TIDMZPHR
RNS Number : 0222S
Zephyr Energy PLC
11 November 2021
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.
11 November 2021
Zephyr Energy plc
("Zephyr" or the "Company")
First hydrocarbons produced at the State 16-2LN-CC well;
well clean-up phase remains ongoing; and,
Q3 non-operated asset portfolio production 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 ongoing production testing at the State 16-2LN-CC well in Utah,
and to report on third quarter ("Q3") performance from its
non-operated portfolio in the Williston Basin, North Dakota.
The Company is delighted to announce the first flowing
hydrocarbons from the State 16-2LN-CC well, even as production
testing and well clean-up efforts remain ongoing. The production of
hydrocarbons marks a major milestone for Zephyr, particularly as
this is the first horizontal well in the wider Paradox Basin to
flow hydrocarbons using a modern hydraulically stimulated
completion.
Combined with a substantial increase in Q3 production and
associated cashflow from Zephyr's non-operated asset portfolio in
the Williston Basin, the Company is well positioned to continue in
the pursuit of its goal to develop a new hydraulically stimulated
resource play in the onshore U.S. oil and gas sector.
State 16-2LN-CC well update overview
-- The State 16-2LN-CC well was put on flowback on 28 October
2021, under a heavy 7/64 inch choke in order to prevent formation
damage during early stages of flowback;
-- The well is now successfully flowing hydrocarbons;
-- Although production rates are facility constrained at
present, the well is demonstrating highly encouraging daily average
flow rates of 420 barrels of oil equivalent per day ("boepd") with
recent hourly rates of over 690 boepd on a slightly less restricted
12/64 inch choke setting;
-- In addition to hydrocarbons, the well continues to flowback
completion fluids at approximately 1,200 barrels per day and
production testing remains ongoing:
o Fluid composition is evolving as additional completion fluid
is recovered, with ultimate expected gas/oil ratios yet to be
determined.
-- The well has demonstrated limited pressure drawdown to date
despite the high liquid rate, an additional encouraging sign which
may indicate a large connected volume.
-- Results to date suggest the State 16-2LN-CC is a successful
proof of concept well with highly positive implications for the
utilisation of hydraulic stimulation completions across the
multiple reservoir zones and across the Company's 37,613-acre lease
position within the Paradox Basin.
While the production testing phase remains ongoing, the results
to date mark a major milestone for Zephyr. Over the coming weeks,
Zephyr will attempt to address the facility constraints in order to
further reduce choke levels and ascertain maximum potential
production rates. The Company will make further announcements once
the well testing is completed, hydrocarbon mix becomes better
understood and well flows become representative of longer-term
reservoir performance.
Q3 non-operated asset portfolio production update
The Company is also pleased to provide an update on the Q3
performance from the seven producing non-operated wells in the
Williston Basin in which the Company has working-interests. Several
of the wells were brought onto full production during the period,
during which time operational production rates increased from 232
boepd in July 2021 to 549 boepd in September 2021, net to
Zephyr.
During Q3, Zephyr sold 35,848 barrels of oil equivalent ("boe")
and net production for the quarter was as follows:
Oil: 31,604 barrels ("bbls") at an average sales price of $68.62
per bbl
Natural Gas: 18,967 million cubic feet ("mcf") at an average sales price of $4.71 per mcf
Natural Gas Liquids: 1,083 bbls at an average sales price of $38.21 per bbl
Production from the non-operated portfolio is expected to
further increase over the coming months as additional wells are
brought online. Going forward, Zephyr plans to report production
numbers from its non-operated portfolio on a quarterly basis.
Colin Harrington, Zephyr's Chief Executive, said: "I'm
absolutely delighted that, after many years of hard work and
investment in the Paradox Basin, we can finally announce the first
flowing hydrocarbons from our Paradox project. As this represents
the first production generated from a horizontal well in the
Paradox Basin using modern hydraulic stimulation, today marks a
historic moment and heightens our expectations regarding the future
development potential of Zephyr's leaseholding.
"We've always viewed this first well as a 'proof of concept' for
a wider development, and our future wells are expected to benefit
from further optimisations such as longer lateral lengths and from
additional refinements of completion techniques. Even without those
future enhancements, I'm hugely excited that we're seeing rates of
nearly 700 boepd, especially given the substantial level of choke
on the well and the fact that we are rate constrained by existing
surface facilities. I fully expect to see production rates increase
further should we further resolve facility constraints during the
remainder of the production test.
"While these initial results are highly encouraging, it's
important to remember that production testing remains ongoing and
key parameters such as fluid mix are still variable and volatile.
That said, what we've seen so far lends support to our vision of
opening up a new hydraulically stimulated play in the United
States, and over the coming months we fully expect to deliver
additional wells that target the Cane Creek reservoir as well as
the overlying reservoirs. The increased production from our
non-operated portfolio in the Williston Basin, during this time of
strong commodity pricing, is expected to generate substantial
cashflows to fund future development efforts in the Paradox.
"I would like to once again thank our technical team and
dedicated contractors for their ongoing efforts in delivering a
successful well. Having invested so much time and resource into the
Paradox project, delivering the first production from our Paradox
position is a true landmark event for the Company, and I look
forward to providing further updates in the near future.
"Finally, but very importantly, I want to remind Shareholders
that all produced hydrocarbons are carefully measured and always
subject to our carbon mitigation efforts. While natural gas volumes
are being flared through this testing phase, Zephyr remains
committed, at the highest level, to providing carbon-neutral
operations through the purchase of Verified Emission Reduction
credits to offset our Scope 1 emissions. Moreover, we are well
underway evaluating a number of profitable long-term solutions for
the sale of any future natural gas volumes produced, including via
interconnection with the nearby pipeline system as well as options
to monetise produced gas directly on site. As always, our goal is
to deliver strong Shareholder value while being responsible
stewards of investors' capital and responsible stewards of the
environment."
Contacts:
Zephyr Energy plc Tel: +44 (0)20 7225 4590
Colin Harrington (CEO)
Chris Eadie (CFO)
Allenby Capital Limited - AIM Nominated Tel: +44 (0)20 3328 5656
Adviser
Jeremy Porter / Liz Kirchner
Turner Pope Investments - Broker Tel: +44 (0)20 3657 0050
James Pope / Andy Thacker
Flagstaff Strategic and Investor Communications
- PR Tel: +44 (0) 20 7129
Tim Thompson / Mark Edwards / Fergus 1474
Mellon
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.
Glossary of Terms
Flowback - refers to process fluids that are collected at the
surface after hydraulic stimulation operations are completed. The
fluids may contain both the hydraulic stimulation fluids and
hydrocarbons.
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