TIDMZPHR
RNS Number : 6287L
Zephyr Energy PLC
14 January 2021
Prior to publication, the information contained within this
announcement was deemed by the Company to constitute inside
information as stipulated under the Market Abuse Regulation No.
596/2014. With the publication of this announcement, this
information is now considered to be in the public domain.
14 January 2021
Zephyr Energy plc
(the "Company" or "Zephyr")
State 16-2 Well Update
Drilling & data acquisition completed ahead of schedule;
113 feet of continuous core and open hole logs secured;
initial indications suggest presence of hydrocarbons across
multiple reservoir intervals;
data evaluation efforts now underway
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") and progress with the State
16-2 well .
Zephyr is delighted to announce that the State 16-2
stratigraphic test well was successfully drilled to a measured
depth of 9,745 feet total depth ("TD"). Drilling operations were
safe and effective, were conducted in accordance with Covid-19
related guidance and restrictions, and were completed well within
the Company's forecast timeframe.
Zephyr's primary objective was to drill and set casing at 6,437
feet measured depth in order to provide a host wellbore for a
future horizontal side track. The Company achieved this goal within
13 days from spud - and subsequently reached TD within 19 days of
spud, a marked improvement over historical drilling efforts in this
part of the Paradox Basin. The reduction in drilling time
represents a major operational success, and demonstrates that the
cost of future development wells can be significantly reduced from
earlier estimates, thereby improving the overall potential value of
the Paradox project for Shareholders.
Zephyr's secondary objective was to acquire new data to improve
the understanding of its Paradox acreage position. The Board of
Zephyr is pleased to report that Zephyr's data acquisition
programme successfully secured the following:
-- Approximately 113 feet of continuous whole core across the
historically productive Cane Creek reservoir interval (the "Cane
Creek");
-- Rotary side wall cores in seven shallower exploration targets; and
-- Gamma ray, neutron density, resistivity, formation
lithoscanner and sonic wireline log data across the bulk of the
Paradox Formation, all of which add significant new petrophysical
information to our existing suite of geologic data.
The 113 feet of Cane Creek core, believed to be the first whole
core ever retrieved in the northern part of the Paradox Basin, has
been shipped from the well site to a laboratory where detailed
analysis will now commence.
Initial indications show similar log responses to offset wells,
suggesting the presence of hydrocarbons in multiple reservoir
intervals. The Company will now begin the work to integrate all log
and core data to fully explore the initial findings in these
complex reservoirs. The analyses will then be combined with
Zephyr's existing 3D seismic data, and Shareholders will be updated
with detailed results as they become available over the coming
weeks.
Now that drilling and data acquisition operations are complete,
the State 16-2 well will be temporarily plugged back at 6,437 feet
TD. This provides Zephyr the opportunity to economically re-utilise
the existing wellbore as the sidetrack host from which a future
horizontal appraisal well can be drilled. Planning for this
horizontal lateral is already underway, and it will seek to target
a series of features identified by our high-quality 3D seismic
data. If successful, the State 16-2 lateral would deliver first
commercial production from the Company's Paradox project.
Colin Harrington, Zephyr's Chief Executive, said "This is a
fantastic result - we delivered on our two major objectives by
successfully drilling to our target depth ahead of forecast, and by
collecting significant amounts of reservoir data across multiple
zones that suggest hydrocarbon presence.
"Our drilling team and contractors worked diligently to deliver
a safe and effective operation - one which reached our Cane Creek
target within 19 days from spud. When compared to all historical
wells in the vicinity, this was a 50% reduction in time versus the
previous record holder, and a 58% reduction in time versus the
average of those historical wells. In addition to the rapid
drilling results, hole conditions and well stability remained
excellent throughout the operations.
"The ability to reduce drilling time is important in many ways.
Most significantly, it demonstrates that with a modern drilling
rig, advanced tools and an experienced operations team, development
of our leasehold may be executed more quickly and at a lower cost
than previous estimates, which therefore increases our already
bullish view of future project economics and value.
"The securing of the continuous core is also significant. Our
State 16-2 drilling operation successfully acquired the first
substantive rock samples from the Cane Creek reservoir in this
northern part of the Paradox play. In addition, our sidewall coring
collected the first rock capable of measurement from seven
additional overlying reservoirs. We also gained high quality log
data across the majority of the Paradox Formation. The analysis and
interpretation of this data has now commenced and will serve to
substantially improve our understanding of the geology, the
potential upside - and, when integrated with our existing 3D
seismic, how best to target and test the natural fractures that
exist in the play.
"It's important to bear in mind the relatively untested
potential of the Paradox Basin. The Cane Creek reservoir has
produced over 10 million barrels of oil to date. However, the US
Geologic Survey estimates a basin-wide, mean potential 1.2 billion
barrels of oil equivalent in the Cane Creek reservoir alone*,
indicating a substantial potential yet to be targeted. Further
prospectivity also exists in other overlying reservoirs from which
we secured data, and these additional reservoirs also appear to
hold the presence of hydrocarbons. The data acquired from the State
16-2, when integrated using modern tools and the resources of our
world class academic and industry partners, is a massive step
forward in our pursuit to unlock the value which we believe is
inherent in our Paradox project and across this Basin.
"I'd like to conclude with a note of gratitude for our team, our
partners and our contractors. This well was drilled around the
clock in challenging conditions, through snow storms and sub-zero
temperatures, and the work kept twenty-two dedicated people away
from their families over the holidays. Their collective performance
was exemplary, as was their adherence to our COVID-19 protocols.
I'd like to thank them all, once again, for their hard work,
resilience and professionalism."
* Whidden, K.J., Anna, L.O., Pearson, K.M., and Lillis, P.G., 2012,
Assessment of undiscovered oil and gas resources in the Paradox
Basin Province, Utah, Colorado, New Mexico, and Arizona: U.S.
Geological Survey Fact Sheet 2012-3031, 4 p
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 Tel: +44 (0) 20 7129
Tim Thompson / Mark Edwards / Fergus 1474
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.
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 it will
also potentially significantly reduce future well costs for the
Company.
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