LONDON (ShareCast) - (Sharecast News) - Rocky Mountains-focussed oil and gas company Zephyr Energy updated the market on the production testing of the State 16-2LN-CC well at its Paradox Basin project in Utah on Wednesday.
The AIM-traded firm said a well test was completed in a "safe and highly successful" way.

After 23 days of production testing, the well demonstrated the potential to drain a larger hydrocarbon resource, with stronger economics than initially forecast.

Zephyr said it was now proceeding with plans to equip the well and facilitate the export or sale of hydrocarbons.

The company said the State 16-2LN-CC well was the first in the Northern Paradox Basin to flow hydrocarbons from a horizontal well with a modern, hydraulically-stimulated completion design.

Its board said it believed the results of the production test provided "substantial justification" for wider development of Zephyr's Paradox project.

"I am incredibly excited about the production test results announced today, and even more so about the significant implications for further drilling and potential full field development of our Paradox project," said chief executive officer Colin Harrington.

"The well test data, modelled production volumes and potential EURs exceed our pre-drill estimates and all indications point to the State 16-2LN-CC as a well which can generate significant shareholder returns.

"Not only does this successful production test indicate the potential for a highly profitable single well, but we also believe the test will lead to a substantial reduction in development risk across our acreage while allowing for a future systematic development of the project - one with relatively predictable well distribution within both the Cane Creek reservoir as well as across the multiple overlying reservoirs."

Harrington said the company was also excited to have "several options" to monetise the "significant" gas potential of the well.

He explained that, given the potential scale of gas volumes, the firm had already entered into detailed conversations regarding selling produced gas into the nearby pre-existing gas infrastructure.

"Alternatively, we've also been impressed with the return potential related to the co-location of a cryptocurrency mining facility on site with shared economics - and we've seen other forward-looking operators in the Paradox and Williston Basins benefit from such arrangements.

"We have therefore formed a first-class advisory board to help guide our deliberations in this area of considerable growth, and foresee a future in which both alternatives are weighed from a value perspective, potentially even in tandem.

"We aim to have a path forward by the end of the first quarter 2022 and look forward to providing updates as progress is made and the well is equipped."

Colin Harrington said Zephyr was "delighted" to report an apparently "large and profitable" first well on the Paradox asset, far exceeding its expectations and validating the board's decision to use hydraulic stimulation.

"The board believes that the results add considerable weight to the view that the Paradox asset has the potential to be a project of substantial scale and profitability, one which can be developed to maximise resource efficiency while minimising surface disruptions and offsetting Scope 1 emissions.

"Our mission, as always, is to be responsible stewards of investors' capital while also being responsible stewards of the environment and I'm delighted that the results to date are a strong confirmation of that focus."

At 1531 GMT, shares in Zephyr Energy were up 5.43% at 7.96p.

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