TIDMZPHR
RNS Number : 3386X
Zephyr Energy PLC
04 May 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.
4 May 2021
Zephyr Energy plc
(the "Company" or "Zephyr")
First North Dakota production revenues received;
completion of four North Dakota wells underway ahead of
schedule;
acquisition of acreage in North Dakota;
Paradox project update
Zephyr Energy plc (AIM: ZPHR), the Rocky Mountain oil and gas
company focused on responsible resource development, is pleased to
provide an update on its recently acquired non-operated working
interests in North Dakota, USA (the "Whiting wells"), to announce
the acquisition of additional near-term production interests in the
nearby area (the "Continental acreage "), and to provide an update
on its project in the Paradox Basin, Utah.
North Dakota assets: operations update
The recently acquired Whiting wells target production from the
Bakken and Three Forks Formations in the Williston Basin of North
Dakota, USA and consist of non-operated working interests in five
wells located across three separate pads:
-- The Iverson 11-14HU well, a well which is currently producing.
-- The S-Bar 11-7HU and 11-7TFHU wells, which are drilled but uncompleted ("DUC") wells.
-- The Feehan 11-9HU and 11-9TFHU wells, which are also DUC wells.
The Company is pleased to announce that it received its first
monthly revenue payment for production from its interest in the
Iverson well. The payment of $140,662 is related to volumes
produced in the month of February, during which net production
averaged 110 barrels of oil equivalent per day ("BOE")*.
In addition, the Company reports that completion operations are
already underway on its four S-Bar and Feehan DUC wells, ahead of
earlier operator forecasts. It is expected that all DUC wells will
be subsequently tied into infrastructure and achieve first
production by the end of July, with Zephyr expected to receive
monthly revenue payments for production from all five Whiting wells
by September 2021.
When the S-Bar and Feehan wells are brought online, these
interests are expected to provide the Company with substantial
additional oil production. The resulting cashflows, which will be
sheltered from federal tax due to Company's historical tax loss
position of circa US$16 million, will be utilised to fund
additional development of the Company's Paradox Basin project or to
acquire other attractive non-operated assets such as the Williston
acquisition announced today.
Acquisition of additional interests in the Williston Basin,
North Dakota
The Company is pleased to announce the acquisition of 11.6 acres
in the Williston Basin, North Dakota (the " Continental acreage ")
which gives Zephyr working interests in a drilling spacing unit ("
DSU ") operated by Continental Resources Inc. (" Continental "),
the largest operator in the Williston Basin. The Continental
acreage is located approximately ten miles from the Company's
Whiting wells, in a highly attractive part of the Basin. The cost
of the acreage acquired by Zephyr was approximately US$170,000 and
was paid for from the Company's existing cash resources.
Continental has already commenced drilling two initial wells on
the DSU ("Initial wells"), with up to an additional 22 future wells
("Future wells") forecast to be drilled by 2023.
-- For the Initial wells currently being drilled, Zephyr's
forecasted net capital expenditure (CAPEX) is approximately
$135,000 and will be funded from existing cash resources.
-- For the 22 Future wells proposed, Zephyr's net CAPEX is
forecast to be approximately $710,000, which could also be funded
from the Group's internal cash resources.
-- CAPEX on the Future wells is discretionary, and Zephyr's
Board of Directors will elect whether to participate in those wells
on a case-by-case basis.
The Continental acreage has, net to Zephyr, Company estimated 2P
reserves (from all 24 wells) of circa 60,000 barrels of oil
equivalent ("BOE"), which were acquired at a price of approximately
$2.83 per BOE. The 1P reserves on the Continental acreage are, net
to Zephyr, estimated at circa 41,000 BOE and the 3P reserves at
circa 72,000 BOE.
This opportunistic acquisition has strong forecast economics and
provides the Company with further exposure to low risk, near-term
production. Initial revenues from the acquisition are expected to
be received in the second half of this year.
Preparations for State 16-2 CC LN well in Paradox Basin continue
on schedule, resource evaluation work continues
The Company continues to make progress with permitting, detailed
drill planning and vendor selection related to the drilling of the
State 16-2 CC LN well on the Company's flagship project in the
Paradox Basin, Utah. The Company remains on track to drill the well
in July 2021, and Zephyr will update Shareholders regularly as key
well planning milestones are met.
