AIM-listed Zephyr Energy has provided an update on current activity on its project in the Paradox Basin, Utah, U.S. (the 'Paradox project').
Highlights:
- Zephyr's board of directors has elected to fund additional engineering and well work to prepare for a higher production rate during the initial phase of the project's development.
- This is supported by the Board's confidence that the necessary regulatory approvals needed for up-rating the operating pressures of Enbridge-operated 16-inch pipeline will be obtained; and
- Zephyr's additional work is progressing in parallel with the Enbridge-led regulatory approval process, and will be funded out of the Company's existing cash resources.
- Engineering work is underway to design a modular gas processing system with up to 15 million standard cubic feet of gas per day (mmscf/d) of production capacity. Gas will be initially supplied by the State 36-2 LNW-CC-R well (the "State 36-2R") and the Federal 28-11 well.
- o Expense related to 'well work' (or 'workovers') involves preparations to allow for existing wells to return to production in a timely manner.
- Zephyr has also high-graded new well locations for follow-on drilling. Locations and permitting details will be announced as and when well planning efforts are finalised. Plans for the tie in of the State 16-2 well will be detailed after first gas is achieved.
- Enbridge's operation to excavate and visually inspect four short sections of the existing 16-inch pipeline is ongoing, with no concerns or safety issues noted to date.
Colin Harrington, Zephyr's Chief Executive, said: 'The successful completion of the Enbridge in-line inspection provided the Board with confidence that the up-rating of operating pressures required for the pipeline to accept Zephyr's increasing gas volumes will not result in any further operational hurdles.
'The Board has also gained confidence that the Enbridge-led regulatory approval process will conclude in a satisfactory manner. The Board has therefore approved an allocation of funding for additional engineering (related to gas processing) and well work operations, with a goal to increase initial processing capacity up to 15 mmscf/d - a significant increase over earlier base case estimates of 5 mmscf/d. This work will be fully funded from the Company's existing cash resources.
'Initial gas volumes would be provided by the State 36-2R and the Federal 28-11 wells, with additional production from new and existing wells to follow as cash flow, planning and regulatory approvals allow.
'Our aim is to progress operational work in parallel with the Enbridge-led regulatory approval process, in order to expedite the timing for first gas and commercial production. While the timeline for Enbridge's approval process remains pending, Zephyr's goal is to be prepared to deliver first gas and commercial production as soon as possible once approvals are secured.
'The Company also continues to progress both the potential farm-out and the proposed US$15 million commodity purchase agreement (as announced on 27 July 2026). Further updates will be provided in due course.'
Background
In relation to the Paradox project gas transportation, Enbridge continues to execute on its workstream to obtain the necessary regulatory approval needed to export Zephyr's natural gas through its 16-inch pipeline and into the Williams-operated, Northwest Pipeline system.
As indicated previously, regulatory approval remains a critical item for Zephyr to achieve first gas and commercial production from the Paradox project. To date, Enbridge has successfully completed a mandatory in-line inspection of the pipeline, and the process of excavating and visually inspecting four short sections of pipeline is well underway. Enbridge views such inspections as routine and they are not considered a risk to achieving first gas. All inspection work on the 16-inch pipeline is being funded by Enbridge.
Zephyr is highly confident that regulatory approval for gas export will be granted, although the exact timing for such approval remains uncertain. The Company will continue to keep shareholders updated as Enbridge completes its inspection process and the timing for the regulatory approval process becomes better defined.
In the interim, the Board has elected to fund additional engineering and operations work to prepare for the initial phase of commercial production. Detailed engineering work related to design of a modular gas processing system with up to 15 mmscf/d of production capacity is underway, with gas expected to be initially supplied by the State 36-2R and the Federal 28-11 wells. Well work to equip, tie-in, and return the 36-2 and the 28-11 wells to production will commence after the engineering work and final processing design has been completed.
The Company has also high-graded future well locations for follow-on drilling, and will announce locations and permitting details when well planning efforts are finalised.
The State 36-2R well was drilled and production tested by Zephyr in 2025. The production test achieved a peak flow rate of 2,848 barrels of oil equivalent per day, with no material drop in bottom hole pressure, and without the use of any fracture stimulation, suggesting that the well ranks in the top 6% of gas wells across the Lower 48 U.S States.
The Federal 28-11 well was drilled in 2008, and was subsequently shut-in due to pipeline and infrastructure constraints. Prior to shut-in, the well produced over 0.36 billion cubic feet of natural gas and circa 93,000 barrels of oil. The well was acquired by Zephyr in 2022 (as announced on 22 September 2022). In 2023, the Company briefly and successfully recommenced production in order to understand the well's potential to contribute to future field production.
Source: Zephyr Energy
