Zephyr Energy is weighing up funding proposals for its Salt Wash Helium project as market interest in helium-related companies intensifies in the Utah Paradox Basin.
Drilling in its ‘flagship’ Paradox project is expected to start mid-April.
In a market statement, the Rocky Mountain oil and gas company said, “Considering that the economics for the project are attractive based on its helium content alone, notwithstanding further upside from oil and gas development, several funding options are now being appraised.”
Net Helium resource potential is between 0.07-0.19 bcf, presenting a net present value of $58 million (with 10% discount) and upside of $120 million, based on $650 mscf and $750 mscf respectively.
Colin Harrington, Zephyr CEO, said, “While helium is a new addition to our resource exposure, many nearby Paradox Basin oil and gas operators are already producing co-mingled helium in commercial quantities, and there is an active local offtake market for produced helium.
“While Zephyr is not looking for helium to become our primary focus, we do believe that the Salt Wash project has significant and currently unrecognised potential value for our shareholders and can further utilise our team’s significant experience in the Paradox Basin.”
The company is mobilising a spudder rig to the well pad to drill and set conductor pipe and once these operations are complete, the location will be ready to accept a drilling rig in early April, with a view to beginning full drilling operations on the 36-2R well mid-April.
The decision to farm-in to the Salt Wash Field was undertaken to increase the company’s oil and gas resource potential, and achieve exposure to the US industrial helium market, which has seen recent prices rising up to $1,000 mscf.
The field has an already discovered, proven helium resource in the Leadville Formation, with further opportunity for upside through three deeper helium exploration targets which have been successfully proven in other nearby fields in the Paradox Basin.
It consists of a thin 15-feet oil rim below an inert gas cap comprising 72% nitrogen, 22% hydrocarbon gases and 1.4-1.7% helium content.
Zephyr made two initial payments of $300,000 to the ‘incumbent leaseholder’ last year. The ‘farm in’ agreement includes a provision to spud the dual-purpose Leadville Formation delineation well before June 30th.
