Presentation & updated well & project economics
11 February 2021
Zephyr Energy plc
(the "Company" or "Zephyr")
Company Presentation and updated well and project economics
Zephyr Energy plc (AIM: ZPHR), the Rocky Mountain oil and gas company focused on responsible resource development, is pleased to advise that a new Corporate Presentation will shortly be available on its website at https://www.zephyrplc.com/investors/reports-presentations/
As announced on 8 February, the Company's Chief Executive Officer, Colin Harrington, will be delivering this presentation at the Proactive Investors One2One virtual investor forum this evening, which starts at 18:00 GMT and which can be accessed through the following link https://event.webinarjam.com/register/903/1nnlvtpg4
The Corporate Presentation provides details of on the Company's project in the Paradox Basin, Utah, U.S. (the "Paradox" or the "Paradox project") and on the State 16-2 well that was recently drilled. In addition, and further to the Company's announcement on 25 January 2021, the presentation includes revised economic forecasts for the Paradox project, updated to reflect current commodity prices.
The Company's Paradox acreage is estimated to hold the following:
· Net 2C contingent recoverable resources of over 12 million barrels of oil equivalent ("mmboe") from 30 wells;
· Net present value of approximately US$120 million (pre-Federal Income Tax), using a flat oil price of US$55 per barrel of oil ("BO") and a ten percent discount rate ("NPV -10"); and
· Net present value of approximately US$148 million (pre-Federal Income Tax), using a flat oil price of US$60 per BO and a ten percent discount rate ("NPV -10").
The above estimates only include forecast resources in the Cane Creek reservoir and do not include the significant potential upside from additional overlying reservoirs which are being evaluated following the drilling of the State 16-2 well. The estimates were calculated in accordance with the Company's Competent Persons Report ("CPR") prepared by Gaffney Cline & Associates ("Gaffney Cline") in June 2018, and will be revised further once all data from the State 16-2 well has been processed.
A potential side track lateral on the State 16-2 well (the "State 16-2LN-CC") is forecast to have strong economics as a standalone investment. Utilising production profiles generated from Gaffney Cline's CPR, and updated with a $55 per BO and $60 per BO prices, the Board estimates the lateral side track could generate the following on a 2C basis:
Initial gross oil production rate: 780 barrels of oil per day
Estimated Ultimate Recovery: 550,000 BO and 1.8 billion cubic feet of gas
Return on Invested Capital: 232% at $55/BO; 314% at $60/BO
Single well net NPV-10: $5.7 million at $55/BO; $6.7 million at $60/BO
The Board believes that the Paradox project has the potential to be a project of considerable scale versus Zephyr's current market capitalisation, and the drilling of the State 16-2LN-CC side track lateral would be a major step forward as Zephyr seeks to unlock the considerable potential value of the project. The decision on whether to drill the side track lateral will be made once the Company has full results from all of the data acquired, and the Board currently expects to be able to make that decision by the end of March.
Contacts:
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Zephyr Energy plc Colin Harrington (CEO) Chris Eadie (CFO)
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Tel: +44 (0)20 7225 4590 |
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Allenby Capital Limited - AIM Nominated Adviser Jeremy Porter / Liz Kirchner
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Tel: +44 (0)20 3328 5656
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Turner Pope Investments - Broker Andy Thacker / Zoe Alexander
Flagstaff Strategic and Investor Communications Tim Thompson / Mark Edwards / Fergus Mellon |
Tel: +44 (0)20 3657 0050
Tel: +44 (0) 20 7129 1474 |
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Glossary of Terms and Definitions
1C Low Estimate of Contingent Resources
2C Best Estimate of Contingent Resources
3C High Estimate of Contingent Resources
CONTINGENT RESOURCES
Those quantities of petroleum estimated, as of a given date, to be potentially recoverable from known accumulations by application of development projects, but which are not currently considered to be commercially recoverable due to one or more contingencies.
Contingent Resources may include, for example, projects for which there are currently no viable markets, or where commercial recovery is dependent on technology under development, or where evaluation of the accumulation is insufficient to clearly assess commerciality. Contingent Resources are further categorized in accordance with the level of certainty associated with the estimates and may be sub-classified based on project maturity and/or characterized by their economic status.
Background to the 16-2 well
As previously announced, Zephyr has been working with a project team led by the University of Utah's Energy & Geoscience Institute ("EGI"), in collaboration with the Utah Geological Survey (the "UGS") and other Utah-based partners. The project is sponsored by the U.S. Department of Energy and its National Energy Technology Laboratory (the "DOE").
Entitled "Improving Production in Utah's Emerging Northern Paradox Unconventional Oil Play," the project's goal is to assess and perform optimisation analyses for more focused, efficient and less environmentally-impactful oil production strategies in the northern Paradox Basin, particularly in the Pennsylvanian Paradox Formation's Cane Creek shale and adjacent clastic zones.
As part of this study, the EGI and UGS originally planned to drill a vertical stratigraphic test well to gather data to improve the understanding of the Paradox Basin play. It was planned that the proposed well would target the Cane Creek and potentially the C18/19 reservoirs, acquiring both core data and a comprehensive well log suite in order to provide valuable new basin data.
Over a period of several months, the project team analysed multiple potential well locations across the Paradox Basin, and the Company was delighted that the EGI and UGS selected Zephyr's Paradox acreage as the location on which to drill the well.
The Company's location was selected for a number of reasons, including the quality of the Group's underlying 3D seismic data (which can be tied into the well results to build a stronger integrated predictive model) as well as a favourable surface location which will be sited on a pre-existing pad.
After Zephyr's Paradox acreage was selected as the location for the test well, Zephyr worked with its project partners to construct a project plan that maximised opportunity for all parties.
A key part of this plan was to design the well in such a way that it could not only be used to obtain all the data required by the research project, but so that it could also be re-used by the Company in the future as the host for a lateral appraisal well. This approach not only reduces environmental impact but will also significantly reduce future lateral well costs for the Company.
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