REG - Zephyr Energy PLC - Initial results from State 36-2R production test

Zephyr EnergyAnnouncement

23/07/2024 07:00

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RNS Number : 4344X  Zephyr Energy PLC  23 July 2024

 

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.

 

23 July 2024

Zephyr Energy plc

(the "Company" or "Zephyr")

 

Initial results from State 36-2R well production test

 

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 operations on the State 36-2R
LNW-CC well (the "well") at the Company's flagship project in the Paradox
Basin, Utah, U.S. (the "Paradox project").

 

The Company has completed the initial phase of the production test on the
well, in which the well was tested at multiple rates and choke settings to
ascertain its production potential.

Initial production test observations include:

·      High reservoir deliverability and high initial reservoir
pressures (approximately 8,600 pounds per square inch absolute).

·      Peak production rates achieved during the production test were
1,350 barrels of oil equivalent per day, at which level the well was still
choked back and constrained.

·      Significantly higher condensate-yield than Zephyr's previously
drilled Paradox project well (with more than a three-fold increase in
condensate rate versus that from the State 16-2LN-CC well). Future production
rates would likely be controlled to facilitate stable flows and maximise
economics from the high condensate yield.

o  Condensate yield averaged 180 barrels per 1,000 mscf produced and peaked
at over 600 barrels of condensate per day.  Condensate produced had an
average American Petroleum Institute ("API") gravity of 58 degrees, making it
a highly desirable barrel for Utah's refinery market.  The condensate
produced from the well to date was sold to a Utah refinery at a price close to
current WTI crude oil prices (inclusive of trucking costs).

o  This elevated liquid yield has the potential to be a significant driver of
improved economics and may increase recoverable liquid volumes across the
Company's White Sands Unit.

o  Almost zero evidence of water production, another potential boost to the
well's economics by reducing the need for water disposal.

While the initial test was successful on multiple fronts, there was also
evidence that the natural fracture network may be partially obstructed from
the greater reservoir at this well location. The fracture network may be
either plugged by the heavyweight drilling mud which was used for well control
purposes (from both the well and the original State 36-2 well) or
compartmentalised by faulting.

 

The Company plans to "acidise" the well to further remove any drilling mud
emulsions from the natural fracture network and maximise the well's
connectivity with the larger reservoir.  This operation is expected to take
place in the first half of August and will be immediately followed by a second
production test.

 

The Company is evaluating further options to improve well connectivity (if
needed).  At a higher level, Zephyr's team has also begun assessing broader
development options to capitalise on the positive benefits of the overall
higher condensate yield and high reservoir deliverability as part of a larger
asset development plan.

 

 

Colin Harrington, Zephyr's Chief Executive, said:

 

"We're delighted with the results from the initial production test.  The well
demonstrated excellent deliverability and consistently higher condensate
yields than expected, both of which are highly encouraging signs for the
underlying value of our wider Paradox asset base.

"The condensate barrels produced from the well to date have been tested and
were sold at a price close to current WTI crude oil prices (inclusive of
trucking costs), which indicates that future barrels could be in strong demand
in the local refinery market.

"Our next step is to further clean out the nearby reservoir to attempt to
maximise the well's connectivity with the larger reservoir, and then
immediately run a second production test.  The data from that test will be
used to determine our future offtake and processing requirements.

We look forward to keeping Shareholders updated on progress over the coming
weeks."

 

 Contacts                                                       Tel: +44 (0)20 7225 4590

 Zephyr Energy plc

 Colin Harrington (CEO)

 Chris Eadie (Group Finance Director and Company Secretary)

 Allenby Capital Limited - AIM Nominated Adviser                Tel: +44 (0)20 3328 5656

 Jeremy Porter / Vivek Bhardwaj

 Turner Pope Investments - Joint-Broker                         Tel: +44 (0)20 3657 0050

 James Pope / Andy Thacker

 Panmure Liberum Limited  - Joint-Broker                       Tel: +44 (0) 20 7886 2500

 Hugh Rich / James Sinclair-Ford

 Celicourt Communications - PR

 Mark Antelme / Felicity Winkles / Ali AlQahtani               Tel: +44 (0) 20 8434 2643

 

 

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.

 

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 46,000-acre leaseholding 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.

 

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