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Zephyr Energy Provides Latest Update on Salt Wash Helium Project
Zephyr Energy Provides Latest Update on Salt Wash Helium Project

Zephyr Energy Provides Latest Update on Salt Wash Helium Project

  • 28-Mar-2024 4:18 PM
  • Journalist: Patrick Knight

Zephyr Energy plc, a company operating in the Rocky Mountain region's oil and gas sector with a focus on responsible resource development through carbon-neutral practices, is pleased to provide an update on its proposed farm-in initiative. This initiative aims to secure a minimum 75 percent working interest in a 1,047-acre leasehold position located within the Salt Wash Field. Positioned merely three miles south of Zephyr's Paradox project in Utah, U.S., the Salt Wash project is a previously productive asset known for its established reserves of oil, gas, and helium.

As previously revealed on October 18, 2023, the Salt Wash Field features a slender 15-foot oil rim, supported by an inert gas cap roughly 500 feet thick. This gas cap comprises approximately 72% nitrogen, 22% hydrocarbon gases, and a helium content ranging from 1.4% to 1.7%. Historically, the field yielded 1.65 million barrels of oil and 11.7 billion cubic feet ("BCF") of gas before being decommissioned in 2014, primarily due to the depletion of the oil rim and unfavorable market conditions for natural gas and helium. Zephyr's decision to engage in the Salt Wash Field venture aims to diversify the company's oil and gas asset portfolio while tapping into the U.S. industrial helium market. Recent market trends have witnessed helium prices surge to approximately US$1,000 per thousand standard cubic feet ("mscf").

The Salt Wash Field boasts a confirmed, proven helium resource within the Leadville Formation, with additional potential for upside through three deeper helium exploration targets, previously validated in neighboring fields within the Paradox Basin. The Board of Directors acknowledges the heightened market interest in helium-related ventures and asserts that the economics of the Salt Wash project are compelling solely based on the helium content, notwithstanding the added benefits of oil and gas development.

Management forecasts for the Salt Wash project include:

              Net helium discovered resource potential ranging from 0.07 to 0.19 BCF (Leadville Formation only)

              Net helium un-risked prospective resource estimated between 0.04 to 0.66 BCF (inclusive of exploration targets)

              Estimated net present value at a ten percent discount rate ("NPV-10") of approximately US$58m, with the risked upside case projecting an NPV-10 of around US$120m (based on pricing of $650/mscf and $750/mscf, respectively)

In accordance with the farm-in agreement, the Company has disbursed two initial payments totaling US$600,000 to the incumbent leaseholder. Zephyr intends to proceed with drilling the dual-purpose Leadville Formation delineation well, known as the "Commitment Well," which will also assess the three additional helium exploration targets and other potential hydrocarbon-bearing reservoirs.

As Per the Agreement, the Commitment Well is slated for spudding before June 30, 2024, with the Company exploring avenues to initiate drilling operations within this timeline, while also considering potential extensions to the deadline. To date, Zephyr has received multiple informal proposals regarding funding for 100% of the drill at the asset level. The Board is actively evaluating these proposals to optimize value for Zephyr's Shareholders.

Colin Harrington, CEO of Zephyr, expressed enthusiasm for the Salt Wash project's potential and affirmed the Company's commitment to exploring various funding options to maximize shareholder value. He emphasized that while helium represents a new addition to Zephyr's resource portfolio, neighboring operators in the Paradox Basin are already producing co-mingled helium commercially, indicating an active local market for produced helium. Harrington underscored Zephyr's belief in the significant yet currently unrecognized potential value of the Salt Wash project for its shareholders, leveraging the team's extensive experience in the Paradox Basin. The Company pledges to keep the market informed of its progress moving forward.

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