TIDMZPHR
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
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 Tel: +44 (0)20 7886
John Prior / Hugh Rich / James Sinclair-Ford 2500
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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