CEO Letter June 2024

Dear Friends and Supporters of Zefiro,

As Zefiro enters its third calendar month on the public markets, we are embarking on a new and exciting chapter. Our growth as an environmental services company in the United States is a testament to the vision I had from the beginning, which is now becoming a reality.

Leveraging the emerging global carbon markets, Zefiro is creating a scalable and sustainable solution to tackle the U.S. methane emissions crisis. Currently, we are proud to be the only “fully integrated” player in the country—a position we are committed to strengthening through partnerships with stakeholders in both the private and public sectors. These stakeholders include government agencies, land owners, commodities trading houses, and innovators of leading-edge technologies which enhance Zefiro’s capabilities.

For those unfamiliar with the company’s backstory, allow me to provide some context on how the concept of Zefiro came to be…

In 2008, while working in Manhattan, I was involved in setting up J.P. Morgan’s carbon trading desk alongside Catherine Flax who now sits on Zefiro’s Board of Directors and Tina Reine, who now serves as Zefiro’s Chief Commercial Officer and is one of the world’s top carbon traders by volume.

Together, we pioneered one of the banking industry’s first major channels for corporations and institutions to reduce their environmental footprints through the innovative approach of “offsetting.” For every ton of carbon emissions an entity was responsible for, they could purchase a credit representing the removal or elimination of the same amount of carbon through reforestation, carbon capture, or other similar methods.

At that time, this approach was not as favored as it is today. I believe this was partly because the environmental situation was not viewed as dire and partly because it was not yet possible to originate carbon credits on a meaningful scale from environmental remediation projects that resonated with an American audience. Although there were numerous projects creatively addressing greenhouse gas emissions, they were typically situated outside of the Americas. Given that a significant percentage of the world’s emissions occur here in the Americas, it made sense to focus our efforts locally.

This became my thesis for Zefiro, which led to the company being founded. As the United States began to emerge from the COVID-19 pandemic, other unaddressed and neglected matters affecting quality of life for Americans and their families started to surface. Among these was the orphan methane crisis. Although it had long been known that many oil and gas wells existed across the United States with no known owner (bringing them into the “orphaned” or “abandoned” classifications), it was not until recently that the sheer scale of the problem has been clear; there are literally millions of these sites, and with new detection capabilities it is evident they represent a potent source of toxic methane emissions. 

Why methane specifically? Compared to carbon dioxide, methane is up to 84x more potent, which gives it the ability to seriously harm air quality. As of 2020, the latest estimates indicate that there are millions of potential orphan methane sources across 26 U.S. states, in the form of defunct well-heads. This amounts to more than half a billion tons of CO2 equivalent in terms of emissions to be reduced. To this end, in 2022 the U.S. federal government allocated the sum of USD $4.7 billion to help states permanently plug orphaned wells.

That created a perfect intersection of supply and demand for Zefiro. In the carbon markets, there is a persistent demand for transparent and verifiable carbon offsets that originated from U.S. projects. Meanwhile, in the environmental services space, there is an increasing level of sophistication in understanding and quantifying the orphan methane crisis. This convergence gave birth to a carbon credit methodology allowing for credits to be generated directly from well-plugging projects, based on the “carbon equivalent” tons of emissions prevented from entering the atmosphere as a direct result of the remediation efforts.

This ideally situated the market for Zefiro’s business model, which generates revenue through two primary channels:

• Environmental remediation work (funded both publicly and privately), including methane emission monitoring and measurement
• Originating credits for the carbon markets

Our business and our business model is growing rapidly. Here are some of Zefiro’s notable recent business accomplishments, many taking place before the company became public in April…

• We acquired Plants & Goodwin (Bradford, Pennsylvania) and Appalachian Well Surveys (Cambridge, Ohio) which established our “Ground Game” in the Appalachia region, enabling Zefiro to carry out key environmental remediation projects in multiple states.
• This was then scaled up with the opening of a new operations facility in Buckhannon, West Virginia to service increased demand. This was promptly covered by the local TV news on 12 WBOY (southeastern West Virginia’s NBC and ABC affiliate).
• In 2023, Zefiro pre-sold certified carbon credits to Mercuria Energy America, LLC, the American arm of one of the world’s largest independent energy/commodity groups.
• Following the completion of a landmark environmental remediation project, we hosted the U.S. Department of the Interior and the New York State Department of Environmental Protection.
• As of May 2, 2024, Zefiro’s common shares are now listed on the Frankfurt Stock Exchange under the ticker symbol Y6B.
• Zefiro now has two of its methane abatement projects listed on the ACRcarbon registry.

