Zephyr Energy PLC on Monday reported increased estimates for recoverable resources in its assets in the Paradox Basin onshore Utah and that it is seeking a partner to launch development.
Proven recoverable reserves (1P) from the Crane Creek reservoir, which spans 20,000 acres in the company’s 100 percent-owned White Sands Unit (WSU), have increased from 0.16 million barrels of oil equivalent (MMboe) to 14.8 MMboe, the London-based company said.
The new 1P figure, representing seven wells, consists of 1.93 million barrels of oil sales volume, 59.36 billion cubic feet (Bcf) of gas sales volume and 2.97 million barrels of natural gas liquid (NGL) sales volume.
The new 1P figure is expected to “generate undiscounted free cash flows, net to Zephyr, in excess of $115 million, with a current NPV-10 of circa $36 million (an increase from $2.1 million in the 2022 CPR)”, stated the report on Zephyr’s website.
Meanwhile proven and probable reserves (2P) grew from 1.4 MMboe to 35.3 MMboe, valued $400 million in undiscounted free cash flows.
The updated 2P figure, from 12 wells, consists of 4.45 million barrels of oil sales volume, 142.24 Bcf of gas sales volume and 7.11 million barrels of NGL sales volume.
Contingent resources in the unrisked best estimate scenario (2C) increased to 24.41 MMboe, consisting of 3.25 million barrels of oil sales volume, 97.7 Bcf of gas sales volume and 4.89 million barrels of NGL sales volume.
The assessment was conducted by Sproule-ERCE International Ltd, which also did Crane Creek’s 2022 Competent Person’s Report (CPR).
“Sproule conducted certain tests and spot checks to confirm the adherence to the Society of Petroleum Engineers Petroleum Resources Management System reserves reporting requirements and that the data flowing into the company’s [Zephyr] reserves and contingent resources determination system was consistent with available records provided by the company”, Zephyr said.
“Both Zephyr and Sproule identify uncertainties which remain across the areas planned for development by the company. These include fluid composition and compressibility, water production, and continuity of geomechanical properties across the reservoir and their impact on hydraulic fracture characteristics and stimulated area around a well (well drainage area)”, it added.
Zephyr chief executive Colin Harrington said, “The [new] CPR further validates the considerable scale of the Paradox project, which is why we have launched a process to identify partners to accelerate drilling and the delivery of value from the asset”.
Several potential partners are reviewing the project’s data, according to Harrington. “The completion of the CPR will now enable more substantive discussions to take place”, Harrington said.
“I feel fortunate that we are bringing the project to development and commercialization at a time when interest and domestic gas demand is [sic] rising in the western markets, and as western seaboard LNG exports begin to ramp up.
“We believe that the Paradox project compares favorably on production and economic metrics with all of the current crude and natural gas basins in the U.S.
“To date, we have drilled two successful, one-mile horizontal wells utilizing different completion technologies and both demonstrated strong deliverability and expanded our completion design options for the greater field development. We have also gathered a substantial amount of data that will help inform future development plans.
“Furthermore, we have acquired significant infrastructure that will enable us to bring the project into full production, including gas gathering lines, plant infrastructure, permits and future water disposal wells, and we are close to securing gas export capacity”.
Harrington added, “I should also point out that the CPR only assesses the 20,000 acres covered by our 3D seismic in the WSU. Our goal is to continually expand the value of our acreage position, both vertically (through the overlying reservoirs) and horizontally (through the leasing of significant new acreage around our unit and infrastructure)”.
“Leased and open acreage without 3D seismic coverage has not been assessed in the CPR and Zephyr’s internal analysis indicates considerable potential immediately surrounding the WSU”, Harrington said.
“To that end, we have nominated a significant amount of contiguous acreage with the Bureau of Land Management for inclusion in future federal lease sales.
“On top of the proven Cane Creek reservoir potential, the eight overlying prospective reservoirs could all deliver similar recoverable volumes as the Cane Creek within the 3D coverage of the WSU and surrounding acreage nominated for lease sale inclusion, should they prove successful on drilling and testing”.
To contact the author, email jov.onsat@rigzone.com
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