In addition to drilling preparations, the detailed resource
evaluation work remains ongoing, both in regard to the potential in
overlying reservoirs above the Cane Creek reservoir, and in respect
to the potential for a resource play development across the
Company's Paradox leasehold. Zephyr continues to work with its
partners at the University of Utah, the Utah Geological Survey and
third-party consulting firms to develop an updated geological model
and resource estimates. The Company will update Shareholders when
this evaluation work is complete.
Colin Harrington, Chief Executive of Zephyr, said : "Following
the completion of our fundraise and acquisition earlier this month,
I'm delighted that the Company has officially delivered a key
corporate objective in becoming a cash-flowing oil producer.
Furthermore, with the completions of the four Whiting DUC wells
underway ahead of schedule, we look forward to substantially
increased cashflows in the very near term. This provides us with an
excellent platform on which to build, particularly with the
envisioned incremental production coming online at a time of strong
commodity pricing.
"Over the last few weeks, Zephyr has transformed into a
fully-funded, self-sustaining platform with the potential for
significant organic growth from the forthcoming drilling programme
on our Paradox project. In addition, we will continue to be
opportunistic in the pursuit of attractive, near-term, high-return,
low-risk non-operated assets, especially as current market
conditions are favourable for growth through acquisition.
"The acquisition of prime Bakken acreage announced today, in a
DSU operated by a first-class Williston Basin participant, is a
strong example of what can be achieved in the current market. The
acreage is in an excellent location and provides both near-term
drilling exposure and future drilling optionality. While the
initial scale of the acquisition is small, for a minimal upfront
cost Zephyr now has potential to participate in up to 24 highly
economic wells over the next two years. Given the continued
improvement in drilling costs and robust oil price environment, the
Company believes this acreage will provide attractive near-term
cash flow returns and is an excellent complement to our growing
portfolio of non-operated production assets.
"The next few months are expected to bring news flow on all
fronts as we target initial production on our Paradox project,
further define our Paradox resource and begin to generate
significant cash flow from our non-operated asset portfolio -
including cash flow from today's newly acquired asset.
"We look forward to keeping Shareholders updated as we look to
deliver on these key objectives. As always, we will continue to
strive to be responsible stewards of our investors' capital and
responsible stewards of the environment in which we work."
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 / James Pope Tel: +44 (0) 20 7129
Flagstaff Strategic and Investor Communications 1474
Tim Thompson / Mark Edwards / Fergus
Mellon
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.
Glossary of Terms
Reserves are those quantities of petroleum anticipated to be
commercially recoverable by application of development projects to
known accumulations from a given date forward under defined
conditions. Reserves must satisfy four criteria: discovered,
recoverable, commercial, and remaining (as of the evaluation's
effective date) based on the development project(s) applied. When
the range of uncertainty is represented by a probability
distribution, a low, best, and high estimate shall be provided such
that:
Proved Reserves are those quantities of Petroleum that, by
analysis of geoscience and engineering data, can be estimated with
reasonable certainty to be commercially recoverable from known
reservoirs and under defined technical and commercial conditions.
If deterministic methods are used, the term "reasonable certainty"
is intended to express a high degree of confidence that the
quantities will be recovered. If probabilistic methods are used,
there should be at least a 90% probability that the quantities
actually recovered will equal or exceed the estimate.
Probable Reserves are those additional Reserves which analysis
of geoscience and engineering data indicate are less likely to be
recovered than Proved Reserves but more certain to be recovered
than Possible Reserves. It is equally likely that actual remaining
quantities recovered will be greater than or less than the sum of
the estimated Proved plus Probable Reserves (2P). In this context,
when probabilistic methods are used, there should be at least a 50%
probability that the actual quantities recovered will equal or
exceed the 2P estimate.
Possible Reserves are those additional Reserves that analysis of
geoscience and engineering data suggest are less likely to be
recoverable than Probable Reserves. The total quantities ultimately
recovered from the project have a low probability to exceed the sum
of Proved plus Probable plus Possible (3P) Reserves, which is
equivalent to the high-estimate scenario. When probabilistic
methods are used, there should be at least a 10% probability that
the actual quantities recovered will equal or exceed the 3P
estimate.
*Production summaries and estimates are given as two phase well
head fluids (oil and unprocessed gas) summaries or estimates. A 6
mcf (thousand cubic feet) of gas to one BOE is used in the
conversion of gas to barrel of oil equivalents.
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END
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