Zephyr swings to H1 profit on higher output, but cash falls to US$2.0m

Summary

Zephyr Energy's interim results today showed revenue up to US$10.8 million for the six months to 30 June 2026, from US$6.3 million, with a net profit of US$1.9 million against a US$13 million loss a year earlier. Output from its non-operated wells beat management's forecasts. The profit was helped by one-off gains, while operating cash flow was negative and cash fell to US$2.0 million against gross borrowings of US$22.7 million. At its Utah Paradox gas project, Zephyr has roughly doubled its acreage and passed a key pipeline inspection. It cannot give a timetable for the pipeline owner's regulatory approval, and its proposed US$15 million pre-production financing from Atlas Oil is still under negotiation.

Key figures

The announcement

• H1 2026 revenue was US$10.8 million (H1 2025: US$6.3 million) and net profit after tax was US$1.9 million, or 0.09 cents per share (H1 2025: loss of US$13 million). The profit included a US$1,995k gain on disposals, a US$1,000k bad-debt recovery and US$1,152k of foreign exchange gains, partly offset by a US$946k loss from a cyber incident.
• Non-operated production averaged 921 boepd (barrels of oil equivalent per day), up from 693 boepd, and ran ahead of management's forecasts. Gross profit, on the company's measure excluding depreciation, doubled to US$6.6 million.
• Operating activities used US$1,359k of cash, against US$2,173k generated in H1 2025. Cash was US$2.0 million at 30 June 2026 and gross borrowings were US$22.7 million, of which US$15,648k was due within a year. In August 2026 the senior lender, FIBT, valued the non-operated production base at US$43 million and reaffirmed the borrowing facilities.
• At the Paradox project, Enbridge's pipeline inspection confirmed the line is structurally sound, which allowed the regulatory approval process to start. Zephyr is not party to the filings and cannot give a timeline. The Board has funded engineering from existing cash to raise initial gas processing capacity to up to 15 mmscf/d, up from a base case of 5 mmscf/d.
• Zephyr added about 27,000 net acres, taking its operated Paradox position to about 70,000 gross acres. It says negotiations continue on the non-binding letter of intent for up to US$15 million of non-dilutive pre-production financing from Atlas Oil, and that a farm-out process to bring in a development partner is under way.
• Divestments of non-core acreage acquired in 2025 have generated total asset sales of circa US$7.0 million. The company says that deal has delivered about US$11 million of value to date, against its US$7.3 million cost.

Against guidance

Non-operated production exceeded management's forecasts. The Atlas Oil letter of intent announced on 27 July 2026 said a binding agreement was expected in the third or early fourth quarter of 2026. Today's report says only that negotiations are continuing, with updates in due course. The report gives no timetable for Enbridge's regulatory approval or for first commercial gas, which the company says remains its priority 'as soon as possible'. The FIBT revolving credit facility is due on 16 December 2026, and the company expects it to be extended for a year, in line with the bank's past practice.

What to watch

• Whether the Atlas Commodity Purchase Agreement becomes binding at or near US$15 million, and on what terms (for example, whether warrants are attached).
• Extension of the FIBT revolving credit facility beyond its 16 December 2026 maturity, and any sign of an equity placing.
• Progress on Enbridge's regulatory approval, the farm-out process and a timetable for first commercial gas from Paradox.
• The share price relative to the 2.81p support and 3.22p resistance levels identified in the committee's technical review.