WTI (Dec) $59.44 -$1.30, Brent (Jan) $63.51 -$1.38, Diff -$4.07 -8c
USNG (Dec) $4.55 +18c, UKNG (Dec) 81.58p -0.77p, TTF (Dec) €31.06 +€0.035

Oil price

When I wrote yesterday’s blog in the early afternoon the oil price was on the skids, but it wasn’t the API stats that did it as I suggested but the seeping into the market that the US was conducting secret negotiations with Russia behind Ukraine’s back. This would upset the oil market who thought that Trump was back in Putin’s pocket…

The market actually turned upwards when the EIA stats came out, after the big build from the API the 3.42m b’s of draw was much better than the market expected, so the oil price rallied from down over two dollars down and ended down just $1.30. 

Last night the much awaited Nvidia results easily beat the whisper and settled the market, today the NFP for September showed a rise of 119,000 against the whisper of 50,000 thus also better for the market, a rate fall in December may yet happen…

Zephyr Energy

Zephyr has provided an update on the ongoing development of its project in the Paradox Basin, Utah, U.S. In addition, the Company announces the successful refinancing of the Company’s existing borrowing base at a lowered blended cost of capital, and the securing of additional short-term loan financing to fund the Company’s incremental near-term expansion and development plans. 

Paradox Project Update

Following the recent completion of the Competent Person’s Report (“CPR”), which detailed a significant upgrade in Company reserves and resources, Zephyr’s key operational focus has been on tying-in the three previously drilled Paradox project wells to nearby pipeline infrastructure, in order to deliver future hydrocarbon production.  The three wells are the State 36-2 LNW-CC-R well, the State 16-2LN-CC well and the Federal 28-11 well.   

Engineering work and commercial documentation with Enbridge (the operator of the adjacent 16-inch natural gas pipeline) is progressing, along with a workstream for securing the necessary regulatory approvals for Zephyr’s proposed natural gas transportation service.  The Company is also in the latter stages of selecting a marketing partner for its natural gas and associated hydrocarbon volumes.  Given the increasing demand for natural gas in the western U.S. markets, Zephyr has seen growing levels of interest for natural gas volumes located in the Paradox Basin region. The Company will provide an updated timeline on the steps to first gas production once documentation is complete.

In conjunction with its stated goal to expand the asset base of the Paradox project both vertically (via overlying reservoirs) and horizontally (via additional acreage acquisitions), Zephyr is also pleased to announce that it has nominated approximately 38,000 net contiguous acres for inclusion in future federal lease sales by the U.S. Bureau of Land Management. Management believes that the Company’s current acreage and existing pipeline and associated infrastructure footprint will provide a strong competitive advantage in the upcoming auction process. 

In addition to its operational focus, the Company continues to run a structured process aimed at securing potential farm-in/joint-venture partners to accelerate drilling and the delivery of value from the Paradox project.  The Company will provide further updates on this process in due course.

Debt Refinancing

The Company’s senior lender, North-Dakota based First International Bank & Trust (“FIBT”), has recently completed its semi-annual redetermination of the Company’s borrowing base, reaffirming the level of Zephyr’s existing borrowing facilities with the bank.

Zephyr’s total current borrowings with FIBT are approximately US$22.1 million (versus US$35.3 million in January 2024 and US$27.4 million in October 2024).

On 26 August 2025, Zephyr announced the completion of an acquisition of working interests in accretive proved developed producing (“PDP”) assets in core Rocky Mountain Basins, U.S. (the “Acquisition”), following which FIBT began its valuation analysis of the Company’s non-operated asset portfolio, incorporating the producing assets acquired. Since the completion of the Acquisition, value generated from the assets acquired has outperformed management’s expectations.

FIBT’s policy is to lend up to 50% of its independent PV-10 valuation of Zephyr’s PDP assets all of which reside in the Company’s non-operated asset portfolio.  It is important to point out the Company’s PDP assets do not include any of the Paradox project reserves, which, as noted above, were significantly upgraded in the recently completed CPR. 

FIBT’s recent work valued the PV-10 of Zephyr’s non-Paradox PDP assets in excess of US$46 million, therefore reaffirming the Company’s existing borrowing base of US$22.1 million.  In addition to the non-operated PDP assets, the Company holds significant non-operated proved undeveloped (“PUD”) reserves which are currently being assessed in an updated internal valuation, the results of which will be released when available.

As part of the redetermination process, Zephyr elected to combine its two outstanding FIBT term loans into a single term loan with a lower average interest rate.  In addition, the Company elected to roll US$4 million of its existing FIBT revolving credit facility (“RCF”) into the new term loan (also at a lower interest rate). The revised term loan of circa US$11 million will be amortised over a 48-month period.

