfil this timing obligation, and alternatives to extend the deadline may also exist. To date, the Company has received multiple informal proposals regarding potential funding for 100% of the drill at the asset level, and the Board is currently considering the best alternatives to maximise the value from this exciting opportunity for Zephyr’s Shareholders.

The Company will provide an update on the above matters in due course.

Colin Harrington, Zephyr’s CEO commented: 

“We are excited about the potential of the Salt Wash project and are appraising several funding options to maximise value for our Shareholders.

“While helium is a new addition to our resource exposure, many nearby Paradox Basin oil and gas operators are already producing co-mingled helium in commercial quantities, and there is an active local offtake market for produced helium. While Zephyr is not looking for helium to become our primary focus, we do believe that the Salt Wash project has significant and currently unrecognised potential value for our Shareholders and can further utilise our team’s significant experience in the Paradox Basin. We look forward to keeping the market updated on our progress.”

This could supply some decent upside for Zephyr, helium is a growing market in the USA and Zephyr may have plenty here. Subject to a potential  farm-out this may become a nice little earner for the company. More later…

Further Information

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Figure 1: Zephyr acreage in the Paradox Basin including the new Salt Wash Field


The Salt Wash Field was discovered in 1961 and consists of a four-way dipping anticline within the Leadville Formation. The field was subsequently shut-in having only been partially developed, as the oil rim was produced and the market for natural gas and helium was not supportive of further development at the time.

Salt Wash Field highlights include:

·    Demonstrable oil and gas potential in the Cane Creek reservoir (the same formation which underlies the WSU).

·    Secondary oil and gas potential within the Upper Leadville Formation.

·    Proven helium discovered resource with deep exploration prospective resource opportunities:

 Net helium discovered resource potential: 0.07 to 0.19 BCF (Company estimate*).

 Net helium un-risked, prospective resource of a further 0.04 to 0.66 BCF (Company estimate*).

 1.4% to 1.7% helium content.

·    Close proximity to Zephyr’s other Paradox acreage and surface infrastructure.

·    Historical production of 1.65 million barrels of oil and 11.7BCF of gas in total (8.26 BCF from the Lower Leadville reservoir) prior to being shut in.

The key terms of the farm-in are as follows:

·    Initial payment of US$600,000 (fully paid in FY 2023)

·    Zephyr to drill, log and case one vertical delineation well (the “Commitment well”), with spudding prior to 30 June 2024, to top basement rock (circa 11,000ft measured depth) to obtain a one hundred per cent share in the leasehold.

·    The incumbent leaseholder (the “seller”) will have the option to back-in to the leaseholding at a 25% working interest, with no historic cost exposure, once the delineation well is drilled and a field development plan has been proposed by Zephyr.  From that point forward, the seller would become a fully paying 25% working interest partner.

·    Zephyr has begun the work to integrate the well planning for the Commitment well within its wider Paradox project development. Should the Company not meet its condition to drill the Commitment well during H1 2024, it could lose its rights to the leaseholding.

The farm-in enables Zephyr to increase its footprint across its primary play, the Cane Creek reservoir, in a location close to existing operations. It also grants access to the increasingly active helium play that spans south-east Utah, northern Arizona and western Colorado, which can supply the growing U.S. industrial demand for helium. This industrial helium supply requirement has resulted in recent helium prices rising up to US$1,000/mscf. As such, this farm-in fits well with Zephyr’s strategy in the area, capitalises on the Company’s regional basin knowledge, and opens a series of possible future opportunities in a region becoming more active with drilling and merger and acquisitions activity.

Pharos Energy

Pharos has announced its preliminary results for the year ended 31 December 2023. A conference call for analysts will take place at 11.00 GMT today. 

Jann Brown, Chief Executive Officer, commented:

“Pharos delivered on several fronts in 2023, laying the groundwork for significant momentum going into 2024. The Group had drilling success both in Vietnam, with the CNV production well coming in strongly, and in Egypt, with two discoveries from exploration wells on NBS and El Fayum. On Block 125, parallel discussions with several potential farm-in partners are ongoing and we are actively working with another operator in the region to enhance our efforts in securing a suitable rig.

