TIDMZPHR
RNS Number : 0880J
Zephyr Energy PLC
18 December 2020
Prior to publication, the information contained within this
announcement was deemed by the Company to constitute inside
information as stipulated under the Market Abuse Regulations (EU)
No. 596/2014 ("MAR"). With the publication of this announcement,
this information is now considered to be in the public domain.
18 December 2020
Zephyr Energy plc
(the "Company" or "Zephyr")
State 16-2 well commencement of drilling
Zephyr Energy plc (AIM: ZPHR), the Rocky Mountain oil and gas
company focused on responsible resource development, provides an
update on its project in the Paradox Basin, Utah, U.S. (the
"Paradox") .
The Board of Zephyr is delighted to announce that it plans to
spud the State 16-2 well today, well ahead of the Company's
year-end target date for the commencement of drilling. Over the
last week, the Cyclone rig mobilised to the well site where it was
subsequently assembled and tested. In addition, all ancillary
services and service providers are now on site to support drilling
operations.
The primary objectives of the well are to drill a mildly
deviated well (8 degree maximum inclination) to an approximate true
vertical depth ("TVD") of 9,815 feet, so that the Company can
acquire up to 100 feet of continuous core from the Cane Creek
reservoir. The Company also plans to run a comprehensive well log
suite across the entire Paradox Formation, which includes the
primary Cane Creek reservoir target and at least five other
potential reservoir zones, in order to gain additional insight into
the potential of those secondary targets.
Drilling operations are expected to take 30-40 days from this
point forward, and the results from the analysis of the core and
logs are expected within three months from the completion of
drilling.
Once the drilling of the well is completed and the cores and
logs acquired, the well will be temporarily plugged back at 6,450
feet TVD. Zephyr (or a farm-in partner) will then have the
opportunity to re-utilise the vertical wellbore as a sidetrack host
from which a horizontal appraisal well can be drilled. By
re-utilising the vertical portion of the well, the Company
estimates the total costs of drilling a future horizontal appraisal
well will be reduced from circa US$6 million to circa US$3
million.
The spudding of the State 16-2 well is also the trigger for the
Company to draw down the third US$600,000 tranche of the US$2
million grant funds allocated to the project by the U.S Department
of Energy and its National Energy Technology Laboratory (the
"DOE"). The balance of the DOE funding, a further US$200,000, will
be received by Zephyr in one final tranche at the completion of
operations.
Colin Harrington, Zephyr's Chief Executive, said "The
commencement of drilling the State 16-2 well is a watershed moment
for the Company as we begin to unlock the considerable value from
our Paradox project.
"There has been significant time, money and effort expended by
many people over many years to get to this point - from the
original leasing program to the considerable investment in modern
3D seismic to the detailed technical work we've undertaken in
conjunction with our world-class project partners. All of this work
has been funded by the Company's Shareholders, and - from my
vantage point on site at the State 16-2 well - I am delighted to be
able to personally witness the tangible results of this historical
effort and investment.
"Once again, I would like to thank our partners and contractors,
and especially the project team, for their commitment to help
Zephyr achieve its ambitious timeline of spudding prior to the end
of the year - especially in such difficult conditions. We are now
100% focused on achieving our operational goals in the safest and
most effective manner possible. I look forward to keeping the
market updated on our progress."
Contacts:
Zephyr Energy plc Tel: +44 (0)20 7225 4590
Colin Harrington (CEO)
Chris Eadie (CFO)
Allenby Capital Limited - AIM Nominated Tel: +44 (0)20 3328 5656
Adviser
Jeremy Porter / Liz Kirchner
Turner Pope Investments - Broker Tel: +44 (0)20 3657 0050
Andy Thacker / Zoe Alexander
Flagstaff Strategic and Investor Communications
Tim Thompson / Mark Edwards / Fergus Tel: +44 (0) 20 7129
Mellon 1474
Background to the 16-2 well
As previously announced, Zephyr has been working with a project
team led by the University of Utah's Energy & Geoscience
Institute ("EGI"), in collaboration with the Utah Geological Survey
(the "UGS") and other Utah-based partners. This project is
sponsored by the U.S. Department of Energy and its National Energy
Technology Laboratory (the "DOE").
The project is entitled "Improving Production in Utah's Emerging
Northern Paradox Unconventional Oil Play" and its goal is to assess
and perform optimisation analyses for more focused, efficient and
less environmentally-impactful oil production strategies in the
northern Paradox Basin, particularly in the Pennsylvanian Paradox
Formation's Cane Creek shale and adjacent clastic zones. This
project is sponsored by the DOE.
As part of this study, the EGI and UGS originally planned to
drill a vertical stratigraphic test well to gather data to improve
the understanding of the Paradox Basin play. It was planned that
the proposed well would target the Cane Creek and potentially the
C18/19 reservoirs, acquiring both core data and a comprehensive
well log suite in order to provide valuable new basin data.
Over a period of several months, the project team analysed
multiple potential well locations across the Paradox Basin, and the
Company was delighted that the EGI and UGS selected Zephyr's
Paradox acreage as the location on which to drill the well.
The Company's location was selected for a number of reasons,
including the quality of the Group's underlying 3D seismic data
(which can be tied into the well results to build a stronger
integrated predictive model) as well as a favourable surface
location which will be sited on a pre-existing pad.
Since Zephyr's Paradox acreage was selected as the location for
the test well, Zephyr has been working with its project partners to
construct a project plan that maximises the opportunity for all
parties.
A key part of this plan is to design the well in such a way that
not only can it be used to obtain all the data required by the
research project, but that it can also be re-used by the Company in
the future as the host for a lateral appraisal well. This approach
not only reduces environmental impact but it will also potentially
significantly reduce future well costs for the Company.
It is currently expected that the total cost of the vertical
well activity is forecast to be between US$2.5 million to US$3
million, of which the first US$2million will be funded by grant
funding from the DOE and up to US$1 million will be funded by
Zephyr. Neither party is liable for any costs in excess of the US$3
million combined project limit.
Cyclone has been selected by the Company to drill the State 16-2
well. Its appointment followed a competitive selection process by
Zephyr's team, involving extensive technical and commercial
evaluation across multiple potential drilling contractors. Cyclone,
based in Gillette, Wyoming, is one of the leading providers of rigs
in the Rocky Mountain region (the "Rockies"). Cyclone's fleet of
modern rigs was purpose-built for operating in the remote locations
and rugged environment of the Rockies, and they hold one of the
best drilling safety records in the U.S. oil and gas industry.
Additionally, Cyclone has recent experience drilling similar
stratigraphic wells, including a 10,200-foot-deep stratigraphic
well drilled in 2019 which was also part-funded by the DOE.
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