Zephyr Energy (ZPHR ), a Rocky Mountains-focused oil and gas company, updated markets on operations at the State 36-2 LNW-CC well at Zephyr's flagship project in the Paradox Basin, Utah.
Earlier this month, Zephyr announced that planning for the State 36-2 well production test had completed. Today, Zephyr confirmed that a contracted service rig has been mobilised to the well-site and operations on the ground have commenced.
Zephyr estimates that workover operations and subsequent production testing will take 4-6 weeks, with the ultimate timeline dependent upon field conditions.
As the well is expected to flow from natural fractures, no hydraulic stimulation is expected at this time, accelerating the timeline to completion. The test will be paid for from Zephyr's existing cash resources.
Colin Harrington, CEO, commented: "I am pleased to announce our continued progress on the State 36-2 well, especially in light of the challenging weather conditions, and I want to thank our operations team for continuing to move the project forward in a safe and effective manner."
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A small update from Zephyr, nevertheless significant, as results from the State 36-2 well production test should provide critical information to determine the best development programme for Zephyr's Paradox project in Utah. Testing at State 36-2 is expected to be completed relatively quickly, as no hydraulic work will be needed.
The Paradox Project in the Paradox Basin, Utah continues to be funded by the US Department of Energy and its National Energy Technology Laboratory. In 2020 and 2021, Zephyr received US$2.1m for the project's State 16-2 well from the US DOE. In December 2022, Zephyr secured an additional US$1m in research grant funding.
In February, Zephyr released its initial 4Q and FY22 results. Zephyr reported fourth quarter revenues of US$7.4m and expected FY22 revenues to come in at US$42.9m, a 7-fold increase compared to FY21, and exceeding Zephyr's initial FY22 guidance of US$35-40m.
Q4 sales volumes averaged 1,192 boepd, resulting in total sales for FY22 of 543,948 boe, at the high end of Zephyr's FY22 guidance. This represents more than a 6-fold increase year-on-year. Sales volumes for FY22 averaged 1,490 boepd, compared to FY21's 263 boepd.
We expect Zephyr to hit its production guidance for FY23 of 1,550-1,750 boepd, which would represent another significant year-on-year increase.
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