“We have managed the challenges of payment delays in Egypt, thanks in part to our carry, but also by careful cost control and capital discipline. We ended the year in a strong financial position with net debt down to $6.6m and cash balances of $32.6m, from revenues of $168.1m. We are also delighted that we have now received $10m from EGPC, as they resume payments to foreign oil companies on the back of the substantial support packages committed to Egypt, putting us into a net cash position today. A strong balance sheet provides us with the foundation to continue our track record of delivering shareholder returns, adding $8.4m through a combination of share buyback programmes ($2.8m of which was completed in 2023) and dividend payments in 2023.

“Today, the Board have recommended a final dividend for the 2023 financial year of 0.77 pence per share, subject to shareholders’ approval at the Company’s 2024 AGM. This would take the 2023 full year dividend to 1.10 pence per share, an increase of 10% on the prior year.

“Looking ahead, we are advancing plans to drill the potentially transformational Block 125 in Vietnam, and we look forward to updating shareholders on progress. In the meantime, we continue to execute on our strategy, including continuing on our recently published roadmap to net zero, of delivering value for all stakeholders in 2024 and beyond.”

This is a very good set of results, in line with guidance and delivering operationally and with plenty of upside to boot. Perhaps more interestingly is that the company today received $10m from the EGPC ‘against receivable balance following payment delays through 2023′ which is fantastic news and more importantly is 26% of the company’s receivables…

Readers may remember that recently I wrote an article about potential in Egypt, I reproduce it here as there is much to be excited about…


I thought I would make some brief comments about recent activity in Egypt as Pharos may benefit from the overall investments into the country as well as the expected greater stability in the currency.

Last month it was announced that the UAE Sovereign Wealth fund, ADQ, announced that it would invest some $35bn in Egypt by the end of April and of which I understand that some $10bn has already been received in-country. 

This has been followed this week by the signing by Egypt Prime Minister Mostafa Madbouly of an $8bn deal with the IMF and it is an expansion of the $3bn, 46 month facility signed in December 2022. I understand that the increased facility is designed to move to a more flexible exchange rate system, the rate divergence at present which leads to an ‘unsustainable’ black market has to be curtailed. On this basis it is hoped that the loan gets the currency trading more freely and the facility includes a 600 Basis Point interest rate hike which it is hoped will ‘stabilise the economy’.

So, exciting times for Egypt and for companies like Pharos who are committed to the country and its economy. For them the reports in the market that some of the monies may be used to settle outstanding debt to foreign investors in the petroleum sector is also a potential substantial benefit. And it is worth bearing in mind that Pharos has a dollar receivable holding of $37.3m as at 31 December…

So this is good news for Pharos in Egypt which is an important part of the portfolio and of course where stability in the economy and its currency counts a great deal. I’m not sure that the market has yet to appreciate this as the shares have yet to gain much from the news, but with Egypt looking better as well as favourable conditions in Vietnam I see considerable upside in Pharos shares.

2023 Operational Highlights

·      Group working interest 2023 production was 6,508 boepd net (2022: 7,166 boepd net), in line with 2023 guidance:

–       Vietnam 5,127 boepd (2022: 5,418 boepd)

–       Egypt 1,381 bopd (2022: 1,748 bopd)

·      In Vietnam:

–       Strong performance from first new CNV lateral well, put on production in 1Q 2023 

–       CNV Revised Field Development Plan (RFDP) submitted to partners for approval, with discussions ongoing

–       Continuing positive feedback received from PetroVietnam and the Ministry of Industry and Trade (MOIT) on five-year extension proposals to the TGT & CNV licences

