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Zephyr Energy: carbon neutral exploration for oil and gas in Utah


This week, we sit down with Colin Harrington, CEO of Zephyr Energy (LON: ZPHR). Zephyr Energy is a responsible developer of economically-attractive oil and gas interests in the Rocky Mountains region of the US.

The oil and gas industry has attracted a lot of attention in recent weeks, with the ongoing conflict in Eastern Europe driving crude oil prices up to unprecedented levels. Given the current climate, this episode will certainly pique the interests of many of our retail and institutional investors.

On the Podcast

Zephyr Energy is commonly known for its unique status as one of the very few carbon-neutral oil and gas companies in the world. On the surface, it would seem rather unusual for a company operating within the oil and gas industry to be considered as carbon neutral. However, as Harrington interestingly explains, Zephyr Energy’s carbon neutrality is achieved by offsetting 100% of its Scope 1 operated carbon emissions through the purchase of verified emission reduction credits. These credits are principally generated by renewable energy projects which counteract the harmful effects of pursuing carbon-intensive ventures.

Last week, Zephyr Energy unveiled the results of a new independent review of its Paradox project in Utah, which covers over 37,000 acres of federal and state land. A Competent Person’s Report (CPR) conducted by consultant Sproule has detailed around 200 million barrels of oil equivalent, in addition to its 2P and 2C reserves. Harrington explains that Zephyr Energy’s success in its first Paradox project well played a pivotal role in these impressive estimates, with the company looking to use their cash flow to further accelerate organic growth in the near future.

The CPR also estimated 27 million barrels of contingent resources, up from 12.3 million barrels in 2018, across the Cane Creek reservoir. Zephyr Energy continues to passively look for highly accretive assets with strong production history or near-term cash flows that have a strong weighting towards oil.

The USA’s perceived inability to address higher oil prices has been a hot topic amongst financial investors in recent weeks, as failure to effectively tackle the issue could result in a rapid expansion of the oil industry to meet the excess demand we are currently seeing.

Harrington sees significant limits to US oil production upscaling in the near future., with limits on services and supplies and logistical hurdles through labour shortages largely preventing mass industry expansion. As such, the Zephyr Energy CEO is bullish on oil prices and believes the existence of supply constraints will keep oil prices high in the short-term.

Looking forward, Harrington highlighted several upcoming developments and projects which investors can look forward to. In addition to drilling three wells in its Paradox Basin, Zephyr Energy is also looking to continue to grow its production and cash flow generation from non-operated assets in the Williston Basin. Furthermore, the business is examining opportunities to co-locate ventures in other wells, which could involve a crypto-mining venture or another form of monetisation, which would allow it to sell gas onsite and for potentially even greater revenues.

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This article does not constitute investment advice. Make sure you do your own research or consult a professional advisor.

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