TIDMZPHR
RNS Number : 4517Q
Zephyr Energy PLC
18 October 2023
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.
18 October 2023
Zephyr Energy plc
("Zephyr" or the "Company")
Paradox project update
Update on State 36-2 well;
28-11 well work to commence; and
farm-in to further acreage in the Paradox Basin, Utah
Zephyr Energy plc (AIM: ZPHR) (OTCQB: ZPHRF), the Rocky Mountain
oil and gas company focused on responsible resource development
from carbon-neutral operations, provides an update on the State
36-2 LNW-CC well (the "State 36-2 well") and the Greentown Federal
28-11 well (the "28-11 well") located on the Company's acreage in
the Paradox Basin, Utah, U.S. (the "Paradox project").
The Company is also pleased to announce an agreement to further
expand the Paradox project by farming-in to the Salt Wash Field, a
previously producing asset with proven oil, gas and helium reserves
located directly to the south of Zephyr's White Sands Unit (the
"WSU") in Utah.
State 36-2 well update
As previously announced, in April 2023 Zephyr's State 36-2 well
experienced a control incident during which hydrocarbons flowed
unconstrained for four days due to the failure of a safety valve.
The well was brought under control with no injuries and limited
environmental impact, and the Company has subsequently undertaken
comprehensive well work operations to assess the future viability
of the existing wellbore.
During the incident, multiple joints of the well's 2 7/8-inch
production tubing were compromised, and Zephyr's operations team
has been working methodically to remove and inspect the remaining
joints while keeping the wellbore static. Operations to retrieve
the damaged tubing have progressed slower than expected due to the
poor condition of the tubing, as exhibited by the multiple damaged
and buckled joints retrieved that led to the need for milling
operations and resulted in shorter retrievals per trip. Recent
operations have not resulted in sufficient recoveries to justify
the continuation of the ongoing cost of the well work versus the
estimated cost to redrill the well.
As a result, the Company's board of Directors (the "Board") has
reviewed multiple alternatives to target the significant
productivity of the reservoir at this location, and has elected to
proceed with a redrill of a "twinned" well from an adjacent
location on the same drilling pad.
The Company retains full well control insurance coverage and
expects to recover substantially all costs associated with the well
control incident, including those associated with the redrill.
Zephyr has a pre-existing approved permit for a second well on
the pad, a permit which will be amended to target the same natural
fracture network at the same location in the Cane Creek reservoir
as the State 36-2 well.
Preparations for the redrill have commenced, focused on
maximising efficiencies and leveraging knowledge learned from
drilling the State 36-2 well. Timing of the redrill will be
dependent upon securing an appropriate rig contract and other
ancillary services, with a current target for redrill in the first
quarter of 2024. Alternatives for nearer term tie-in of production
from the State 16-2 and State 28-11 wells are being considered in
parallel.
In addition to the redrill, and utilising corporate cash flows
expected to be generated from the Company's Williston Basin
portfolio, Zephyr plans to drill a second well in the Paradox Basin
in the first half of 2024 ("H1 2024"). It is expected that a single
rig contract may cover the drilling of both wells, providing
further efficiencies and reduced overall costs. At present, the
Company plans to drill the second well on the Salt Wash Field, as
outlined below.
Greentown Federal 28-11 well update
The 28-11 well forms part of the Paradox Basin asset and
infrastructure package acquired by Zephyr in October 2022.
Historically, the well produced over 0.36 billion cubic feet
("BCF") of gas and 93,000 barrels of oil ("BO") prior to being
shut-in due to a pipeline shut-down. Since then, pressure at the
wellhead has increased due to the natural recharge of the Cane
Creek reservoir.
Over the last three months, Zephyr's operations team has
restarted production of the well to reduce wellhead pressure and to
produce oil in volumes suitable for sale. The well has averaged
circa 50 BO per day, with a small amount of associated natural gas
being flared. Due to tight monthly flaring limits, the well is
limited to roughly ten days of production per month.
Now that the wellhead pressures have been reduced, Zephyr plans
to utilise the workover rig currently at the State 36-2 well (once
operations at that pad have been completed) to commence well work
at the 28-11 well. These operations will include the installation
of a new pump.
Figure 1: Federal 28-11 well Figure 2: Oil storage tanks
site at the Federal 28-11 well site
After the new pump is installed, Zephyr plans to continue to
produce the well within mandated flaring limits until the Company's
natural gas processing infrastructure becomes operational. The
28-11 well has a pre-existing tie into Zephyr's pipeline
infrastructure and will be able to achieve higher uptimes when
Zephyr's gas processing facilities have been completed.
Salt Wash Field farm-in
The Board remains fully committed to growing and developing its
Paradox project and unlocking its significant potential value for
shareholders. As a further step in this process, in line with other
recent acreage, working interest and infrastructure acquisitions,
the Company is pleased to announce an agreement to farm-in to a
minimum 75 per cent working interest in a 1,047-acre leasehold
position in the Salt Wash Field which lies three miles to the south
of the Company's WSU.
