Paradox well -commencement of operational activity

19 November 2020

Zephyr Energy plc

("Zephyr" or the "Company")

Commencement of operational activity for the State 16-2 Paradox well;

Participation in upcoming investor webinar

Zephyr Energy plc (AIM: ZPHR), the Rocky Mountain oil and gas company focused on responsible resource development, provides an update on its project in the Paradox Basin, Utah, U.S.A. where the Company is preparing to spud the 'dual-use' State 16-2 well before the end of the year.

The Company is pleased to announce the commencement of remediation work on the State 16-2 well pad and access road. The pad preparations and road work are expected to take less than five days, and will be completed well ahead of the scheduled rig mobilisation in early December.

Colin Harrington, Zephyr's Chief Executive, said: "I am delighted that we have started operational activity on the ground, fully in line with our plans to spud the State 16-2 well before the end of the year. 

"Furthermore, in line with our mission to be responsible stewards of both our capital and of the environment in which we work, it should be noted that one of many benefits to the State 16-2 site selection is co-location of the new well on a pre-existing well pad.  By re-utilising this particular pad, we will minimise environmental disruption by taking advantage of existing road and site infrastructure - thereby reducing cost, timeline and surface footprint impacts. We have also worked with the State of Utah to develop a plan to responsibly plug and abandon the existing inactive well on site, an activity which we will undertake shortly after the road work is complete.

"The next few weeks will be a period of intense activity for the Company, and we look forward to keeping the market updated on our progress as we deliver on the key milestone of drilling the State 16-2 well."

Investor webinar

The Company is also pleased to announce that it will be participating in the London South East investor webinar at which Colin Harrington, Chief Executive Officer, will be delivering a presentation and answering questions about the Company.

The webinar is to be held at 6pm on Tuesday 1 December 2020 and investors wishing to view this may register through the following link: https://www.lse.co.uk/events/

For further information please visit https://www.zephyrplc.com/ or contact:

Background to the 16-2 well

As announced on 2^nd September 2020, the Company has been working with a project team led by the EGI in collaboration with the UGS and other Utah-based partners. The project is entitled "Improving Production in Utah's Emerging Northern Paradox Unconventional Oil Play" and its goal is to assess and perform optimisation analyses for more focused, efficient and less environmentally-impactful oil production strategies in the northern Paradox Basin, particularly in the Pennsylvanian Paradox Formation's Cane Creek shale and adjacent clastic zones. This project is sponsored by the U.S. Department of Energy and its National Energy Technology Laboratory (the "DOE").

As part of this study, the EGI and UGS originally planned to drill a vertical stratigraphic test well to gather data to improve the understanding of the Paradox Basin play. It was planned that the proposed well would target the Cane Creek and potentially the C18/19 reservoirs, acquiring both core data and a comprehensive well log suite in order to provide valuable new basin data.

Over a period of several months, the project team analysed multiple potential well locations across the Paradox Basin, and the Company was delighted that the EGI and UGS selected Zephyr's Paradox acreage as the location on which to drill the well.

The Company's location was selected for a number of reasons, including the quality of the Group's underlying 3D seismic data (which can be tied into the well results to build a stronger integrated predictive model) as well as a favourable surface location which will be sited on a pre-existing pad.

Since Zephyr's Paradox acreage was selected as the location for the test well, Zephyr has been working with its project partners to construct a project plan that maximises the opportunity for all parties.

A key part of this plan is to design the well in such a way that not only can it be used to obtain all the data required by the research project, but that it can also be re-used by the Company in the future as the host for a lateral appraisal well. This approach not only reduces environmental impact but it will also potentially significantly reduce future well costs for the Company.

It is currently expected that the total cost of the vertical well activity is forecast to be between US$2.5 million to US$3 million, of which the first US$2 million will be funded by grant funding from the DOE and up to US$1 million will be funded by Zephyr.  Neither party is liable for any costs in excess of the US$3 million combined project limit.

The primary objectives of the initial stratigraphic well are to drill vertically to an approximate true vertical depth ("TVD") of 9,850 feet, and to acquire up to 90 feet of continuous core from the Cane Creek reservoir. The results from the analysis of the core and from other drilling data are expected to be available within three months from the completion of drilling.

Once the vertical well is completed it will be temporarily plugged back to 6,500 feet TVD. Zephyr (or a farm-in partner) will then have the opportunity to re-utilise the vertical wellbore as a sidetrack host from which a horizontal appraisal well can drilled.  By re-utilising the vertical portion of the stratigraphic well, the Company estimates the total costs of drilling a future horizontal appraisal well will be reduced from circa US$6.0m to circa US$3.0m.