Zephyr Energy PLC (LON:ZPHR) chief executive Colin Harrington said the company may have a “wider viable development alternative to the natural fracture play” on its flagship project in Utah’s Paradox Basin.
His comment followed an in-depth geological analysis of results from the State 16-2 dual-use stratigraphic test well drilled earlier this year.
The work appears to have unlocked the potential of eight high-graded hydrocarbon reservoirs overlying the Cane Creek opportunity it was initially investigating.
The key to tapping their potential would be to develop them hydraulically stimulated resources rather than treating them as natural fracture plays as had been the working assumption before the assessment of the latest well data.
Zephyr believes there is the potential for up to 200 well locations across the eight overlying reservoirs identified.
That equates to a potential, net to the company, of up to an additional 125mln barrels of oil equivalent on a middle estimate (P50) of around 1bn barrels of hydrocarbons in place on the acreage.
But the Rocky Mountains oil and gas specialist went on to add: “This estimate of the HSRP [hydraulically stimulated resource] potential is preliminary and highly dependent upon developing better understanding of each zone's reservoir pressure, fluid phase, geo-mechanical properties, permeability and a successful proof of concept hydraulic stimulation and production well.
“The contingent resources are classified as 'development unclarified' and are risked for chance of development.”
Still, CEO Harrington said he was “encouraged” by the data.
“I am both cautiously optimistic and excited about our initial findings for the overlying reservoirs and the potential for substantially increased resources on the Paradox project,” he told investors.
"The results suggest multiple viable scenarios for considerable upside - from the exploration potential of the overlying reservoirs to the hydraulic stimulation of targeted reservoirs, or from a combination of both.
"It's important to bear in mind that while the potential project upside is exciting, the Paradox Basin is an immature play with limited data when compared to offset Rocky Mountain basins, with the only notable production coming from the Cane Creek reservoir NFP and with only very limited prior testing of the HSRP.
“That said, the knowledge gained from the development of other basins has the potential to be leveraged and applied in the Paradox, and we are very grateful to Premier for sharing their deep experience and expertise in relation to hydraulic stimulation. Recent advances in the technology and understanding of modern completion techniques may also prove beneficial to future development efforts.”
The company’s next steps will be to “safely and responsibly” drill the State 16-2LN-CC well to its targeted depth.
After that, it will obtain further log and geologic data, and test the well “should efforts to target production prove successful”.
"Given the substantial potential increase in project scale, the Board will also explore the possibility of a multiple well programme in the near-term, as additional drilling could serve to better define and unlock the significant potential value of this asset,” Harrington added.
"Above all, Zephyr's Board will always approach the potential Paradox development in a prudent and measured way and only deploy the Company's capital when it sees favourable risk/reward conditions.”