–       On Blocks 125 & 126, two-year PSC extension granted to 8 November 2025

–       Competent Person’s Report (CPR) for Block 125 published in July 2023, confirming a range of gross unrisked prospective oil resources of between 1,178 MMstb (1U) and 29,785 MMstb (3U) with a Mean value of 13,328 MMstb

·      In Egypt:

–       Three new wells (2 producers and 1 injector) put on production and injection in 2023, in line with pre-drill expectations

–       On El Fayum, exploration success with the first commitment well in the Abu Roash G and Upper Bahariya formations in July 2023. The well is set up for re-entry and testing in 2024

–       On North Beni Suef (NBS), first exploration commitment well (NBS-SW1X) declared a commercial discovery and put on production in December 2023, opening up a new area for production and development

–       Approval received from EGPC in September 2023 for the grant of a 20-year development lease for NBS-SW1X

–       3D seismic survey acquired on time and on budget in 2H 2023


2023 Financial Highlights

·      Group revenue of $168.1m 1,2 (2022: $221.6m 1,2)

·      Cash generated from operations $88.8m (2022: $110.7m)

·      Operating cash flow $44.9m 3 (2022: $53.4m)

·      Cash operating costs of $15.70/bbl 4 (2022: $16.36/bbl 4)

·      Cash balances as at 31 December 2023 of $32.6m (2022: $45.3m)

·      Net debt as at 31 December 2023 of $6.6m 4,5 (2022: $28.9m 4,5)

·      Loss for the year of $48.8m (2022: profit $24.4m)

·      Net debt to EBITDAX of 0.06x 4 (2022: 0.23x 4)


2024 Outlook and Highlights

·      Group working interest production guidance of 5,200 – 6,500 boepd net:

–       Vietnam 3,900 – 5,000 boepd

–       Egypt 1,300 – 1,500 bopd

·      In Vietnam:

–       TGT RFDP approved by MOIT on 9 January 2024

–       Planning underway for a two-well TGT drilling programme, expected to commence 2H 2024

–       On Block 125, ongoing discussions with another operator to secure a well drilling slot during their multi-well drilling programme in the region

–       Parallel discussions with several potential farm-in partners for Block 125 in progress

·      In Egypt:

–       Continuation of modest and measured approach to capital allocation and drilling in El Fayum and NBS, with potential to ramp up activity this year and beyond in response to the improving economic environment

–       Focus for this year’s work programme in El Fayum is low-cost recompletions and waterflood

–       Processing and interpretation of c.130km2 of 3D seismic data on NBS is underway and expected to be completed in 2H 2024

–       Development drilling in the NBS SW field planned to start in 2H 2024

–       Ongoing engagement with EGPC regarding payment of receivables, and more favourable outlook following $57 billion support packages

–       Concession terms in Egypt being reviewed following award of 20-year development lease over NBS

·      Forecast Group cash capex in the year is expected to be $32m ($27.1m after Egyptian carry by IPR)

·      Egypt cash opex and capex expected to be substantially funded in EGP from historical receivables

·      Notification of $10m to be received today from EGPC in USD against receivable balance following payment delays through 2023

·      Continuation of share buyback programme, with a further $3m committed for 2024

·      Interim dividend in relation to the financial year ending 31 December 2023 of 0.33 pence per share, amounting to $1.7m, paid out on 24 January 2024. Final dividend of 0.77 pence per share for the year to be paid on 19 July 2024, subject to shareholder approval

·      Appointment of Dr Bill Higgs as a new independent Non-Executive Director

·      Jann Brown to retire and step down from the Board, effective 30 April 2024

·      Appointment of Shore Capital Stockbrokers Limited (Shore Capital) as the Company’s joint broker


1 Egyptian revenues are stated post government take including corporate taxes


2 Stated prior to realised hedging loss of $0.2m (2022: loss of $22.5m)


3 Operating cash flow = Net cash from operating activities, as set out in the Cash Flow Statement


4 See Non-IFRS measures on page 39


5 Includes RBL and National Bank of Egypt working capital drawdown