REG - Zephyr Energy PLC - Operations Update

Zephyr EnergyAnnouncement

29/05/2025 07:00

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RNS Number : 5083K  Zephyr Energy PLC  29 May 2025

Prior to publication, the information contained within this announcement was
deemed by the Company to constitute inside information as stipulated under the
UK Market Abuse Regulation. With the publication of this announcement, this
information is now considered to be in the public domain.

 

29 May 2025

Zephyr Energy plc

(the "Company" or "Zephyr")

 

Operations Update

 

Initial results from State 36-2R well evaluation

 Williston Project and Zephyr Hawk update

 

 

Zephyr Energy plc (AIM: ZPHR) (OTCQB: ZPHRF) is pleased to provide initial
post-well evaluation results from the State 36-2R LNW-CC-R well (the "State
36-2R well") at the Company's flagship project in the Paradox Basin, Utah,
U.S. (the "Paradox project").   In addition, the Company also provides
initial results related to hydrocarbon production in the first quarter of 2025
("Q1") from its non-operated asset portfolio in the Williston Basin, North
Dakota and Montana, U.S. (the "Williston project") as well as an update on
business development activities in relation to the Williston project.

 

Colin Harrington, Zephyr's Chief Executive, said:

 

"The quality of the data gathered from our recent production test on the State
36-2R well is solid, and the results are robust.  The evaluation confirms
that the Cane Creek reservoir is highly productive and potentially ranks
alongside some of the most productive oil and gas plays in the U.S. The
results also suggest that there may be a substantial increase in our base case
recoverable resources which could add tremendous value to the project over
time.

 

"The decision to perform a novel perforation and acidisation completion has
been very much vindicated, and the potential for further optimisation of the
project is exciting. Our operations team, alongside key service company
partners, did an excellent job in delivering this result and I am thrilled
with these initial findings.

 

"There is much still to do, and our team is hard at to work to deliver on our
next key objective of delivering first gas.

 

"While the results announced today focus solely on the Cane Creek reservoir,
it should be remembered that there are eight other overlying reservoir zones
with core data that compares well with the Cane Creek B reservoir zone. This
highlights the further substantial potential of our project acreage that is
yet to be tested.  The scale of the project has the potential to grow
considerably and we look forward to sharing further information with both the
market and potential partners as work continues.

 

"I am also pleased to be able to announce our initial Q1 results from the
Williston project which continues to perform as a cash generating engine for
the wider group.  Work at our Zephyr Hawk subsidiary has also commenced with
a strong level of initial deal flow being evaluated."

 

State 36-2R well evaluation

The Zephyr team has conducted an integrated post well evaluation incorporating
all geological, geophysical and engineering data gathered from the State 36-2R
well and from the greater field area. The key results from the evaluation are
set out below.

·    Management estimates of gas estimated ultimate recovery (EUR) for
the State 36-2R well range from 4-6 billion cubic feet ("BCF") (0.9 to 1.3
BCF/1000 feet (') of perforated interval) and between 160,000 and 240,000
barrels of condensate, equivalent to a total range of 0.827 to 1.24 million
barrels of oil equivalent ("boe") for the well. The internal technical
evaluation of this well is now largely complete, prior to further review by a
third party.

 

·   These results can be scaled to longer lateral lengths (e.g. 10,000' to
15,000' laterals) for the purpose of field development planning, with
potential gas EURs ranging from 9 to 37.5 BCF per well (dependent upon
completed lateral length, location on structure, expected reservoir and fluid
properties).  Although well lengths will be constrained by the structural
form of the reservoir, as observed from the 3D seismic data and by the overall
well bore geometry proposed, the proposed conceptual development wells consist
of predominantly 10,000 feet to 15,000-feet horizontal wells. While drilling
and completing longer horizontal wells has not been undertaken in the Paradox
previously, the use of longer 2 and 3 mile laterals is widespread in other
U.S. resource plays and extends to 4 mile laterals in some locations.

 

·    The overall liquid yield development over the life of the well is
expected to deliver valuable condensate volumes ranging between 60-130bc/mmscf
(barrels of condensate per million standard cubic feet of gas) at initial
reservoir conditions. Over the estimated 20-year life of the well, total
liquid yield estimates of 20-60bc/mmscf are expected as reservoir pressure
drops.

 

The estimated normalised gas EUR/1000' lateral length forecast for the 36-2R
well (0.8-1.3 BCF/1000') and across the greater development area (0.8-2.5
BCF/1000') suggest potential well performance that is comparable to the top
six per cent of hydraulically stimulated horizontal gas wells across all the
key lower 48 onshore US plays, based on production, well data and EUR
assessment from the Enverus Prism database.*

·      These single well assessments can also be applied to a conceptual
full field development plan to understand the larger potential resource range
of the Cane Creek reservoir with 3D seismic coverage and which is under lease
by Zephyr. This conceptual development plan suggests the potential for a
further 20 Cane Creek reservoir horizontal wells (plus the previously drilled
State 16-2 LN-CC and State 36-2 wells), with preliminary management estimates
of gross ultimate recoverable gas in a low-mid-high scenario range of 174 -
341 - 501 BCF and 3.5 - 15.7 - 29mmbc of recoverable condensate (and set out
in the table below).

