TIDMZPHR
RNS Number : 2896N
Zephyr Energy PLC
29 January 2021
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.
29 January 2021
Zephyr Energy plc
(the "Company" or "Zephyr")
Initial evaluation of State 16-2 well log data:
Positive indications of stacked, continuous oil and gas
plays;
hydrocarbon saturation across a majority of potential
reservoirs;
update on U.S. Administration Executive Order
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" or the "Paradox project").
Over the last two months, Zephyr drilled the State 16-2 well
safely, successfully, and in record time to a total depth ("TD") of
9,745 feet. After reaching TD, a significant amount of reservoir
data was extracted. The well is currently plugged at 6,435 feet,
and is available for re-use as a host from which a future side
track lateral could be drilled with the objective of delivering the
Company's first oil production from the Paradox project.
Early Observations and Results
The State 16-2 well operations acquired extensive log and core
data. While the Company is still awaiting initial core analysis
from the laboratory, it is pleased to share the following early
observations and analysis from the open hole logs:
-- The State 16-2 well penetrated 21 clastic reservoirs
("reservoirs") within the Paradox Formation.
-- Substantial drilling gas shows were observed across 5 of the
reservoirs, including the prime target Cane Creek reservoir.
-- Robust drilling gas shows were observed across a further 10 of the reservoirs.
-- Log analysis suggests hydrocarbon saturation across the bulk
of these reservoirs. It is worth noting these positive initial
results will require further calibration with the acquired core
data.
-- Core samples were acquired from 12 of the reservoirs,
representing the first in situ core data from this part of the
Paradox Basin.
-- A draft petrophysical facies analysis shows similar reservoir
and source facies to offset wells in many of the reservoirs,
including the nearby producing Federal 28-11 well and a vertical
well from the producing Cane Creek Field, which were also cored in
the Cane Creek reservoir.
-- These results are consistent with offset wells and suggest
the presence of a hydrocarbon-filled reservoir matrix and high
Total Organic Carbon ("TOC") source rock intervals. These high TOC
source rock intervals may also store hydrocarbons and act as
another low permeability reservoir.
-- The results provide compelling evidence for the presence of
stacked continuous oil and gas plays - plays which could
potentially be drained should viable natural fracture networks be
identified (as has been demonstrated elsewhere in the Cane Creek
Field) or should artificial hydraulic stimulation completion
techniques be applied successfully.
-- Further evaluation is underway to calibrate the log data to
the core data, in order to evaluate which of the additional zones
have the volumetric potential to act as viable reservoir targets,
and to determine whether hydraulic stimulation can act as a viable
reservoir drainage strategy. This work will be integrated with
Zephyr's existing 3D seismic data and natural fracture
evaluation.
Next steps
The drilling and data acquisition operations of the State 16-2
well provided 113 feet of Cane Creek core, as well as 31 sidewall
cores from 11 overlying reservoirs. These core samples are
currently under evaluation at a laboratory in Houston where
detailed analysis is being conducted. The initial results from that
analysis will be available in the coming days.
The decision on whether to drill the side track lateral will be
made once the Company has full results from all of the data
acquired, and the Board currently expects to be able to make that
decision by the end of March.
In order to assist and expedite activity should the Company
decide to proceed with the side track lateral, Zephyr's team has
already commenced the related detailed well design and planning
work. The Company has also contracted to retain the services of the
same experienced drilling operations team which successfully
completed the vertical portion of the well in record time. In
addition, the Company has applied for the necessary permits
required to drill the horizontal lateral leg of the well. The State
16-2LN-CC Application to Drill ("APD"), once granted, would allow
Zephyr to fully test the commerciality of the Cane Creek reservoir
with a goal of achieving near term oil and natural gas
production.
Updated outlook regarding the Biden Administration Executive
Orders
Further to its announcement on 25 January 2021, the Company
notes that on 27 January 2021, the Biden Administration released an
Executive Order pausing the sale of new oil and natural gas leases
on public lands. This halt on new federal leasing does not impact
Zephyr's current leases, as the Company dedicated significant
resources over the last eighteen months to solidify all existing
federal leases across the 25,353 acres covered by its 3D seismic
data.
As importantly, the Executive Order does not impede the issuance
of new federal drilling permits. The Company believes the actions
dictated in the Executive Order are beneficial for Shareholders, in
that substantial undeveloped federal leaseholdings such as Zephyr's
may now be even more difficult to replicate.
Colin Harrington, Zephyr's Chief Executive, said "We continue to
make excellent progress in the work to unlock value from our
Paradox acreage. Although Zephyr is in the earliest phase of its
data evaluation process, and there is a significant amount of
additional data to come, t hese initial results provide positive
evidence of the presence of multiple stacked continuous oil and gas
plays on our Paradox acreage, in addition to the previously
outlined potential of the Cane Creek reservoir. Just as
importantly, the logs suggest hydrocarbon saturation across a
majority of these overlying potential reservoirs.
"These additional zones, if confirmed by further analysis, would
generate a much better understanding of the overall scale and value
of our prospective resource. Efforts are now underway to calibrate
log to core data, in order to evaluate which additional zones have
the most volumetric potential to act as viable reservoir
targets.
"We are also evaluating multiple alternatives for the future
commercial development of these assets. Any additional intervals
identified could be targeted using existing natural fracture
networks, similar to previous successful developments in the Cane
Creek Field. Alternatively, the project may also be developed as a
resource play using artificial stimulation completion techniques,
and the newly acquired data will also assist in the evaluation of
that type of development path. This optionality increases the
attractiveness of the project and will be helpful as we discuss
development plans with strategic and industry partners.
"Finally, we believe the actions taken this week by the Biden
Administration should serve to bring even more interest to our
leaseholding, given its scale, potential and undeveloped
status.
"It's an exciting time for the Company as we continue our work
to unlock the significant potential of our Paradox asset. Further
updates will be coming in the near term as results from the core
analysis become available."
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
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.
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. The project is sponsored
by the U.S. Department of Energy and its National Energy Technology
Laboratory (the "DOE").
Entitled "Improving Production in Utah's Emerging Northern
Paradox Unconventional Oil Play," the project's 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.
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.
After Zephyr's Paradox acreage was selected as the location for
the test well, Zephyr worked with its project partners to construct
a project plan that maximised opportunity for all parties.
A key part of this plan was to design the well in such a way
that it could not only be used to obtain all the data required by
the research project, but so that it could 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 will also
significantly reduce future lateral well costs for the Company.
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