Zephyr Energy PLC (AIM:ZPHR, OTCQB:ZPHRF) has laid out its plans for the Salt Wash Field helium project, located in the vicinity of its Paradox oil and gas project.
The AIM-quoted firm is to acquire at least 75% of Salt Wash, which was formerly an oil and gas operation with by-product helium volumes.
Salt Wash is described by Zephyr as having a unique geological structure - comprising a thin oil rim underlaid by a significant gas cap, rich in nitrogen, hydrocarbon gases, and notably, helium.
In the past, it produced around 1.65 million barrels of oil and 11.7 billion cubic feet of gas, but its not been online since the 2014 downturn in crude prices.
Zephyr, as previously announced, is earning into the project with some $600,000 paid to the leaseholder, and it is committed to spud a new well at the project before the end of June.
The company today added that it believes it can meet this intended timeline, though "alternatives to extend the deadline may also exist".
Zephy has received multiple informal proposals regarding potential funding for 100% of the drill at the asset level, and is currently considering the best option to maximise the value from the exciting opportunity.
Today, Zephyr also detailed its forecasts for a possible future of Salt Wash as a helium project.
It estimates the net helium discovered resource potential between 70 million and 190 million cubic feet, from just the known Leadville formation, excluding the project’s exploration targets which are currently estimated between 40 million and 660 million cubic feet.
Helium, which is abundant but not concentrated in the atmosphere, commands a premium price compared to natural gases used for energy and heating. Helium is an essential component in several important industrial and medical applications, including its use in MRI scanning technology.
Zephyr estimates the Salt Wash project’s helium value at around $58 million (discounted NPV), with its upside ‘risked’ value pitched at $120 million.
Salt Wash is likely to draw investor attention as helium exploration has been a high-interest area in recent years with a small number of companies in the UK and Canada particularly in the spotlight for small-cap investors.
Eyes will now be on the funding and drill plans for Salt Wash in the coming weeks and months.
"We are excited about the potential of the Salt Wash project and are appraising several funding options to maximise value for our shareholders,” Zephyr chief executive Colin Harrington said in a statement.
"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 our primary focus, we do believe that the Salt Wash project has significant and currently unrecognised potential value for our shareholders and can further utilise our team's significant experience in the Paradox Basin.
“We look forward to keeping the market updated on our progress."