TIDMZPHR
RNS Number : 4654F
Zephyr Energy PLC
10 July 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.
10 July 2023
Zephyr Energy plc
("Zephyr" or the "Company")
Paradox project update
Update on State 36-2 well;
First tranche of insurance proceeds received;
Amendment to White Sands Unit acreage approved; and
Assessments underway on previously acquired Greentown wells
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
operations at its flagship Paradox Project in the Paradox Basin,
Utah, U.S (the "Paradox project").
State 36-2 LNW-CC well update
On 19 January 2023 the Company announced that it had intersected
a major, highly-pressured, natural fracture network while drilling
the State 36-2 LNW-CC well (the "State 36-2 well"). On 20 March
2023 the Company announced that workover and subsequent production
test operations were set to commence.
In early April 2023, a significant well control issue arose in
which hydrocarbons flowed from the well in an uncontrolled manner.
The incident was the apparent result of multiple equipment failures
and in particular the failure of a safety valve. Importantly, there
were no injuries during the incident and subsequent well control
efforts proved to be successful.
At present, the State 36-2 well remains static and under
control, and Zephyr is in the process of pulling the production
tubing out of the hole, as some joints were compressed/compromised
or stuck due to the high pressures experienced during the well
control incident and subsequent well control efforts. To date
approximately 7,000 feet of 8,900 feet of tubing has been pulled
and inspected with circa 15 per cent of the pulled joints requiring
replacement. The Company is moving methodically to remove and
inspect the remaining joints while keeping the wellbore static.
Once the tubing work is complete, a final cement squeeze will be
performed and then the casing will be perforated across the
reservoir interval prior to production testing the well.
Current and future operations will continue to be conducted in
such a way that well control is maintained and working conditions
are safe for our team. Although recent operations have been slower
than initially expected, the Company's Board of Directors (the
"Board") notes the safe progress to date and fully expects to
deliver a production test in the near-term. This methodical and
patient approach is necessitated by the expected high pressure and
substantial apparent deliverability of the well and reservoir, as
witnessed during the earlier phases of the operation.
Well control insurance update
While the State 36-2 well control incident was a powerful
illustration of the high pressures and productivity inherent in
certain Paradox Basin natural fracture networks, the resulting well
work operations have subsequently resulted in a delay to the work
programme.
As previously reported, the Company retains comprehensive well
control insurance coverage, and the Board ultimately expects to
recover the vast majority of costs associated with the well control
incident. Under the terms of Zephyr's insurance policy these
payment recoveries are made on a reimbursement basis (after
approval by the insurer, and after the Company has paid the
corresponding contractor invoices).
The Company is pleased to announce the initial invoices
submitted to its insurer have now been approved and funds from
Zephyr's initial claim, totaling circa US$800,000, have been
received. Additional invoices are being submitted on a regular
basis with payments expected within 30 days of receipt by the
insurer.
BLM Approval of White Sands Unit Acreage
Expansion/Contraction
On 25 August, 2022, the Company announced the acquisition of
additional prime Paradox Basin acreage adjacent to its operated
White Sands Unit (the "WSU") through the targeted acquisition of
1,920 leased acres deemed by the Company to have immediate
development potential. Additional contiguous acreage was acquired
as reported on 14 September 2022 (collectively, the "acquired
acreage").
The acquired acreage was largely covered by Zephyr's existing 3D
seismic, and directly bordered the Zephyr lease on which the State
36-2 is located, and with access to pre-existing surface
infrastructure which Zephyr subsequently acquired.
A portion of the acquired acreage was envisioned to be added to
the WSU, subject to approval from the U.S. Bureau of Land
Management (the "BLM") for which the Company applied in early 2023.
Zephyr is pleased to report such approval has now been granted as
part of larger Expansion/Contraction amendment of the WSU. As part
of the approval, 5,000 high-graded acres with near-term development
potential have been added to the WSU, and roughly 5,395 acres
deemed by the Company to be less suitable for future development
have been relinquished.
These actions are part of the Company's active and ongoing
portfolio management of its Paradox Basin position. The Board is
pleased with its recent BLM interactions and subsequent approval,
which results in an amended federal unit with an upgraded and
manageable acreage position - a position increasingly difficult to
replicate in today's regulatory and political environment.
Assessment underway on recently acquired Greentown wells
The Company is also pleased to report that it has commenced the
assessment on five existing wellbores (located in the WSU) acquired
as part of a larger acquisition of infrastructure assets and which
was announced on 14 September 2022. Several of the existing wells
are former producers of hydrocarbons and were subsequently shut-in
due to lack of operating infrastructure. Others were deemed to have
potential future use as salt water disposal wells or as producers
of salt water brine for potential extraction of lithium
resources.
As part of this assessment, Zephyr's operations team recently
recommenced production from the Greentown Federal 28-11 well in
order to understand the well's potential contribution to overall
field production when ongoing field infrastructure work has been
completed. Hydrocarbons are currently flowing from the well, with
condensate volumes collected for sale and natural gas volumes being
flared. Once flow stabilises, the Company will assess its future
potential for the short and longer term when gas export is
available.
Colin Harrington, Zephyr's Chief Executive Officer, stated:
"Work on the State 36-2 well has progressed safely, and the team
continues to push forward while maintaining control of the well and
ensuring the safety of those working on it. I would like to once
again thank our team on the ground for their ongoing efforts in
keeping the well stable and safe.
"I am also pleased to report the receipt of initial proceeds
from our well control insurance policy. We appreciate the level of
engagement from our insurance partners.
"In relation to the upgraded acreage position in the WSU, we
continue to work closely with the BLM and other regulatory
authorities to perfect the federal unit by maximising its upside
potential and minimising environmental impact in areas not deemed
as prospective.
"Finally, I would like to note the work being done on the
Paradox project away from the 36-2 well, with recent operations
including the restart of the Federal 28-11 well where hydrocarbons
are now flowing. While this well will not have the same volumetric
potential as the State 16-2 LN-CC well or the State 36-2 well, we
do believe it will have positive economic impact once our
infrastructure buildout has been completed. Two other existing
wells in the Zephyr portfolio have also had notable prior shows of
hydrocarbons and offer potential future locations and/or workover
opportunities.
"We look forward to updating investors on continued progress in
the coming weeks during this pivotal time for the Paradox
project."
Contacts
Zephyr Energy plc Tel: +44 (0)20 7225
Colin Harrington (CEO) 4590
Chris Eadie (FD)
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
2500
Celicourt Communications - Public Relations
Mark Antelme / Felicity Winkles / Ali
Al Qahtani
Tel: +44 (0) 20 7770
6424
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 lease holding
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.
The Williston portfolio currently consists of working-interests
in over 220 modern horizontal wells. 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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