REG - Zephyr Energy PLC - Paradox project update

Zephyr EnergyAnnouncement

08/03/2023 07:15

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RNS Number : 2219S  Zephyr Energy PLC  08 March 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.

 

8 March 2023

Zephyr Energy plc

(the "Company" or "Zephyr")

 

 Paradox project update

 

Zephyr Energy plc (AIM: ZPHR), 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 36-2 LNW-CC well (the "State
36-2 well") and the State 16-2 LN-CC well (the "State 16-2 well") at the
Company's flagship project in the Paradox Basin, Utah, U.S (the "Paradox
project").

 

State 36-2 well update

 

As reported on 19 January 2023, the State 36-2 well intersected a major
natural fracture network in the Cane Creek reservoir which led to a
significant influx of hydrocarbons into the wellbore. This influx was managed
and safely controlled, which subsequently allowed for the drilling of an
additional 132 feet in the fractured and productive Cane Creek reservoir. The
Company then elected to run production casing down to the total-depth of the
well.

 

The Company has now finalised its planning for the completion and production
testing of the well's fractured reservoir interval. All services have been
procured, with operations expected to start in the next two weeks when a
service rig will be mobilised to site. Workover operations and production
testing are expected to take four to six weeks to complete. The production
test will be paid for from the Company's existing cash resources and any oil
and/or condensate produced during the test is expected to be sold via existing
marketing partners.

 

Production test results from the well, along with results from the production
test on the State 16-2 well, will be integrated into Zephyr's overall
reservoir model and will help define the next steps for the Paradox project
development, including the sizing of related gas infrastructure and the
associated capital expenditure.

 

State 16-2 well update

 

The first phase of the extended production testing on the well has now
concluded within the flare consent limit set by the regulatory bodies, and the
Company now plans to further test the well (subject to regulatory approval and
during warmer weather months) in order to gather more data.

 

As previously announced, the State 16-2 well test was hampered by severe
weather and surface facility commissioning issues which resulted in delays to
the programme and, at times, intermittent operational activity.

 

During the most recent testing, the Company's efforts were primarily focused
on surface facility issues, and once these issues had been successfully
resolved, the well was initially brought online at choked-back, moderate rates
in order to test for flow assurance at varying levels of production.  At a
controlled rate of 2 million square cubic feet of gas per day and 100 barrels
of oil per day (an average of 433 barrels of oil equivalent per day) the well
flowed continuously and surface flow assurance efforts proved successful.

 

As flow rates were increased above those levels, well performance became
limited by fresh water pumping capacity and was subsequently impacted by the
formation of down hole salt precipitate, an issue not uncommon with this type
of completion. The precipitate, which blocked and subsequently cleared
multiple times, impacted the well's flow capacity to achieve extended higher
rates.  The Company was in early stages of testing higher rates when its
mandated flaring limits were reached.

 

The Company is now assessing whether the precipitate issue is a function of
continued flow back of injected completion fluids or a function of normal
flowing conditions.  If it is a result of normal flowing conditions, a series
of mitigation solutions that have been successful in the past can be applied,
and the Company will likely test these solutions in the coming months (subject
to regulatory approvals) in order to fully determine the potential of the
reservoir.

 

In relation to the State 36-2 well production test, precipitate formation is
not expected to pose an issue as the well is testing the natural fracture
network. In addition, the well has not been hydraulically stimulated and will
therefore not flow back large volumes of completion fluid (water).

 

Colin Harrington, Zephyr's Chief Executive, said:

"We're excited to production test the State 36-2 well, an operation which will
commence shortly and which (due to the fact we're testing a natural fracture)
is anticipated to take significantly less time than the State 16-2 well
production test, which is still in the late flow back phase to clean up all
injected completion fluids.

"In respect of the State 16-2 well test, the Company deliberately limited the
well from a production perspective in order to first test flow assurance and
uptime at a measured set of rates.  The long ramp-up ultimately demonstrated
success with stable constrained flows and solid uptime, but it also resulted
in the utilisation of most of our approved gas flaring allotment during the
ramp up phase.

"When constraints were relaxed to test the upper bounds of production rates,
flow was impacted by downhole salt precipitation, but once the root cause is
diagnosed, I'm confident our team will devise appropriate mitigation measures
as needed, and our plan will be to seek additional authority for continued
testing as we seek a greater understanding of the potential upside of the
well.  It's important to remember that the Paradox is an emerging play and
one in which we are breaking new ground, and while start-up issues are not
unexpected, our goal is to learn and improve with each subsequent phase of
operations.

"We look forward to updating investors on the results from the State 36-2
production test and once the results from the test are analysed, we expect to
be in a position to announce our plans for future drilling and infrastructure
plans on the Paradox project."

 

Contacts

 

 Zephyr Energy plc                                  Tel: +44 (0)20 7225 4590

 Colin Harrington (CEO)

 Chris Eadie (CFO)

 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 Gordon (UK) Limited - Joint Broker        Tel: +44 (0)20 7886 2500

 John Prior / Hugh Rich / James Sinclair-Ford

 Celicourt Communications - PR

 Mark Antelme / Felicity Winkles                   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 45,000-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 240 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.

 

The Williston portfolio currently consists of working-interests in over 200
modern horizontal wells which are expected to provide production of 1,550 -
1,750 barrels of oil equivalent per day, net to Zephyr, in 2023.  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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