Zephyr Energy PLC (AIM:ZPHR, OTCQB:ZPHRF) is making steady progress at its Paradox Basin project in Utah, according to broker Panmure Liberum, but those holding out for clear timelines may have to wait a bit longer.
In a research note, Panmure said the company has begun early work on a gas processing plant and pipeline infrastructure, aiming to unlock value from its State 36-2 well, the centrepiece of its development plans.
A nearby export pipeline sits just 70 metres from the site, and discussions are underway with the owner. Panmure noted that the pipeline has sufficient spare capacity for Zephyr’s expected gas volumes, which removes a major logistical hurdle.
At this stage, Zephyr is planning for an initial capacity of between five and ten million cubic feet of gas per day.
Panmure estimates that it could generate between $19 million and $38 million in annual revenue, based on commodity prices of $4 per thousand cubic feet of gas and $65 a barrel for the associated condensate.
That condensate, which has an API gravity of between 52 and 60 degrees, is likely to fetch a premium price. Panmure highlighted its value to refiners, who can blend it with the heavier, waxier crudes that are common in the area.
It is also worth noting that the proposed plant capacity could be met by production from the State 36-2 well alone. Additional volumes could come from older wells, State 16-2 and Federal 28-11, if required.
To firm up the valuation of the wider project, Zephyr has commissioned Sproule to update its Competent Person’s Report.
Panmure expects the success of State 36-2 and improved recoveries from longer horizontal sections to lead to an increase in both reserves and resources across the acreage.
While the broker described the update as encouraging, it also acknowledged that investors may be left frustrated by the lack of clarity on development timelines.