Zephyr Energy plc provided an update on recent activity at its project in the Paradox Basin, Utah, U.S.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 crypto-mining facility (capital expenditure forecast to be less than USD 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 expectsto 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.Further details and State 16-2LN-CC well update: In the interim, Zephyr’s Board of Directors has elected to recommence production from the State 16-2LN-CC well, whereby: Liquid volumes produced from the well will be trucked and sold to refineries in Utah; Gas volumes will be sold to a Zephyr-owned crypto-mining facility to be built and co-located on the State 16-2 well pad; and Valuable, longer term production data will be gathered while the produced gas is used to fuel the crypto-mine facility.Design work, permitting and procurement is underway to prepare the well for production re-start and to build an initial 1MW, rate constrained “beta test” crypto-mining facility.Re-started production from the State 16-2 LN-CC well and production from the initial phase of the mining facility is expected to be brought online within 8-12 weeks.CryptoKnight Energy, an experienced operator of oil industry co-located crypto mining operations, will serve as the general contractor for the construction and operator of the mining facility.Site preparation work at the State 16-2 pad commenced in early May 2022, when 1,185 barrels of oil condensate produced and stored onsite during the December 2021 production test were hauled and sold to a refinery in Salt Lake City.
Zephyr received a realised price of USD 103.36 per barrel, net of transportation costs, for those volumes.Post review of the beta test operations, Zephyr may elect to build up to 4MW of power generation and crypto-mine facilities on the pad.Zephyr is evaluating a range of third-party investment options in the event it elects to expand the crypto-mining infrastructure and will provide updates on the outcome of these discussions following the results from the beta test.Paradox Basin three well drilling programme update: Zephyr remains firmly on track to commence its planned three well drilling programme in the second half of 2022.Recent development milestones include: All well design work has been finalised; All permit applications have been filed; Stimulation optimisation is well advanced; The vendor selection process continues, with the rig contract award a key short-term objective; Partner outreach, both with potential upstream and midstream counterparties, is well underway.
ZEPHYR ENERGY PLC.