Zephyr Energy highlights Paradox upside as is it mullls sidetrack

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Zephyr Energy Plc (LON:ZPHR) revealed new estimates for the Paradox project based on current commodity prices, following the initial findings of the State 16-2 well.

Contingent recoverable resources are estimated to exceed 12mln barrels of oil equivalent, based on 30 wells, the company said in a statement. 

It also estimates a net present value of US$120mlm, based on a US$55 per barrel oil price, and, US$148mln at US$60.

READ: State 16-2 well sees multiple stacked reservoirs

The company said the estimates are for the Cane Creek reservoir and do not include the significant potential upside from additional overlying reservoirs being evaluated following State 16-2.

In late January, Zephyr announced initial analysis of the well.

State 16-2, drilled in the Paradox Basin, Utah, USA, penetrated a total of 21 clastic reservoirs within the Paradox formation, and hydrocarbon saturation is indicated across most of them, Zephyr noted.

It added that substantial drilling gas shows were observed across five of the reservoirs including the primary target, Cane Creek. Robust drilling gas shows were observed across a further ten of the reservoirs.

Sidetrack under consideration

Today, the company said a potential side track lateral on the State 16-2 well is forecast to have strong economics as a standalone investment.

Using production profiles generated by consultant Gaffney Cline the company believes a lateral sidetrack could achieve an initial production rate of 780 bopd, to recover some 550,000 barrels of oil and 1.8mln cubic feet of gas.

It would offer an estimated 232% return on investment capital, it added. The single well NPV is estimated at US$5.7mln.

“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 company said.

“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.”

The new Zephyr presentation was delivered to an audience of investors at last night’s Proactive One2One virtual investor forum.

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