Zephyr Energy PLC (AIM:ZPHR, OTCQB:ZPHRF) has told investors it plans to advance the Paradox project in Utah through redrilling at the original State 36-2 site to deliver a "twinned" well.
It follows the previously reported "well control incident" earlier this year.
Chief executive Colin Harrington described it as “the optimal path forward to harness the significant discovery” made originally in the initial well.
“We are focused on both the near-term potential of the State 36-2 well location as well as the long-term potential of the Paradox project and the board remains fully committed to its vision of opening up the next prolific onshore US oil and gas play,” Harrington said.
Benefits of a ‘twinned well’
"Benefits from a redrill include obtaining a new wellbore and utilising the learnings from the State 36-2 well operations to date, and we expect that our well control insurance coverage will cover substantially all costs associated with the redrill," Harrington said in a statement
“I am confident that our operations team will be able to deliver an effective twin well and once again access the considerable productivity we observed in the original well bore.”
He added: “Next steps include securing a drilling rig. In the interim, the workover rig currently on site will be moved to the 28-11 well pad, where it will undertake work to generate an additional source of incremental production for the company.
“The 28-11 well is a particularly liquid rich Cane Creek well and at this time of higher oil prices, this work is expected to have a rapid payback and provide a stable revenue stream going forward.”
Zephyr repeated prior guidance that it expects to recoup most costs related to the well incident in April through its insurance cover.
The company, meanwhile, also updated on its Greentown Federal 28-11 well which was acquired in October 2022, and recently restarted production.
It is now planned that a new pump will be installed to enable production up to mandated flaring limits.
Acquiring new opportunity
Additionally, Zephyr has agreed to farm-in to a 1,047-acre leasehold position in the Salt Wash Field, which lies south of Zephyr's White Sands Unit in Utah. The field was first discovered in 1961 and it hosts proven oil, gas, and helium reserves. Zephyr plans drilling activity for the second quarter of 2024.
To acquire its interest in Salt Wash, the company is paying US$300,000 upfront (within 30 days) followed by a further US$300,000 within 60 days.
“We have long studied the potential to redevelop the remaining reserves of the Salt Wash Field,” Harrington said, adding “[it] lies directly to the south of the WSU, utilises the same road network, and may ultimately sell produced hydrocarbon volumes into our recently acquired pipeline infrastructure.
“While helium is a new addition to our resource exposure, many nearby Paradox Basin oil and gas operators are already producing co-mingled helium in commercial quantities, and there is an active local offtake market for produced helium.
“While Zephyr is not looking for helium to become a primary focus, we do expect to partner with industry participants to help appraise and fund the potential of this resource while also taking advantage of our regional knowledge, existing operations and asset platform.
Harrington added: “I should also make clear that funding for the Commitment well will not be provided through a future Zephyr equity raise.”
Confident for coming months
The Zephyr boss, meanwhile, highlighted his confidence that the company is “taking the optimal course of action for the long-term value of the company”.
He said the next months will be “full of activity” with the company’s efforts focused on preparing its next round of drilling along with the delivery of a gas sales agreement and the development of supporting infrastructure.
Finally, Harrington added: “With production from our non-operated portfolio expected to grow significantly in the fourth quarter, we are fully funded for all planned work on the existing portfolio, with room left for further acquisition opportunities and additional drilling in 2024."