Zephyr Energy acquires additional acreage in Utah’s Paradox Basin
Zephyr Energy, the Rocky Mountain oil and gas company focused on responsible resource development from carbon-neutral operations, announced an increase in its operating land position with the acquisition of an additional 1,920 acres in the Paradox Basin, Utah, United States
Zephyr has increased its land position adjacent to its operated White Sands Unit (WSU) through the targeted acquisition of 1,920 leased acres considered by the company to have immediate development potential.
Optimal location. The new acreage is directly abutting the Zephyr-operated WSU, with the potential to be added to the unit acreage subject to US Bureau of Land Management (BLM) approval.
- The acquired area is largely covered by existing Zephyr 3D seismic and directly borders the Zephyr concession on which the planned State 36-2 LNW-CC and 36-3 LN-C9 well pad is located.
- The new area is close to pre-existing surface infrastructure in the form of a six-inch gas pipeline that crosses the lease.
Immediate drilling profits. By adding the new area, the lateral for the proposed State 36-2 LNW-CC can be fully completed over a lateral length of 10,000 feet, subject to final regulatory approval. This should further improve the economics of the well and the estimated ultimate recovery.
- Concurrent with the acquisition, Zephyr recently amended its BLM Application for a Drilling License (an “APD”) for the State 36-2 LNW-CC well to reflect the improved completion design. BLM approval is expected shortly.
Increased global resources and drill locations. Based on modeling results from the recently drilled State 16-2LN-CC, modeling from the upcoming State 36-2 LNW-CC, and production data from the nearby Federal 28-11 vertical well, the engineering team at Zephyr estimates that the acquisition adds over 4 million barrels of oil equivalent of additional net contingent resources of 2C to Zephyr’s Paradox Basin position with the following additional benefits:
- The acquisition significantly increases the Company’s working interest in approximately 4 Cane Creek reservoir wellsites, adding approximately 2.4 net wells assuming lateral well lengths of 2 miles.
- It adds a 10% risk-free net present value. discount rate (“NPV-10”), net to Zephyr, of approximately US$40 million from the Cane Creek Reservoir, based on estimated economics for 2-mile laterals. This estimate assumes the results of the pass cases of the State 16-2 LN-CC throughput tests and the State 36-2 LNW-CC drills and tests.
- It provides access to an area that can hold liquid yields similar to those seen at the nearby Federal 28-11 vertical well and higher than those of the recently tested State 16-2 LNW-CC well.
- It offers additional potential in the overlying shallow clastic zones.
The acquisition is part of the company’s ongoing portfolio management of its position in the Paradox Basin. This active land management strategy has resulted in a defensible and growing portfolio of development opportunities that Zephyr’s board believes is increasingly difficult to replicate in the current regulatory and political environment.
Although the terms of the acquisition are not made public, immediate consideration for the new acreage has been satisfied by payment from Zephyr’s existing cash resources. The majority of the consideration paid to the vendor is expected to take the form of royalty payments which are only payable upon successful drilling. The Company has also agreed to use commercially reasonable efforts to drill at least one well on the new acreage by December 2023, a requirement which the Board says will be met by the upcoming drilling of the State 36-2 LNW-CC well. .
Including the new acreage, the Company will operate a total of 39,473 gross acres in the Paradox Basin, the majority of which the Company has a 75% working interest.