TIDMZPHR
RNS Number : 1457I
Zephyr Energy PLC
10 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.
10 December 2020
Zephyr Energy plc
(the "Company" or "Zephyr")
State 16-2 well milestones met;
Conductor rig on site;
Main rig mobilisation underway; and,
Second tranche grant funds received
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") where the Company is in the final stages of preparation
ahead of the spud of its 'dual-use' State 16-2 well.
The Company initially targeted a spud date by 31 December - and
it remains firmly on track to deliver this key corporate
objective.
Over the last two months, the Company made significant progress
on important milestones to ensure that it can safely deliver a
successful well on time and within budget. During this period, the
Company:
-- Assembled a project drilling team with substantial Paradox Basin drilling expertise;
-- Secured all permits and satisfied all pre-operational conditions;
-- Completed remediation works on the road leading to the State 16-2 site;
-- Finished all other site preparations, including the
completion of work to responsibly plug and permanently abandon an
existing inactive well on the pad;
-- Awarded the rig contract to Cyclone Drilling Inc.
("Cyclone"), a leading provider of purpose-built rigs in the Rocky
Mountain region. The specific rig under contract is Cyclone Rig
#34; and,
-- Received the first $600,000 tranche of grant funds allocated
by the U.S Department of Energy and its National Energy Technology
Laboratory (the "DOE") for the drilling of the well.
Today, the Company is pleased to announce that a conductor rig
is on-site at the State 16-2 pad, where it has commenced work to
drill and set conductor casing. This initial drilling will be
completed shortly and will provide a stable base for the main rig,
Cyclone Rig #34, as well as provide protections for the surface
formations during drilling operations.
Zephyr has also been informed that Cyclone Rig #34, having
completed its previous work in Wyoming, has now commenced
mobilisation to the State 16-2 site. Once on site next week, the
equipment will be rigged up over a period of a week in preparation
to drill the stratigraphic well to approximately 9,850-foot true
vertical depth. Drilling, once spudded, is expected to take between
30-40 days and will seek to acquire continuous core and electronic
log data from the Cane Creek reservoir, as well as a comprehensive
log suite across other shallower reservoirs.
In addition, the Company can confirm that it has received the
second US$600,000 tranche of the US$2 million grant funds allocated
by the DOE for the drilling of the well. A further US$600,000 is
due once drilling has commenced and the final balance of US$200,000
will be received by Zephyr once additional routine well development
milestones are met.
Colin Harrington, Zephyr's Chief Executive, said "Given these
unusual times, I'm particularly proud that our team continues to
work through significant hurdles in order to deliver the drilling
of this well on the timeline - and in the responsible manner - that
we originally promised. It's an exciting moment for the Company and
its stakeholders as we begin to unlock the considerable value from
our Paradox project."
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.
The primary objectives of the initial stratigraphic well are to
drill vertically to an approximate true vertical depth ("TVD") of
9,850 feet, and to acquire up to 90 feet of continuous core from
the Cane Creek reservoir. The results from the analysis of the core
and from other drilling data are expected to be available within
three months from the completion of drilling.
Once the vertical well is completed it will be temporarily
plugged back to 6,500 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 drilled.
By re-utilising the vertical portion of the stratigraphic well, the
Company estimates the total costs of drilling a future horizontal
appraisal well will be reduced from circa US$6.0m to circa
US$3.0m.
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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