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Northern Paradox Basins Rediscovered by Zephyr

Zephyr Energy of the Rocky Mountains announced on Dec. 8 that its field testing of the State 16-2LN-CC well at its Paradox Basin project in Utah provided a substantial basis for further development.

Zephyr reported that after 23 days of production testing the well demonstrated the ability to extract a larger hydrocarbon resource than initially estimated. It is now planned to outfit the well and facilitate the sale and/or export of hydrocarbons.

The research may have allowed the discovery of eight high-grade hydrocarbon reservoirs under the opportunity that was initially being investigated. A total of 200 wells could be drilled, creating a potential resource of 125 million barrels of oil equivalent.

This milestone was achieved when the company's State 16-2LN-CC horizontal well became the first with a hydraulically-stimulated completion to flow hydrocarbons in the Northern Paradox Basin.

A rate-constrained daily rate of 716 barrels of oil equivalent per day (boepd) was achieved with limited pressure drawdown and a rate-constrained maximum rate of 1,083 boepd.

Based on initial simulation modeling, Zephyr concludes that 2,100 boepd plateau rates would be possible when the well is fully equipped and not rate-constrained.

In an investor presentation, Zephyr said that gas rates may reach plateaus of 10 million square cubic feet per day and 500 boepd of liquids.

Zephyr's predrill estimates of up to 0.85 million barrels of oil equivalent (mmboe) are significantly lower than the growth potential of State 16-2LN-CC resulting from production testing.

To maximize this potential, hydraulically stimulated resources must be developed instead of assuming that they are naturally fractured, as was thought before the evaluation of the most recent well data.

Zephyr forecasts that the reserve will produce strong economics for its new gas condensate wells based on a highly successful appraisal of the reserve. According to the company, up to 200 well locations are potentially available across the eight identified overlying reservoirs.

In light of the new production forecasts and realized oil prices of $65 per barrel and $3 per thousand cubic feet of gas, Zephyr calculates the well's net present value to be $12.5 million at a 10% discount rate (NPV-10).

Due to the substantial potential for an increase in project size, Zephyr's Board has committed to exploring the idea of a multi-well drilling program in the near future, as additional drilling could help better define and unlock the considerable potential value of this asset.

Zephyr's Board, however, will not rush into an investment in Paradox, according to Zephyr CEO Colin Harrington, and will only deploy company capital if the risks/rewards are favorable.

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BP's South Haynesville Natural Gas Passed MiQ’s Certification with Flying Colours: a Straight-A Student

BPX Energy achieved an admirably low level of methane emissions, ranking among the best performing players in Haynesville Shale, around 0.05%! And MiQ awarded the company with an A grade certification. BPX very well may be one of the cleanest natural gas producers in all of Texas.

Crescent Energy closed the acquisition of Uinta Basin assets in Utah that were previously owned by EP Energy for $690 million, a few hundred million dollars below the original price. The accretive deal increases Crescent's Rockies position and adds significant cash flow and a portfolio of high-quality oil-weighted undeveloped sites. In addition to its acquired Uinta assets, Crescent's pro forma year-end 2021 provided reserves totaled 598 million boe, of which 83% was developed, 55% was liquid, and its provided PV-10 was $6.2 billion.

Shareholder’s payout target was increased by 50% after the largest U.S. independent oil producer surpassed Wall Street’s earnings estimates on growing energy prices, said Houston-based Conoco Phillips Co. on Aug. 4. Due to Western sanctions on major producer Russia throttling energy supply amid a rebound in demand from pandemic lows, oil and gas #prices have soared. Crude has been trading more than 25% higher since the start of the year and results also benefited from high natural gas prices. Meanwhile, shares were down a fraction, to $91.03, in early trading but are up about 26% year to date. Conoco Phillips stated, that the average price obtained for a barrel of oil and gas accelerated 77% from a year earlier to $88.57. The company acknowledges that it has not hedged any of its oil and gas sales to make the most of higher market prices. The capacity of 1.69 million boe/d was in line with Wall Street estimates, however, the company expected the current quarter’s output would be between 1.71 million and 1.76 million boe/d.

California oil joint venture, Aera Energy, of Exxon Mobil Corp. and ShellPlc is being sold to German asset manager IKAV, according to the agreement of Sept. 1. Shell noted that the sale of its 51.8% membership interest in Aera Energy is for a total consideration of about $2 billion in cash with additional contingent payments based on future oil prices, subject to regulatory approval. However, the total transaction value was not disclosed. Being one of California’s largest oil and gas producers, Aera Energy accounts for nearly 25% of the state’s production. The sale by Exxon Mobil and Shell ends a 25-year-long partnership in California, meanwhile, it persists a streak of divestments of mature oil and gas properties by the two supermajors. Aera Energy LLC operates about 13,000 wells in the San Joaquin Valley in California, producing oil and associated gas. In 2021, Aera took out about 95,000 boe/d. Exxon Mobil’s interests in the Aera oil-production operation in California contained a 48.2% share of Aera Energy LLC and a 50% share of Aera Energy Services Co. held by Mobil California Exploration & Producing Co. Moreover, Exxon Mobil affiliates have signed a separate agreement for the sale of an associated loading facility and pipeline system. The sale effectively ends Shell’s upstream position in California. The company reported that the divestiture is valued to result in a post-tax impairment of $300 million to $400 million, subject to adjustments.

The completion of the merger between Centennial Resource Development Inc. and Colgate Energy Partners II LLC happened on Sept. 1, sealing the debut of Permian Resources Corp., which is considered the largest pure-play E&P company in the Delaware Basin. Permian Resources’ idea was to combine two successful E&P companies, creating a better, stronger, and more strategically compelling company. Centennial and Colgate announced an agreement to merge in May, denying rumors that Colgate, a privately held independent Midland-based company, had been seeking an IPO. The merger estimated Colgate at about $3.9 billion and consists of 269.3 million shares of Centennial stock, $525 million of cash, and the assumption of approximately $1.4 billion of Colgate’s outstanding net debt. Permian Resources, being the combined company, has a deep inventory of “high-quality” drilling locations on around 180,000 net acres the companies anticipate will provide more than $1 billion of free cash flow in 2023 at current strip prices, in accordance with the company release on Sept. 1.

2022 blog posts