Zephyr Energy, a Rocky Mountain oil and gas business focused on carbon-neutral resource development, is delighted to share an update on recent activity at its property in Utah's Paradox Basin.
Highlights
- Following the completion of a successful well test on the State 16-2LN-CC well in December 2021, and after a detailed evaluation of the various natural gas sales and export options, the Board has elected to recommence production from the State 16-2LN-CC well in conjunction with the completion of a Zephyr owned crypto-currency mining facility now under development.
- Liquid volumes produced from the well will be trucked and sold to refineries in Utah, and produced gas volumes will be sold to fuel onsite power generators which in turn will provide electricity for the co-located crypto-mining facility.
- The Company plans to fund the initial investment required to launch the initial 1 megawatt ("MW") crypto-mining facility (capital expenditure forecast to be less than US$2 million) from existing cash resources or via third party investment, with facility capital payback expected in under two years at current crypto-currency prices.
- The Board has taken steps to fast-track equipment procurement, and it is expected that the crypto-mine will be operational in as little as eight to 12 weeks. Well work will also be conducted over the same timeframe, at which point production from the State 16-2LN-CC well is expected to recommence.
- Over the longer-term, the Company expects to tie its gas production into the nearby gas export infrastructure recently purchased by Dominion Energy, Inc. ("Dominion") a Fortune 500 Company which currently services over seven million customers in the U.S. Dominion has made public its plans to refurbish and expand the natural gas infrastructure running across Zephyr's acreage, and is expected to be available to accept gas volumes from Zephyr's wells in 2023.
- In parallel with the work on the State 16-2LN-CC well, the Company is also at an advanced stage of planning for a three well drill programme on the Paradox project expected to commence in the second half of this year. Well design has been completed, all permit applications have been submitted and negotiations continue with rig vendors.
Colin Harrington, Zephyr's Chief Executive, said:
'We are hugely excited to embark on the next steps to open up the Paradox Basin resource play. The completion of our highly successful initial well test gave the Zephyr team the comfort to proceed with detailed evaluations of both near and long-term off-take solutions for the gas volumes from the State 16-2LN-CC well. The plan announced today allows us to both accelerate near-term production and benefit from long term gas sales optionality should the economic returns from the co-located crypto-mining facility meet internal expectations.
'While the Dominion infrastructure is envisioned to be the long-term solution for the majority of our gas production from the Paradox project, the construction of the co-located crypto-mining facility is an excellent interim step. We believe it has potential to be a profitable opportunity for Zephyr and we hope to have production from the State 16-2LN-CC well and the crypto-facility online in as little as eight to 12 weeks.
'Over the last twelve months, a growing number of U.S. upstream oil and gas operators (including an immediately adjacent Paradox Basin oil and gas operator) have chosen to co-locate crypto-mining facilities at well sites in order to benefit from the growing demand for natural gas to fuel dedicated sources of power generation.
'Our planned crypto-mining facility will enable Zephyr to meet its near-term objectives - it will allow us to accelerate revenues from the State 16-2LN-CC well, to earn additional revenues from the crypto-mine infrastructure, and to enable a long-term test which will provide valuable information about the well's production profile.
'The coming months will be a period of intense activity on the Paradox project. In addition to the re-start of State 16-2LN-CC well production and launch of crypto-mining operations, we are in detailed planning for our forthcoming three well drill programme. We look forward to providing regular updates as we prepare to commence drilling in the upcoming months.
'As we embark on another busy period for the Company, I'd like to reiterate that our mission, as always, is to be responsible stewards of investors' capital while also being responsible stewards of the environment.'
