TIDMZPHR
RNS Number : 4697K
Zephyr Energy PLC
02 September 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.
2 September 2021
Zephyr Energy plc
(the "Company" or "Zephyr")
Positive results from the State 16-2LN-CC diagnostic fracture
injection test;
well to be completed using hydraulic stimulation; and
update on timing and next steps
Zephyr Energy plc (AIM: ZPHR) (OTCQB: ZPHRF) , the Rocky
Mountain oil and gas company focused on responsible resource
development and carbon-neutral operations, is pleased to provide an
update on its flagship project in the Paradox Basin, Utah, U.S.
The Company recently drilled the State 16-2LN-CC well to a Total
Depth ("TD") of 14,370 feet ("ft"), at which point a full suite of
wireline logs was run and production casing was set. During
drilling operations, the Cane Creek reservoir target indicated
hydrocarbon charge across the entirety of its 4,555 ft horizontal
lateral portion, as well as across multiple overlying reservoirs.
Wireline data also suggested that a high percentage of the lateral
well (approximately 85 per cent) has the potential to be tested for
production.
Based on the positive geological data received, the excellent
positioning of the lateral portion of the well within the Cane
Creek reservoir and the potential to utilise the State 16-2LN-CC
completion as a "proof of concept" for wider development of the
Paradox asset base via hydraulic stimulation, the Company recently
opted to conduct a wellbore diagnostic fracture injection test
("DFIT"). During the DFIT, a 3 ft interval at the toe of the
lateral was perforated and hydraulically stimulated.
The Company is pleased to report that the analysis of DFIT has
been completed, and that the test provided strong evidence of the
potential to successfully develop the Cane Creek reservoir as a
hydraulically stimulated resource play (a "HSRP").
Highlights from the DFIT
-- High formation pressure: After perforation of the State
16-2LN-CC wellbore and stimulation of the reservoir, pressure
measurements from the wellbore suggested high formation pressure -
a strong positive indicator of reservoir drive.
-- Permeability: DFIT results also suggested evidence of matrix
permeability consistent with other prolific resource plays.
-- Hydrocarbon flow: During the DFIT operation, there was
demonstrable evidence of hydrocarbons flowing into the well after
stimulation.
-- Geomechanical interpretations: Further rock mechanical data
(including lithostatic gradient, effective stress and fracture
propagation data) has been interpreted and has provided valuable
insight to assist with completion design.
-- HSRP completion method selected: Based on the positive
results from the DFIT in conjunction with the recent log and core
data acquired, Zephyr has now elected to complete the State
16-2LN-CC by way of hydraulic stimulation. The well will serve as
the initial "proof of concept" for wider potential development of
the Paradox asset base via HSRP, although natural fracture
completions may also be utilized where optimal.
Final State 16-2LN-CC well completion design work is currently
underway. Despite increasing challenges posed by industry supply
chain constraints and volatile weather across the western U.S., the
Company has secured equipment and a completion crew which will be
on-site during the second week of October. From that point,
completion operations are expected to take less than a week and
production testing will commence immediately thereafter, with
initial flow tests and results expected by the end of October.
Colin Harrington, Zephyr's Chief Executive, said: "I'm thrilled
with the continued progress from the well site. The results of the
DFIT, combined with the significant amount of data previously
gathered from the well, all indicate that the State 16-2LN-CC has
the potential to be an excellent "proof of concept" location for an
HSRP test.
"This marks tremendous progress, and the Board's subsequent
decision to move forward with an HSRP completion is a clear
indication of the significant value which we believe may exist
through that development route.
"The next step - a successful HSRP test - would result in a
substantial reduction in development risk across our acreage, as
well as allow for a wider systematic development with predictable
well distribution. Production results from the first well, expected
to be available in late October, will be the first test of the
viability of this strategy - but given what we've learned to date,
I feel confident that we'll continue to hone drilling and
completion techniques on this acreage well into the future.
"Indeed, we now believe that our acreage holds multiple
opportunities within both the Cane Creek and the shallower clastic
reservoirs to support the drilling of additional wells to delineate
the acreage. This first completion will add further data to help us
understand the reservoirs and our ability to optimise well length,
well spacing and completion design.
