Zephyr Energy PLC (AIM:ZPHR, OTCQB:ZPHRF) told investors it has signed a cooperation agreement with Kirkwood Oil and Gas covering data sharing and joint drilling in the Paradox basin, Utah.
The company, in a statement, additionally said that it remains confident that it can start its planned drill programmes in Utah in the near term. Zephyr noted that has completed all preparations to begin drilling the fully-funded State 36-2 LNW-CC well and it is awaiting a final Federal drilling permit – such approvals have slowed markedly across the entire US domestic oil and gas industry, it added.
In the meantime, Zephyr said it has recently completed construction of the shared pad on which the State 36-2 LNW-CC and the State 36-3 LN-C9 wells will be located. The latter is an exploration well, targeting a shallower reservoir and it is being permitted in parallel with the former.
"It's exciting to see activity building across the Paradox project as we prepare for the commencement of our fully-funded drilling programme,” said Zephyr chief executive Colin Harrington in the statement.
"Based on discussions with the relevant Federal authorities our team is confident that drilling approval has the potential to be granted in the near-term in spite of an industry-wide slowdown of Federal drilling permit approvals.
“In the meantime, we've worked extremely hard to navigate the challenging rig, labour and supply chain market environment so that we're positioned to spud the well as soon as possible," he added.
The well sites are located within Zephyr's White Sands Unit (WSU), and, a third well located outside the WSU will be drilled in partnership with Kirkwood – which Zephyr noted is the ‘Paradox Basin's largest operator’ and is a stakeholder in the Cane Creek field, some 12 miles south of WSU.
The joint well will be drilled Grand County, Utah, immediately to the south of Cane Creek. It will target the underlying Cane Creek reservoir and will be a test of the potential of modern hydraulic stimulation and completion methods within Cane Creek’s “black oil fairway”.
Previously, a horizontal Cane Creek well drilled in 2014 was recompleted with a ‘small volume diesel stimulation’, Zephyr said, noting that it has produced some 188,000 barrels of oil to date and is still in production today. The company highlighted that the partners expect a new well applying latest completion techniques, will see increased initial production rates and higher ultimate recoveries.
Additionally, it is expected that success in the joint well would be a ‘play opening’ opportunity.
Zephyr chief executive, Harrington commented: “As the most active operator in the northern Paradox Basin, Kirkwood's team has a strong history and service relationships which are second to none in the basin.
“Paired with Zephyr's technical understanding and expertise gained from successfully drilling the northern Paradox Basin's first horizontal well using a modern completion, our joint cooperation on the funding and drilling of a new well - at a location where our respective acreage positions are contiguous - has the potential to be highly beneficial for both parties, and with a minimum of surface disruption.
“We look forward to the collaboration and are eager to see the application of hydraulic stimulation applied to a long lateral horizontal well in the black oil fairway of the Cane Creek Field.”