Figure 3: 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 has a thin (15 feet) oil rim which was the target for most
historic development drilling activity and resultant production.
Above the oil rim is an inert gas cap (500' gas column) consisting
of nitrogen (72%) with approximately 22% hydrocarbon gases and 1.4%
to 1.7% helium content. The field was first produced in 1961 and
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.
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.
-- Drilling activity planned for the second quarter of 2024 with
a dual-purpose Leadville Formation delineation well with deep
exploration targets.
The key terms of the farm-in are as follows:
-- Initial payment of US$300,000 due within 30 days of the date
of the transaction, to be funded from the Company's existing
resources.
-- A second payment of US$300,000 due within 60 days of the
transaction, also to be funded from the Company's existing
resources.
-- 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.
It is currently forecast that the cost of the Commitment well
will be up to circa US$6 million, and the Company has commenced
conversations with industry participants (including infrastructure
and existing helium-focused companies) to jointly fund the drilling
of the Commitment well. Alternative options include funding the
Commitment well from Zephyr cash resources or not proceeding with
the project. The Company does not intend to raise funds for the
Commitment well by way of an issue of equity.
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 M&A activity.
Colin Harrington, Zephyr's CEO commented: "Our Board has
concluded that redrilling the State 36-2 well is the optimal path
forward to harness the significant discovery made by the initial
well. We are focused on both the near-term potential of the State
36-2 well location as well as the long-term potential of the
Paradox project and the Board remains fully committed to its vision
of opening up the next prolific onshore U.S oil and gas play.
"Benefits from a redrill include obtaining a new wellbore and
utilising the learnings from the State 36-2 well operations to
date, and we expect that our well control insurance coverage will
cover substantially all costs associated with the redrill.
Furthermore, I am confident that our operations team will be able
to deliver an effective twin well and once again access the
considerable productivity we observed in the original well
bore.
"Next steps include securing a drilling rig. In the interim, the
workover rig currently on site will be moved to the 28-11 well pad,
where it will undertake work to generate an additional source of
incremental production for the Company. The 28-11 well is a
particularly liquid rich Cane Creek well and at this time of higher
oil prices, this work is expected to have a rapid payback and
provide a stable revenue stream going forward.
"In conjunction with the redrill and workover operations, our
new Paradox farm-in is particularly exciting. We have long studied
the potential to redevelop the remaining reserves of the Salt Wash
Field, which lies directly to the south of the WSU, utilises the
same road network, and may ultimately sell produced hydrocarbon
volumes into our recently acquired pipeline infrastructure. 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 a primary focus, we do expect to
partner with industry participants to help appraise and fund the
potential of this resource while also taking advantage of our
regional knowledge, existing operations and asset platform. I
should also make clear that funding for the Commitment well will
not be provided through a future Zephyr equity raise.
"Overall, I am confident that we are taking the optimal course
of action for the long-term value of the Company, and the next few
months will be full of activity. Upcoming efforts will focus on
preparations for the next round of drilling operations, the
delivery of a gas marketing agreement, construction of
infrastructure and the commissioning of a Competent Persons Report
for the entirety of the Paradox project. We also plan to progress
partnership conversations with upstream and infrastructure
participants.
"Finally, with production from our non-operated portfolio
expected to grow significantly in the fourth quarter, we are fully
funded for all planned work on the existing portfolio, with room
left for further acquisition opportunities and additional drilling
in 2024."
Contacts:
Zephyr Energy plc Tel: +44 (0)20 7225
Colin Harrington (CEO) 4590
Chris Eadie (CFO)
Allenby Capital Limited - AIM Nominated Tel: +44 (0)20 3328
Adviser 5656
Jeremy Porter / Vivek Bhardwaj
Turner Pope Investments - Joint Broker Tel: +44 (0)20 3657
James Pope / Andy Thacker 0050
Panmure Gordon (UK) Limited - Joint Tel: +44 (0) 20 7886
Broker 2500
John Prior / Hugh Rich / James Sinclair-Ford
Celicourt Communications - Public Relations Tel: +44 (0) 20 7770
Mark Antelme / Felicity Winkles / Ali 6424
AlQahtani
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.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
RNS may use your IP address to confirm compliance with the terms
and conditions, to analyse how you engage with the information
contained in this communication, and to share such analysis on an
anonymised basis with others as part of our commercial services.
For further information about how RNS and the London Stock Exchange
use the personal data you provide us, please see our Privacy
Policy.
END
UPDEAAEXFSDDFAA
(END) Dow Jones Newswires
October 18, 2023 02:00 ET (06:00 GMT)
Zephyr Energy (AQSE:ZPHR.GB)
Gráfica de Acción Histórica
De Nov 2024 a Dic 2024
Zephyr Energy (AQSE:ZPHR.GB)
Gráfica de Acción Histórica
De Dic 2023 a Dic 2024
