TIDMZPHR
RNS Number : 7936D
Zephyr Energy PLC
24 October 2022
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.
24 October 2022
Zephyr Energy plc
("Zephyr" or the "Company")
Drilling programme update;
State 16-2LN-CC production test update ;
Cooperation Agreement established with Kirkwood Oil and Gas LLC;
and
Investor webinar update
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 operations
and related investor webinar on its project in the Paradox Basin,
Utah, U.S. (the "Paradox project") and announces the signing of a
Cooperation Agreement with Kirkwood Oil and Gas LLC related to data
sharing and planned joint drilling in the Paradox Basin.
Drilling programme update
The Company has completed all preparations needed to commence
drilling the fully-funded State 36-2 LNW-CC well, pending receipt
of the final Federal drilling permit. While Federal drilling permit
approvals have slowed markedly across the entire U.S. domestic oil
and gas industry, the Company remains confident it will be able to
commence drilling in the near-term.
In anticipation of the receipt of the final permit, and in order
to be in position to spud the well shortly thereafter, the Company
recently completed construction of the shared pad on which the
State 36-2 LNW-CC and the State 36-3 LN-C9 wells will be located.
The State 36-2 LNW-CC well will be the initial well drilled and
will target the Cane Creek reservoir. The State 36-3 LN-C9
exploration well (targeting the shallower C9 reservoir) is being
permitted in parallel. The pad for the wells is located in an area
with good quality road access and adjacent to the recently acquired
6-inch gas gathering pipeline, providing efficient access to gas
export infrastructure.
With the exception of the final Federal permit, all regulatory
approvals required to drill the State 36-2 LNW-CC well have been
secured. The Company is in advanced discussions to execute a rig
contract shortly after the final permit is approved, details of
which will be announced in due course.
The two wells mentioned above are both located within Zephyr's
White Sands Unit (the "WSU"), the same Federal unit in which the
previously drilled State 16-2LN-CC well is located. A third well is
expected to be drilled outside of the WSU, and will be drilled in
partnership with, and operated by, Kirkwood Oil and Gas LLC, the
Paradox Basin's largest operator, details of which can be found
below.
State 16-2LN-CC well production test update
The State 16-2 LN-CC well was successfully drilled, completed
and tested in late 2021, although rates were constrained throughout
the production test due to surface equipment limitations. Since
then, Zephyr's operations team, working with a team of external
consultants, has spent significant time designing surface
facilities to re-equip the well pad in order to:
a) test plans for improved flow assurance;
b) prepare for eventual gas export and continual production
operations; and,
c) obtain further production data for overall well and field
management.
The Company, which previously announced plans to conduct an
additional production test on the well, is pleased to announce that
all permits needed for that production test have been approved and
operations to construct further surface facilities on the well pad
are in progress.
Multiple service providers are currently active on site, and the
wellbore has been re-entered to prepare for the commencement of the
additional well test, currently envisioned to begin mid to late
November 2022.
Cooperation Agreement with Kirkwood Oil and Gas LLC
The Company is pleased to announce it has entered into an
agreement (the "Agreement") with Kirkwood Oil and Gas LLC and its
affiliate, Wesco Operating, Inc. ("Wesco") (collectively,
"Kirkwood"), in which Zephyr and Kirkwood agree to co-operate and
collaborate on the extension and further development of the Cane
Creek play in Grand County, Utah - including the drilling of a new,
Kirkwood-operated well.
Kirkwood, based in Wyoming, operates over 500 wells across 39
oil fields in the Rocky Mountain region and is currently the
operator of the Cane Creek oil field located 12 miles to the south
of Zephyr's White Sands Unit in the Paradox Basin. Kirkwood, via
its operating subsidiary Wesco, is the most active regional
operator in the northern Paradox Basin.
The Agreement allows for the sharing of certain proprietary data
in order to assist both companies with the development of their
individual acreage positions. In addition, the Agreement also
allows for the planning and drilling of a 2-mile horizontal well
targeting both Zephyr and Wesco held acreage. The planned well will
be located in Grand County, Utah immediately to the south of the
Wesco-operated Cane Creek Field. Cooperation on the planned well
would involve sharing design and lessons learned from the
Zephyr-operated State 16-2LN-CC well and utilising Wesco's
considerable experience as operator of the Cane Creek oil field.
Wesco will act as the operator of the planned well, and each party
will hold a 50% working interest with all expenses shared
pro-rata.
