Zephyr Energy readying to production test completed well in Paradox Basin

August 30, 2022

Zephyr Energy plc, the Rocky Mountain oil and gas company focused on responsible resource development from carbon-neutral operations, continues to prepare for extended production testing of its successfully drilled and completed State 16-2 LN-CC well. 

All relevant applications have been filed and orders for long lead time items have been made in anticipation of recommencement of production operations this autumn, subject to final permit approval. The production test is designed to further investigate the flow potential of the State 16-2 LN-CC well, to add production data for use in surface infrastructure development decisions, and to test and develop flow assurance processes for the well.

In conjunction with the production test, and as announced on June 7, Zephyr planned to sell a small portion of gas produced from the State 16-2 LN-CC to a crypto-mining facility to be co-located on the well pad.  Due to continued volatility in the crypto-currency markets, Zephyr’s Board has elected to further monitor pricing of crypto-mining equipment and facilities prior to proceeding with a co-located facility and prior to committing to any related investment.  To date, no Zephyr funds have been expended on crypto-mining equipment or facilities.  In parallel, Zephyr continues to focus on commercial efforts regarding the acceleration of gas sales into nearby existing gas infrastructure.

The company also continues with extensive preparatory work related to its upcoming high impact drilling program.  The State 36-2 LNW-CC well, with a 10,000-foot lateral well targeting the Cane Creek reservoir, has been designated as the first of the three wells planned to be drilled.  As previously noted, the Company updated its APD with the BLM to reflect the extended lateral.  Zephyr will proceed with drilling operations upon receiving Federal approval and securing a rig contract.  All state level approvals related to the State 36-2 LNW-CC well have now been received.

"Our team has been working flat out to deliver substantive value from our Paradox project during a globally challenging period of supply chain conditions.  We’ve often compared this type of development process to a jigsaw puzzle, and another important piece has been connected through the acquisition of the new acreage,” said Colin Harrington, Zephyr's Chief Executive. “This prime acreage, already located under Zephyr’s 3D seismic, adds valuable locations and resources, and just as importantly, it secures an immediate win by providing the opportunity to drill and complete a longer and more effective delineation/development well.  We expect a corresponding beneficial impact on the well’s production potential and its estimated ultimate recovery.

“With the new acreage secured, we plan to spud the State 36-2 LNW-CC as soon as final permits are received and a rig contract is secured.  We will be providing a full update on the proposed drilling program once the final permits have been issued.

“In the meantime, we are focused on recommencing production testing at the State 16-2 LN-CC, for which operational preparations are largely complete and long lead time items are in process.  The test will allow for the sale of liquid volumes and, most critically, allow for data generation which will help as we evaluate the most effective options for infrastructure development.

“Overall, I am thrilled to bolster the scale of our Paradox project at this point in time.  Our team is developing a unique understanding and data set across the Paradox Basin - and we're excited about this timely opportunity to further expand our operated asset base. Furthermore, we are always mindful of our core mission to be responsible stewards of the environment in which we operate, and we have taken great care to acquire acreage which we believe can be developed with a maximum of potential and a minimum of surface and environmental disruption.

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