Zephyr Acquires Assets Around Its Paradox Project In Utah

Zephyr Energy has put pen to paper on a binding agreement to purchase oil and gas assets on and around its Paradox project in Utah, the United States.

The agreement will see Zephyr acquire 21 miles of natural gas gathering lines, the Powerline Road gas processing plant, rights of way for additional gathering lines, active permits, five existing wellbores and additional acreage which is partly contiguous to the company’s operated White Sands Unit.

The consideration for the acquisition is $750,000 and will be satisfied by a payment from Zephyr's existing cash resources and as the new owner, Zephyr will assume responsibility for all eventual decommissioning and plugging and abandonment liabilities for the assets acquired (estimated to be approximately $2.5 million in today’s terms).

Once the acquisition is completed, which is expected by 7 October 2022, Zephyr will operate approximately 45,000 gross acres in the Paradox Basin, the majority in which the company holds a 75 percent or greater working interest.

The asset package will allow Zephyr to substantially reduce the capital required to build the necessary gas export infrastructure for its forecast gas production from the Paradox project. Given Zephyr’s potential significant gas resource, strong current pricing and increasing demand for U.S. domestic natural gas, the Board is delighted to have secured this opportunity ahead of commencing its further development of the Paradox project.

The plant acquired under the agreement, is not currently in operation, bit it is well suited for brownfield redevelopment and contains useable pre-existing infrastructure and related permits. It has an estimated replacement cost value of $1.8 million.

"We’ve often compared our Paradox project development to a jigsaw puzzle with a number of requisite pieces to be assembled prior to the commencement of commercial production - and today’s announcement is another substantial piece now in place.  By acquiring this package of surface infrastructure, we are moving rapidly from a program of value delineation to a tangible development program which is expected to facilitate cashflows from the project in a more rapid timeframe,” said Colin Harrington, Zephyr's Chief Executive.

“Beyond the additional resources being acquired, today’s Acquisition provides us with several critical benefits.  Firstly, it allows us to greatly reduce the capital needed to build out the gas infrastructure required to sell produced gas volumes into the market.  Secondly, it completes the acquisition of all key acreage covered by the WSU 3D.  Thirdly, it provides an additional well pad already tied to the pipeline, which in combination with the New Acreage will simplify future development drilling.  Similarly, the gas plant, while currently not in use, has excellent potential for reintroduction to service and can potentially act as a WSU supply base,” he added.

Harrington went on to say that the acquired wellbores provide the company with multiple re-use options over the short to medium term.  “Along with the wells comes a proprietary well database from the Cane Creek and overlying reservoirs (including wells with notable hydrocarbon shows and prior production).  Wellbores that do not become work over candidates have potential as water supply and/or salt water disposal wells, which can substantially reduce our future operating and completion costs as the development progresses,” concluded Harrington. 

To contact the author, email andreson.n.paul@gmail.com