Zephyr Energy PLC (LON:ZPHR) said it aims to begin production at its project in the Paradox Basin, Utah by drilling a side-track lateral well off the initial well later this year.
The lateral well will target production from the Cane Creek reservoir and will utilise the pre-existing roads, pad and wellbore from the State 16-2 well, the AIM-listed company said.
Since the completion of the State 16-2 well in late January, Zephyr and its project partners have been analysing the reservoir data obtained from the prime Cane Creek reservoir target and from multiple other shallower reservoirs.
Initial analysis of the Cane Creek continuous core data provides further evidence of hydrocarbon saturation across the Cane Creek reservoir, the company said.
The structure to be drilled in the proposed side-track has comparable geometry and form to other productive structures found within the neighbouring Cane Creek field, Zephyr said, and is characterised by multiple seismic indicators along its length that may represent natural fracture networks within the Cane Creek reservoir.
Using the State 16-2 well’s top hole will, it added, enables a substantial well cost reduction and drilling risk mitigation.
The Rocky Mountain oil and gas company’s board is aiming to deliver first oil production and benefit from recently improved commodity prices “in a rapid and responsible manner”, with permitting and detailed drill planning efforts for the lateral already underway.
A spud date of late in the first half or early in the second half of 2021 is being targeted, subject to final permitting, funding and internal approvals.
Zephyr added that is in “advanced discussions” with potential industry and financial partners regarding funding of the estimated drilling cost of US$3.5mln.
On its own, the lateral well, known as State 16-2LN CC, is forecast by the company’s board to have a net present value of roughly US$8.2mln at US$60.00 per barrel of oil and at a ten percent discount rate, with a breakeven oil price of US$23.00 per barrel of oil.
The well is estimated to offer ultimate recovery of 694,000 barrels of oil equivalent (mmboe), out of the total recoverable resources of over 12mmboe estimated for the entire Cane Creek reservoir on the company’s acreage.
Zephyr stressed that these estimates do not include what it sees as the significant potential upside from additional overlying reservoirs which are still being evaluated from the initial State 16-2 continuous core data and recently acquired log data, existing 3D seismic data, geologic and regional analogue analysis.
Chief executive Colin Harrington said: “I am delighted that the initial results obtained from the State 16-2 Cane Creek reservoir core data both corroborate and support the board’s long-held view that the Paradox has the potential to be a project of considerable scale with robust and highly attractive economics.”
He noted that Zephyr has already secured grant funding to reduce the cost of the wellbore host by US$2mln, “and an environment in which global commodity prices are rising, the board feels the timing is excellent to undertake the next step in the careful and responsible development of this project”.