"I'd like to conclude by noting that in pursuing the HSRP
development route, Zephyr's goal is to maximise resource efficiency
and project economics while minimising environmental and surface
disruption. Zephyr's core mission is to be responsible stewards of
our investors' capital while also being responsible stewards of the
environment, and a tangible demonstration of that commitment is our
pledge to offset one hundred per cent. of our Scope 1 carbon
emissions by the end of September. With any future development, we
will continue to strive to mitigate the environmental impact by
reducing surface footprint, minimising disturbance and offsetting
our emissions.
"We look forward to keeping shareholders informed as completion
operations commence and production data is received."
Background
On June 30, 2021, Zephyr released an internally-generated
Updated Resource Estimation, in which the Company detailed its work
to analyse and interpret the extensive geological data obtained
during the State 16-2 drilling programme - data from both the
project's primary target, the Cane Creek reservoir (the "Cane
Creek") and from multiple potential stacked reservoirs overlying
the Cane Creek (the "overlying reservoirs").
In addition to the work carried out by the Company, Zephyr
engaged the third-party consultant Premier Oilfield Group
("Premier") to assist the Company in determining the viability of
additional methods for the development of the Paradox project. A
U.S. Department of Energy-backed project team, led by the
University of Utah's Energy & Geoscience Institute, also
contributed data and analysis as part of their evaluation of the
State 16-2 well data related to ongoing Paradox Basin research.
As part of this analysis, Zephyr released the following
internally generated estimates regarding development of the Paradox
leasehold by way of HSRP:
Internal Zephyr Assessment: HSRP Case #1 - hydraulic stimulation
of the Cane Creek reservoir only
Background: In Q2 2021, Zephyr hired Premier to assess the
Company's primary Cane Creek reservoir related to its potential for
a HSRP development. This process modelled a modern stimulation and
its impact on the Cane Creek reservoir, and concluded that if a
continuous hydrocarbon play exists, there is good evidence that
hydraulically stimulated wells have potential to deliver commercial
well rates and volumes. This estimate is preliminary and highly
dependent upon the continued observations of ubiquitous low water
saturations, reservoir over-pressure and a yet to be proven,
successful hydraulic stimulation operation.
This HSRP alternative delivers the following preliminary
estimates:
-- up to 30 well locations
-- A range of risked net recoverable contingent resources of up
to 18 million barrels of oil equivalent ("mmboe").
Internal Zephyr Assessment: HSRP Case #2: hydraulic stimulation
of the overlying reservoirs
Background: The C1, C2, C4, C7, C8, C9, C10/11 and C18/19
overlying reservoirs have been high-graded by Zephyr as potential
exploration zones with an estimated P50 total of 1 billion barrels
of oil equivalent ("boe") HCIIP in place across the ZPHR acreage.
Scaling of Premier's models indicates an opportunity to target this
in place resource via HSRP development. Should the conditions for
the HSRP be proven to be favourable, it could result in the
potential for up to 200 well locations across the shallow
reservoirs with a net contingent resource potential of up to
125mmboe. This estimate is highly dependent upon developing a
better understanding of each zone's reservoir pressure, fluid
phase, geomechanical properties, permeability and a successful
proof of concept production well. The assessment can be summarised
as:
-- up to 200 well locations
-- Range of risked net recoverable contingent resources
(overlying reservoirs only): up to 125mmboe
-- Range of total risked net recoverable contingent resources for the HSRP: up to 143mmboe
Glossary of Terms
Contingent Resources : A discovered accumulation where project
activities are under evaluation and where justification as a
commercial development is unknown based on available
information.
Hydrocarbon Initially In Place (HCIIP) - Quantity of hydrocarbon
that is estimated, as of a given date, to be contained in known
accumulations before production. HCIIP may be subdivided into
commercial, sub-commercial, and the portion remaining in the
reservoir as unrecoverable.
About Premier Oilfield Group
Premier was formed in May 2016 under the private equity
sponsorship of CSL Capital Management. Headquartered in the U.S.,
Premier is a global leader in the aggregation, generation and
application of rock and fluid data, utilising it to better
understand, explore and develop earth resources. It is founded on
the belief that the data-driven energy industry is here, and
generating and sharing relevant data from rock and fluid samples is
the key to more effective and efficient resource development.
Premier has assembled world-class experts, laboratories and
platforms to produce data, make it readily accessible and help its
clients apply the data effectively. https://pofg.com/about/
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
Andy Thacker / James Pope
Flagstaff Strategic and Investor Communications
Tim Thompson / Mark Edwards / Fergus Tel: +44 (0) 20 7129
Mellon 1474
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.
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END
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