 

 Estimated Ultimate Recovery**        LOW         MID      HIGH
 Gross Recoverable Gas (BCF)          174.0       341.0                   501.0
 Gross Recoverable Condensate (MMBC)      3.5       15.7    29.0
 Total Gross equivalent (MMBOE)         32.5        72.5                  112.5

 

 

·      Initial management estimates of net ultimate recoverable
resources range from 137 - 271 - 399 BCF and 2.7-12.5-23.1 mmbc (26-58-90
mmboe net recoverable resources) (and are set out in the table below). These
estimates are interim and have been developed solely to illustrate the
potential recoverable resource of the Cane Creek reservoir under lease.
Further field development planning work and economic analysis will be
completed prior to the completion of a revised Competent Persons Report on the
Paradox project.

 Estimated Ultimate Recovery**      LOW         MID      HIGH
 Net Recoverable Gas (BCF)          137.0       271.0    399.0
 Net Recoverable Condensate (MMBC)      2.7       12.5     23.1
 Total Net equivalent (MMBOE)        25.6        57.7      89.5

 

 

Further observations on the State 36-2R well include the following:

The well is producing along the entire length and from all three reservoir
zones of the Cane Creek reservoir, and predominantly from the Cane Creek B
reservoir zone. This is due to the fact that the well was mostly drilled and
completed in the Cane Creek B reservoir zone. The near wellbore area shows
increased permeability that is most likely caused by the successful acid
stimulation. The well was not hydraulically fractured during perforation or
acidisation.

The reservoir matrix permeability also appears to be as good, or better, than
the Company's pre-drill, base case estimate of reservoir permeability, a key
driver for the estimated improvement in the resource base.

The novel completion technology deployed has been very successful both in
terms of accessing the reservoir but also enabling the assessment of the
matrix permeability and potential exists to further improve completion
effectiveness during future development.

Reservoir properties were determined from the well test results using an
analytical model. The resulting properties were then used to build a numerical
model to generate production forecasts. Both models were consistent with the
geological interpretation of the well and regional geologic data gathered
previously.

*Sample size used is the top 6,900 wells out of a total of 116,000 gas wells,
as defined by Enverus.

** Estimated Ultimate Recovery has no economic limit applied and is used here
to illustrate the technical potential of the well and field area.

Williston Project and Zephyr Hawk update

 

The Company also reports initial Q1 results related to hydrocarbon production
from the Company's Williston project.

·      Q1 production averaged 756 boepd, net to Zephyr, versus an
average production in the fourth quarter of 2024 ("Q4") of 829 boepd, net to
Zephyr. Both Q4 and Q1 were impacted by operator induced downtime, and the
Company expects the production impacts to be temporary.

·      At 31 March 2025, 228 wells in Zephyr's portfolio were available
for production (versus 229 wells at the end of Q4).

·      Net working interests across the Zephyr portfolio now average 7%
per well (equivalent to 16.0 net wells).

·      The Company hedged a total of 18,000 barrels of oil ("bbls") in
Q1. These were hedged at a weighted average price of price US$68.68 per barrel
of oil ("bbl").

In respect of the Company's newly formed acquisition vehicle Zephyr Hawk, as
announced on 13 May 2025, the Company is pleased to report it is in the
process of assessing approximately US$30 million of sourced drilling
opportunities which have the potential to be funded through the Company's new
US$100 million strategic partnership. The Company will provide further updates
to investors as and when individual transactions are finalised.

 

Contacts

 Zephyr Energy plc                                              Tel: +44 (0)20 7225 4590

 Colin Harrington (CEO)

 Chris Eadie (Group Finance Director and Company Secretary)

 Allenby Capital Limited - AIM Nominated Adviser                Tel: +44 (0)20 3328 5656

 Jeremy Porter / Vivek Bhardwaj

 Turner Pope Investments - Joint-Broker                         Tel: +44 (0)20 3657 0050

 James Pope / Andy Thacker

 Canaccord Genuity Limited - Joint-Broker                      Tel: +44 (0)20 7523 8000

 Henry Fitzgerald-O'Connor / Charlie Hammond

 Celicourt Communications - PR

 Mark Antelme / Ali AlQahtani                                  Tel: +44 (0) 20 7770 6424

 

Qualified Person

 

Dr Gregor Maxwell, BSc Hons. Geology and Petroleum Geology, PhD, Technical
Adviser to the Board of Zephyr Energy plc, who meets the criteria of a
qualified person under the AIM Note for Mining and Oil & Gas Companies
- June 2009, has reviewed and approved the technical information contained
within this announcement.

 

Notes to Editors

Zephyr Energy plc (AIM: ZPHR) (OTCQB: ZPHRF) is a technology-led oil and
gas company focused on responsible resource development from carbon-neutral
operations in the Rocky Mountain region of the United States.  The
Company's mission is rooted in two core values: to be responsible stewards of
its investors' capital, and to be responsible stewards of the environment in
which it works.

 

Zephyr's flagship asset is an operated 46,000-acre leaseholding located in
the Paradox Basin, Utah.

In addition to its operated assets, the Company owns working interests in a
broad portfolio of non-operated producing wells across
the Williston Basin in North Dakota and Montana. Cash flow from
the Williston production will be used to fund the planned Paradox
Basin development. In addition, the Board will consider further opportunistic
value-accretive acquisitions.

 

 

 

 

 

 

 

 

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