Turner Pope Research Note, 23 July 2024
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The much-anticipated initial phase of the production test on the State 36-2R LNW-CC well (‘the well’) at Zephyr’s flagship project in the Paradox Basin, Utah, has been completed. Undertaken at multiple rates and choke settings in order to ascertain its production potential, high reservoir deliverability and high initial reservoir pressures (approximately 8,600 pounds per square inch absolute) were observed. Achieving peak production rates of 1,350 barrels of oil equivalent per day (‘boepd’) while still choked back and constrained, indicates excellent potential for long term productivity which will be further delineated with a longer testing period. It furthermore delivered a significantly higher condensate-yield than Zephyr’s previously drilled Paradox project well (with more than a three-fold increase in condensate rate versus that from the State 16-2LN-CC well) which holds significant positive implications for the larger Paradox development. The release goes on to note, however, that despite the excellent initial rates, evidence suggests that the natural fracture network may still be partially restricted from the greater reservoir at this well location. This is most likely due to the fracture network being plugged by the heavyweight drilling mud used for well control purposes (from both the well and the original State 36- 2 well) or otherwise compartmentalised by faulting. As such, Zephyr now plans to ‘acidise’ the well to further remove any drilling mud emulsions from the natural fracture network and maximise its connectivity with the larger reservoir. This operation is expected to take place in early to mid- August and will be immediately followed by a second production test. It is also evaluating further options to improve well connectivity (should it be needed). A successful outcome could then be translated quite rapidly into 2P reserves and potentially spike overall Group production during H1 2025. We would draw your attention to the various disclaimers in the document both at the beginning and at the end of the note. Retail clients (as defined by the rules of the FCA) must not rely on the research document. In particular you should note that the research document is a non-independent marketing communication. The analyst who has prepared the research is aware that TPI provides research to Zephyr Energy plc. Accordingly the research has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibitions on dealing ahead of its dissemination. The information in the document is published solely for information purposes and is not to be construed as a solicitation or an offer to buy or sell any securities or related financial instruments. The material contained in the document is general information intended for recipients who understand the risks associated with equity investment in smaller companies. It does not constitute a personal recommendation as defined by the FCA or take into account the particular investment objectives, financial situation or needs of individual investors nor provide any indication as to whether an investment, a course of action or the associated risks are suitable for the recipient. |
