Zephyr Energy Plc announced the first flowing hydrocarbons from the state 16-2LN-CC well in Utah as production testing and well clean-up operations continue.
The production of hydrocarbons is a major milestone for the company, Zephyr said in a statement and marks the first horizontal well in the wider Paradox Basin to flow hydrocarbons using a modern hydraulically stimulated completion.
Flows from the well are presently constrained yet rates seen during testing averaged 420 barrels oil equivalent per day, Zephyr said, whilst noting that recently measured hourly rates equated to 690 boepd on a slightly less restrictive choke.
"I'm absolutely delighted that, after many years of hard work and investment in the Paradox Basin, we can finally announce the first flowing hydrocarbons from our Paradox project,” said chief executive Colin Harrington.
“Today marks a historic moment and heightens our expectations regarding the future development potential of Zephyr's leaseholding.
"We've always viewed this first well as a 'proof of concept' for a wider development, and our future wells are expected to benefit from further optimisations such as longer lateral lengths and from additional refinements of completion techniques.
“Even without those future enhancements, I'm hugely excited that we're seeing rates of nearly 700 boepd, especially given the substantial level of choke on the well and the fact that we are rate constrained by existing surface facilities.”
Harrington told investors he “fully expects” to see production rates rise if the company can resolve facility constraints through the remainder of production testing.
Additionally, Zephyr noted the well has shown limited pressure drawdown to date despite the high liquid rate, which it says is an “additional encouraging sign” that may indicate the well has accessed a large connected volume of resources.
Production testing is ongoing and the company said it would make further announcements when testing is completed, the hydrocarbon mix becomes better understood, and well flows become representative of longer-term reservoir performance.
Non-operated production
Zephyr additionally updated investors on its portfolio of interests in seven producing non-operated wells in the Williston Basin which saw some 35,848 barrels oil equivalent of sales attributable to the company in the third quarter.
It noted that some 31,604 barrels were sold at an average price of US$68.62 per barrel, whilst it saw an average gas sales price of US$4.71 per mcf and it sold some 1,083 barrels of natural gas liquids at an average price of US$38.21.
“The increased production from our non-operated portfolio in the Williston Basin, during this time of strong commodity pricing, is expected to generate substantial cashflows to fund future development efforts in the Paradox,” Harrington said.
ESG
Harrington added: “Finally, but very importantly, I want to remind shareholders that all produced hydrocarbons are carefully measured and always subject to our carbon mitigation efforts.
“While natural gas volumes are being flared through this testing phase, Zephyr remains committed, at the highest level, to providing carbon-neutral operations through the purchase of Verified Emission Reduction credits to offset our Scope 1 emissions.
“Moreover, we are well underway evaluating a number of profitable long-term solutions for the sale of any future natural gas volumes produced, including via interconnection with the nearby pipeline system as well as options to monetise produced gas directly on site.
“As always, our goal is to deliver strong shareholder value while being responsible stewards of investors' capital and responsible stewards of the environment."