Prior to publication, the information contained
within this announcement was deemed by the Company to constitute
inside information as stipulated under the UK Market Abuse
Regulation. With the publication of this announcement, this
information is now considered to be in the public
domain.
27 March 2024
The following
announcement replaces the "Salt Wash helium project update"
announcement released on 27 March 2024 at 0700 under RNS No 4204I.
In the third paragraph the definition of "mscf" has been changed
from "million square cubic feet" to "thousand standard cubic feet".
All other details remain unchanged. The full amended text is shown
below.
Zephyr Energy plc
("Zephyr" or the
"Company")
Salt Wash helium project
update
Zephyr Energy plc (AIM: ZPHR) (OTCQB: ZPHRF),
the Rocky Mountain oil and gas company focused on responsible
resource development from carbon-neutral operations is pleased to
provide 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. (the "Salt Wash project").
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 thousand standard 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
"Agreement"), the Company confirms that the two initial payments of
US$300,000 each (totaling US$600,0000) were made to the incumbent
leaseholder (the "seller") 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."
Further
Information
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:
o Net helium
discovered resource potential: 0.07 to 0.19 BCF (Company
estimate*).
o Net helium
un-risked, prospective resource of a further 0.04 to 0.66 BCF
(Company estimate*).
o 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.
Contacts:
Zephyr Energy plc
Colin Harrington (CEO)
Chris Eadie (CFO)
|
Tel:
+44 (0)20 7225 4590
|
Allenby Capital Limited - AIM Nominated
Adviser
Jeremy Porter / Vivek
Bhardwaj
|
Tel:
+44 (0)20 3328 5656
|
Turner Pope Investments - Joint Broker
James Pope / Andy
Thacker
|
Tel:
+44 (0)20 3657 0050
|
Panmure Gordon (UK) Limited -
Joint Broker
Hugh Rich / James
Sinclair-Ford
|
Tel:
+44 (0) 20 7886 2500
|
Celicourt Communications - Public Relations
Mark Antelme / Felicity Winkles /
Ali AlQahtani
|
Tel: +44 (0) 20 7770 6424
|
Qualified Person
Dr Gregor Maxwell, BSc Hons. Geology
and Petroleum Geology, PhD, Technical Adviser to the Board
of Zephyr Energy plc, who meets the criteria of a qualified
person under the AIM Note for Mining and Oil & Gas Companies
-June 2009, has reviewed and approved the technical information
contained within this announcement.
*Estimates of resources and reserves
contained within this announcement have been prepared according to
the standards of the Society of Petroleum Engineers. All estimates
are internally generated and subject to third party review and
verification.
Notes to Editors
Zephyr Energy plc (AIM: ZPHR)
(OTCQB: ZPHRF) is a technology-led oil and gas company
focused on responsible resource development from carbon-neutral
operations in the Rocky Mountain region of the
United States. The Company's mission is rooted in two core values:
to be responsible stewards of its investors' capital, and to be
responsible stewards of the environment in which it
works.
Zephyr's flagship asset is an
operated lease holding of over 46,000 gross acres located in
the Paradox Basin, Utah, 25,000 acres of which has
been assessed to hold, net to Zephyr, 2P reserves of 2.6 million
barrels of oil equivalent ("mmboe"), 2C resources of 34 mmboe and
2U resources 270 mmboe.
In addition to its operated assets,
the Company owns working interests in a broad portfolio of
non-operated producing wells across the Williston
Basin in North Dakota and Montana. Cash flow
from the Williston production will be used to fund the
planned Paradox Basin development. In addition, the Board
will consider further opportunistic value-accretive
acquisitions.