Following the redetermination, the Group borrowings with FIBT are US$22.1 million, and consist of:

• US$11.1 million of amortising term loan (at 8.99% interest per annum); and 
• US$11.0 million of debt drawn on the RCF (at 10% interest per annum). 

Additional funding

In tandem with the successful FIBT refinancing, Zephyr also announces that it has secured US$2 million in additional loan financing (“additional funding”) from a strategic industry lender (the “lender”). The key terms of the additional funding are set out below.

The additional funding will be used to finance incremental near-term expenditures across Zephyr’s portfolio, including federal bonding increases recently imposed by the U.S. Government and for potential further leasehold acquisitions.

As outlined above, Zephyr has nominated a significant amount of contiguous acreage with the U.S. Bureau of Land Management for inclusion in future federal lease sales.  While there can be no guarantee that Zephyr will be successful in acquiring any additional acreage, the capacity to move quickly and be fully funded for potential acquisitions is integral to success in the auction process. 

Colin Harrington, Chief Executive of Zephyr, said: 
“We continue to be fully focused on delivering first production from our Paradox project, and the exciting conclusions from the recent CPR, matched with strong well test results and excellent proximity to buoyant U.S. gas markets, have helped to raise the overall profile of the project significantly.  We are working diligently with our partners to execute the operational and regulatory tasks needed to tie in our three wells that are currently capable of production, and we are vigorously pursuing our ongoing project partnership discussions.

“I am happy to report the outcome of our refinancing, which reaffirms the substantial current value of our non-operated portfolio and reduces our overall cost of debt. The cash flow generated from our non-operated assets continues to provide a stable platform for our Company.

 “Securing additional funding for Paradox growth, which enhances our operational flexibility as we look to expand our Paradox project footprint with as little dilution as possible to our shareholders, is another positive step.

” We look forward to providing further updates as we move towards the pivotal moment of first production from the Paradox project.”

Yet more good news from Zephyr, following hard on the heels of an excellent CPR which gave a huge increase in 2P reserves and a contingent resources revaluation, it comes as no surprise that the RBL refinancing has turned out so well. It should also be noted that the refinancing has been done only on the non-operated portfolio which proves what a wise decision it was to invest in parallel to the Paradox and which provides ‘a stable platform for the company’.

The semi-annual refinancing has lowered borrowing rates, tick, and means that costs fall as does net debt, in addition the company has a new commitment from a strategic investor for another potential $2m. 

This additional sum is worth explaining, some investors worry about such things but there is very good reason. The company has announced that it has nominated significant contiguous acreage for federal auction and sometimes these chances come up very quickly, indeed I imagine that one is imminent. 

So, Zephyr has prepared a war chest for such additional acreage and increased federal bond fees.  I’m told that they need to be able to act quickly as there is no margin for error on BLM auctions and there’s increasing interest in the area thanks to the results of the well test and CPR. This in itself should satisfy the market in that it is gratifying to know that Zephyr is now capable of accessing cheaper capital against assets other than the non-operated portfolio. And it is worth knowing that there is a significant value cushion in the non-operated PDP and PUD portfolio even at current prices. 

To the Paradox itself, all is going well, the tie-in of the three wells currently capable of production to the pipeline is ongoing and with partners they are sorting the operational and regulatory tasks needed to proceed. 

In addition the company is pursuing project partnership discussions with a data room open and busy, I understand. Also the company states that they are ‘in the latter stages of selecting a marketing partner for its natural gas and associated hydrocarbon volumes’. So, two separate tracks but with optionality should they converge as one financing/partnership solution. 

Zephyr shares are up a little today but they remain massively below the level that would be dictated by the size of the asset.  At the moment, the company appears to be trading on its non-operated value alone, without even looking at the Paradox Basin. This announcement confirms the strength of the assets.

I have not changed my TP at all, I still have 100% commitment to Zephyr and in particular its exceptional management and of course the huge potential at the Paradox, accordingly I’m sticking with 20p and think that recent announcements only serve to confirm my views. It’s been a long haul but this prize is worth the patience that holders have exhibited. 

An interview with Chief Executive Colin Harrington, providing further commentary on today’s update, is available to view here: https://youtu.be/4oTZT7oGOtU?si=xBVNTbLUOx06iy2P

Europa Oil & Gas

Europa has announced that the Oil and Gas Authority (now officially referred to as the North Sea Transition Authority) has granted a 5-year extension to the DL003 licence which holds the Company’s West Firsby asset, as such the licence will now expire on 31 December 2030.

This is good long-term news for EOG, whilst West Firsby produces 40 b/d it has potential to be ‘a good candidate for testing geothermal solutions’ so the extension might be quite appropriate. 

Original article   l   KeyFacts Energy Industry Directory: Malcy's Blog