Zephyr Energy, a US-based oil and gas company has secured full funding for the extended lateral well at its flagship Paradox project in Utah, US.
The company entered into binding documentation to fund all drilling, completion and production test costs, totalling $7.5m.
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This funding marks an increase from the initial estimate of $7m and has been obtained from a US-based industry investor in exchange for a 50% non-operated working interest in the well.
The funding arrangement with the wellbore investor does not involve the issuance of Zephyr’s equity or any form of debt.
Zephyr retains a right of first refusal to repurchase the 50% non-operated working interest at a discount if the investor sells it. Going forward, the wellbore investor will cover its share of operating and overhead costs, with Zephyr continuing as the operator.
Net revenue from the well will be evenly split between Zephyr and the wellbore investor from the onset of production.
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By GlobalDataThe $7.5m from the wellbore investor will be transferred to Zephyr by 31 December 2024, in preparation for the drilling commencement.
With the funding now in place, Zephyr is finalising the necessary operational activities including rig contracts and service provider agreements.
Surface operations have already started, and full drilling operations are expected to begin in early January 2025.
Following the drilling phase, Zephyr plans to move directly into production testing, with results anticipated in the first quarter of 2025.
Zephyr chief executive Colin Harrington said: “The US non-operated investment market is growing increasingly active, with notable recent transactions in proven basins such as the Williston, as well as in other emerging plays close to our operations in Utah. We are delighted to be able to utilise this type of US-specific funding for our Paradox project and view it as a highly attractive form of growth capital.
“With no issue of Zephyr equity or debt, and with no residual upside exposure in the future development of the Paradox project, this is a strong endorsement of the projects’ single well economics. We are hopeful that the extended lateral will be the catalyst that ultimately delivers significant value from many more wells to be developed on our Paradox acreage, and this funding provides Zephyr with full flexibility for that future development.”
