Zephyr Energy plc (ZPHR) (ZPHRF), the Rocky Mountain oil and gas company focused on responsible resource development and carbon-neutral operations, is pleased to provide an update on recent progress on its non-operated asset portfolio in the Williston Basin, North Dakota, U.S.A.
Williston Basin update - Whiting operated wells
In March 2021, Zephyr completed the acquisition of non-operated working interests in five wells located on three separate pads operated by Whiting Petroleum Corporation ("Whiting"):
- The producing Iverson 11-14HU well;
- The S-Bar 11-7HU and 11-7TFHU wells (which were drilled but not completed ("DUC" wells) at the time of acquisition); and
- The Feehan 11-9HU and 11-9TFHU wells (which were also DUC wells at the time of acquisition).
In the period since the completion of the acquisition, Zephyr has received its scheduled monthly revenue payments related to its interests in the producing Iverson well. In addition, the S-Bar and Feehan wells were all completed by Whiting during the second quarter of 2021 - completion operations progressed as envisioned, at expected lateral lengths and ahead of schedule.
Zephyr is now pleased to announce that all acquired DUC wells on both the S-Bar and Feehan pads are tied into infrastructure and have been placed into production, and with a minimum of temporary gas flaring. Zephyr will update Shareholders on initial production rates once the wells have cleaned up and reached peak rate.
Williston Basin update - Continental operated wells
In May 2021, Zephyr announced the acquisition of 11.6 acres in the Williston Basin, North Dakota (the "Continental acreage") which gave Zephyr working interests in a drilling spacing unit ("DSU") operated by Continental Resources Inc. ("Continental"), the largest operator in the Williston Basin. The Continental acreage is located approximately ten miles from the Company's Whiting wells, in a highly attractive part of the Basin. Continental had already commenced drilling two initial wells on the DSU ("Initial wells") at the time of Zephyr's acquisition, with up to an additional 22 future wells ("Future wells") forecast to be drilled commencing in 2022.
Zephyr is now pleased to announce that the two Initial wells have been completed and are currently being placed into production. For the Initial wells drilled and completed, Zephyr's forecasted net capital expenditure (CAPEX) is approximately $135,000 and is being funded from existing cash resources. First revenues from the Initial wells are expected to be received by the end of the October 2021.
Zephyr's CAPEX for the 22 Future wells is forecast to be approximately $710,000, which it also proposes to fund from the Group's internal cash resources. The additional CAPEX on the Future wells is discretionary, and Zephyr's Board of Directors will elect whether to participate in those wells on a case-by-case basis.
Williston Basin update - future growth opportunities
Zephyr's working interests in the seven wells detailed above were acquired in the first half of 2021 and are projected to deliver strong economics via exposure to low-risk near-term production with additional development upside.
Now that these acquired wells are online, Zephyr's Williston Basin interests are expected to provide the Company with substantial additional oil production over the coming months. The resulting cashflows, which will be sheltered from federal corporation tax due to Company's historical tax loss position of circa US$16 million, will be utilised to fund additional development of the Company's flagship Paradox Basin project and/or to acquire other attractive non-operated assets located in the Rocky Mountain regions where the Company continues to pursue accretive transactions.
Colin Harrington, Chief Executive of Zephyr, said : " We have a great deal of activity taking place across our project portfolio, and I'm delighted with the milestones being met. Now that our interests in the seven acquired Williston Basin wells are drilled, completed and online - and at a time of strong commodity prices - we expect significant cash flow generation from the non-operated portion of our portfolio over the coming months.
"Cash flow generated in the second half of 2021 is forecast to be rapidly redeployed into additional accretive opportunities - either into our flagship Paradox project, on additional drilling opportunities in the Williston, on further accretive acquisitions, or on all of the above. Combined with the ongoing drilling operations at State 16-2LN-CC wellsite and our recent acreage addition in the Paradox Basin, our goal is to deliver substantial Shareholder value during the remainder of 2021.