In May, Zefiro also released its very first earnings report as a public company. Coming from having no substantive revenues two years ago, in the first quarter of 2024 Zefiro recorded record revenues of USD $8.5 million, gross profit margin of 31%, and EBITDA of USD $407,000.

Furthermore, with the company’s impressive early-stage performance, I recently added to my equity position in Zefiro through an exercise of over 637,000 warrants as detailed in a press release dated June 3, 2024. With this, the combined ownership stake of Zefiro’s “Sponsor Group” of founding partners is now approximately 30.2%. This is to say that we are very much “all-in” on Zefiro, with meaningful skin in the game. Not just with our full dedication in terms of our personal involvement in the company’s operations, but also with our financial commitments in which we are putting our own capital on the line to propel Zefiro’s long-term growth. We have participated in each and every round of financing, and we have even purchased ZEFI shares in the open market. So when I say that Zefiro’s management team and its insiders are “invested” in the company… I mean it!

In closing, what inspires me the most is that this is all just the beginning. It is the beginning of a promising enterprise with nearly limitless potential, the beginning of a new standard in the carbon markets - an area I have been involved in since its early days - and the beginning of a better America with cleaner air, land, and water for our children, grandchildren, and great-grandchildren to enjoy. I am eternally grateful for the support of Zefiro’s extensive network of family, friends, investors, partners, and collaborators… and I hope to continue making you all proud as we keep moving forward to drive unprecedented value for everyone involved!

With Warm Regards,

Talal A. Debs

Talal A. Debs PhD
Founder and Chief Executive Officer
Zefiro Methane Corp.

Forward-Looking Statements

This news release contains “forward-looking information” within the meaning of applicable Canadian securities legislation. Forward-looking information is often, but not always, identified by the use of words such as “seeks”, “believes”, “plans”, “expects”, “intends”, “estimates”, “anticipates” and statements that an event or result “may”, “will”, “should”, “could” or “might” occur or be achieved and other similar expressions. In particular, this news release contains forward-looking information including statements regarding: the Company’s intention to reduce emissions from end-of-life oil and gas wells and eliminate methane gas; the Company’s partnerships with industry operators, state agencies, and federal governments; the Company’s expectations for continued increases in revenues and EBITDA growth as a result of these partnerships; the Company’s intentions to build out its presence in the United States; the anticipated federal funding for orphaned well site plugging, remediation and restoring activities; the Company’s expectations to become a growing environmental services company; the Company’s ability to provide institutional and retail investors alike with the opportunity to join the Active Sustainability movement; the Company’s ability to generate long-term economic, environmental, and social returns; and other statements regarding the Company’s business and the industry in which the Company operates. The forward-looking information reflects management’s current expectations based on information currently available and are subject to a number of risks and uncertainties that may cause outcomes to differ materially from those discussed in the forward-looking information. Although the Company believes that the assumptions and factors used in preparing the forward-looking information are reasonable, undue reliance should not be placed on such information and no assurance can be given that such events will occur in the disclosed timeframes or at all. Factors that could cause actual results or events to differ materially from current expectations include, but are not limited to: (i) adverse general market and economic conditions; (ii) changes to and price and volume volatility in the carbon market; (iii) changes to the regulatory landscape and global policies applicable to the Company's business; (iv) failure to obtain all necessary regulatory approvals; and (v) other risk factors set forth in its Prospectus dated April 8, 2024 under the heading “Risk Factors”. The Company operates in a rapidly evolving environment where technologies are in the early stage of adoption. New risk factors emerge from time to time, and it is impossible for the Company’s management to predict all risk factors, nor can the Company assess the impact of all factors on Company’s business or the extent to which any factor, or combination of factors, may cause actual results to differ from those contained in any forward-looking information. Forward-looking information in this news release is based on the opinions and assumptions of management considered reasonable as of the date hereof, including, but not limited to, the assumption that general business and economic conditions will not change in a materially adverse manner. Although the Company believes that the assumptions and factors used in preparing the forward-looking information in this news release are reasonable, undue reliance should not be placed on such information. The forward-looking information included in this news release is made as of the date of this news release and the Company expressly disclaims any intention or obligation to update or revise any forward-looking information whether as a result of new information, future events or otherwise, except as required by applicable law.

Statement Regarding Third-Party Investor Relations Firms

Disclosures relating to investor relations firms retained by Zefiro Methane Corp. can be found under the Company's profile on SEDAR+ at www.sedarplus.ca/.