The objective of the planned well is to test the potential of
modern hydraulic stimulation and completion (as recently performed
at the State 16-2LN-CC well) on the Cane Creek reservoir within the
black oil fairway of the play. The well will be drilled from an
existing pad with existing infrastructure, thereby reducing
environmental impact and the need for further gathering line
infrastructure. The planned well location is immediately offset by
a 2014 vintage horizontal well (with a 4,900-foot lateral) which
targeted the productive, highly over-pressured, naturally-fractured
Cane Creek reservoir. That well was subsequently recompleted with a
small volume diesel stimulation and has produced over 188,000
barrels of oil to date, at very low water cut, and is still in
production today.
By applying the latest completion techniques, it is expected
that initial oil rate and expected ultimate recovery from the
planned well will be increased both by drilling a longer well and
improving the overall reservoir drainage. Success at this location
would open new play opportunities for both companies on their
existing acreage positions. Drilling operations remain subject to
regulatory authority approvals.
Investor Webinar
On 28 September 2022, the Company announced that it would be
presenting a live investor webinar on Tuesday 25 October 2022. At
the webinar, the Company intended to present detailed development
plans and schedules related to the forthcoming drilling programme.
Given that the Company is still awaiting the final Federal permits
for the two wells located in the WSU, it has elected to delay the
webinar until the State 36-2 LNW-CC Federal permit is granted and
the rig contract awarded, so that the webinar can be as detailed,
accurate and informative as possible.
Colin Harrington, Zephyr's Chief Executive, said: "It's exciting
to see activity building across the Paradox project as we prepare
for the commencement of our fully-funded drilling programme. With
the construction of the State 36-2 LNW-CC drilling pad now
complete, our team is prepared to commence drilling operations as
soon as possible after the final Federal permit has been
granted.
"Based on discussions with the relevant Federal authorities our
team is confident that drilling approval has the potential to be
granted in the near-term in spite of an industry wide slowdown of
Federal drilling permit approvals. In the meantime, we've worked
extremely hard to navigate the challenging rig, labour and supply
chain market environment so that we're positioned to spud the well
as soon as possible.
"In addition to preparations for drilling, our facilities team
has been working on the re-equip and augmentation of the surface
facilities at the State 16-2 LN-CC, and we look forward to the
seeing the results of the production test over the coming
weeks.
"I am further delighted to announce the signing of the Agreement
with Kirkwood. As the most active operator in the northern Paradox
Basin, Kirkwood's team has a strong history and service
relationships which are second to none in the basin. Paired with
Zephyr's technical understanding and expertise gained from
successfully drilling the northern Paradox Basin's first horizontal
well using a modern completion, our joint cooperation on the
funding and drilling of a new well - at a location where our
respective acreage positions are contiguous - has the potential to
be highly beneficial for both parties, and with a minimum of
surface disruption. We look forward to the collaboration and are
eager to see the application of hydraulic stimulation applied to a
long lateral horizontal well in the black oil fairway of the Cane
Creek Field.
"Finally, while I'm frustrated with the delay related to our
Paradox-focused investor webinar, we look forward to rescheduling
as soon as the Federal permit is granted and the drilling contract
is finalised - at which point it will be possible to more
accurately share details regarding drill timing, service partners
and expected completion and testing schedules.
"We expect the next period to be an exciting time in our
development of the Paradox project and we look forward to providing
further updates when activity on the ground permits."
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-Broker
John Prior / Hugh Rich / James Sinclair-Ford Tel: +44 (0) 20 7886
/ Harriette Johnson 2500
Celicourt Communications - PR
Mark Antelme / Felicity Winkles
Tel: +44 (0) 20 8434
2643
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 45,000-acre leaseholding
located in the Paradox Basin, Utah which has been assessed by third
party consultants Sproule International to hold, net to Zephyr, 2P
reserves of 2.1 million barrels of oil equivalent ("mmboe"), 2C
resources of 27 mmboe and 2U resources 203 mmboe. Following the
successful initial production testing of the recently drilled and
completed State 16-2LN-CC well, Zephyr is planning a three well
drilling program commencing later this year to further delineate
the scale and value of the project.
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. The
Williston portfolio currently consists of working-interests in over
200 modern horizontal wells which are expected to provide US$35-40
million of revenue, net to Zephyr, in 2022. 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.
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