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Zephyr Energy reports progress at Williston Basin
8th Sep 2021 15:24
(Sharecast News) - Rocky Mountain-focussed oil and gas company Zephyr Energy updated the market on its non-operated working interests in the Williston Basin of North Dakota, on Wednesday, as well as the acquisition of two additional non-operated near-term production portfolios in the basin and a joint-venture with Purified Resource Partners related to ongoing non-operated business development efforts.
The AIM-traded firm owns minority working interests in seven non-operated producing wells in the Williston Basin.
It acquired those wells in the first half of 2021, with a goal of delivering a "diversified and stable" cash flow stream which could be used to fund additional operated Paradox Basin drilling and potential new acquisitions.
The company said production from the seven wells was, net to Zephyr, 509 barrels of oil equivalent per day during August.
Four of the wells were still being brought into full production, with oil production still rising, water cuts reducing and gas oil ratios stable.
Zephyr said four of the wells were initially brought on at reduced production rates in order to minimise any gas flaring and carbon dioxide emission impact while gas export infrastructure constraints were addressed, a carbon dioxide mitigation effort "welcomed" by the firm's board.
Now that those infrastructure constraints were resolved, the company said it expected overall production to continue to rise during the next quarter and further updates would be announced as production data matured.
Zephyr also announced the completion of two additional non-operated portfolio acquisitions in the Williston Basin, with the first being 72.5 net acres, resulting in an average 5.6% working interest in four drilled but uncompleted wells operated by Prima Exploration, which target production from the Middle Bakken reservoir in Montana's Richland County.
The second acquisition purchased an average 3.1% working interest in 11 wells operated by Whiting Petroleum, all of which targeted the Middle Bakken reservoir in North Dakota's Mountrail County.
All of the newly-acquired wells were estimated by Zephyr to have rapid paybacks within two years, high internal rates of return, and a combined total 2P estimated ultimate recoveries net to Zephyr of 194,000 barrels of oil equivalent.
Once initial payback has been achieved, Zephyr said it could utilise its historic tax losses of more than $15m to reduce the federal tax payable on the revenues received from the new acquisitions.
Total consideration for the new acquisitions was $0.97m, which was paid for from the company's existing cash resources.
In addition to the acquisition price paid, Zephyr said it was planning to fund the discretionary net capital expenditure related to the drilling and completion of the 15 wells acquired, forecast to be about $3.9m.
The firm said it expected all 15 newly-acquired wells to be in production by 31 March 2022, resulting in a forecast additional 200 to 300 net barrels of oil equivalent per day.
Finally, Zephyr announced the formation of a joint venture with Purified for the identification and execution of additional non-operated acquisitions.
Purified's principals had "substantial experience" in the Williston Basin, the board said, where they previously helped assemble and close over $70m of non-operated asset acquisitions and associated capital expenditure for a private equity-backed vehicle.
More recently, Purified assisted and co-invested in all four Williston acquisitions that Zephyr had closed this year, and its team would have the right to continue to co-invest up to 20% in future transactions.
The newly formed joint venture would provide Zephyr with "significant" land and business development expertise directly in its geographic region of focus.
"The next few months are expected to bring news flow on all fronts as we target completion of our operated State 16-2LN-CC well in October, further define our Paradox resource potential, achieve carbon neutrality across our asset base and receive increased cash flow from our non-operated asset portfolio - including cash flow from our new acquisitions." said chief executive officer Colin Harrington.
"We look forward to keeping shareholders updated as we deliver on our strategy and achieve additional objectives across the portfolio."
At 1506 BST, shares in Zephyr Energy were down 0.33% at 6.08p.
The AIM-traded firm owns minority working interests in seven non-operated producing wells in the Williston Basin.
It acquired those wells in the first half of 2021, with a goal of delivering a "diversified and stable" cash flow stream which could be used to fund additional operated Paradox Basin drilling and potential new acquisitions.
The company said production from the seven wells was, net to Zephyr, 509 barrels of oil equivalent per day during August.
Four of the wells were still being brought into full production, with oil production still rising, water cuts reducing and gas oil ratios stable.
Zephyr said four of the wells were initially brought on at reduced production rates in order to minimise any gas flaring and carbon dioxide emission impact while gas export infrastructure constraints were addressed, a carbon dioxide mitigation effort "welcomed" by the firm's board.
Now that those infrastructure constraints were resolved, the company said it expected overall production to continue to rise during the next quarter and further updates would be announced as production data matured.
Zephyr also announced the completion of two additional non-operated portfolio acquisitions in the Williston Basin, with the first being 72.5 net acres, resulting in an average 5.6% working interest in four drilled but uncompleted wells operated by Prima Exploration, which target production from the Middle Bakken reservoir in Montana's Richland County.
The second acquisition purchased an average 3.1% working interest in 11 wells operated by Whiting Petroleum, all of which targeted the Middle Bakken reservoir in North Dakota's Mountrail County.
All of the newly-acquired wells were estimated by Zephyr to have rapid paybacks within two years, high internal rates of return, and a combined total 2P estimated ultimate recoveries net to Zephyr of 194,000 barrels of oil equivalent.
Once initial payback has been achieved, Zephyr said it could utilise its historic tax losses of more than $15m to reduce the federal tax payable on the revenues received from the new acquisitions.
Total consideration for the new acquisitions was $0.97m, which was paid for from the company's existing cash resources.
In addition to the acquisition price paid, Zephyr said it was planning to fund the discretionary net capital expenditure related to the drilling and completion of the 15 wells acquired, forecast to be about $3.9m.
The firm said it expected all 15 newly-acquired wells to be in production by 31 March 2022, resulting in a forecast additional 200 to 300 net barrels of oil equivalent per day.
Finally, Zephyr announced the formation of a joint venture with Purified for the identification and execution of additional non-operated acquisitions.
Purified's principals had "substantial experience" in the Williston Basin, the board said, where they previously helped assemble and close over $70m of non-operated asset acquisitions and associated capital expenditure for a private equity-backed vehicle.
More recently, Purified assisted and co-invested in all four Williston acquisitions that Zephyr had closed this year, and its team would have the right to continue to co-invest up to 20% in future transactions.
The newly formed joint venture would provide Zephyr with "significant" land and business development expertise directly in its geographic region of focus.
"The next few months are expected to bring news flow on all fronts as we target completion of our operated State 16-2LN-CC well in October, further define our Paradox resource potential, achieve carbon neutrality across our asset base and receive increased cash flow from our non-operated asset portfolio - including cash flow from our new acquisitions." said chief executive officer Colin Harrington.
"We look forward to keeping shareholders updated as we deliver on our strategy and achieve additional objectives across the portfolio."
At 1506 BST, shares in Zephyr Energy were down 0.33% at 6.08p.