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No one can be certain that every single cost will be met by the insurers. Zephyr have said they will recover all costs. Although that means all costs that the insurers agree to as they are working together. Anything outside of that agreement will be different. Those costs are not the issue though.
Getting to a test state 36, and soon, are the problem. There has unfortunately been no update on how long it will take as they really do not know. They could suddenly pull all remaining pipe in a day or could be fishing a few mangled feet for days on end. No one knows. What we do know though is at the end they will be testing something that is positively bursting with hydrocarbons.
Any further testing at 16-2, the new pipeline from 16-2 and the commissioning of the gathering lines will also be down to Zephyr. As will some of the work at the gas facility. However, they are looking for 3rd party involvement for the gas processing to reduce any upfront costs. So the initial equipment costs should in theory be covered by someone else. The completion of the Dominion pipeline will work in favour for the company in the further negotiations of this.
As CH said the delay to the Slawson wells and further income is annoying but they are coming online when oil is $20 a barrel higher so not all bad and will increase the portfolio and shorten the payback. We will not know until next year but the Q4 results could offer a good increase in cash received and 'if' they get to test the state 36-2 this year that will set up 2024 nicely.
It is now just a question of time, but also don't be fooled as things could also change rapidly.
Was thinking when the other shares were due to be issued when I mentioned a possible raise.
From June rns
The net proceeds of the Fundraising will be used to fund an estimated US$3.65 million of incremental near-term CAPEX at the Company's flagship project in the Paradox Basin, Utah, U.S. (the "Paradox project"). This is expected to include a production test on the Company's State 36-2 LNW-CC well (the "State 36-2 well") as well as future infrastructure and gas processing costs.
They still need to pay for refurbishing all the gas pipes on the land plus pay for the connection pipe to state 16. Not to mention fresh water transfer. But if they also said that money was for the facility then that is a bit underhand.
Got it now.
The Group has not yet put out an estimate on 36-2's possible flow rate range. Given the strength and characteristics of the recent blowout, this is of significant market interest, but will have to wait until the necessary kit has been installed to take such a measurement. In terms of processing extracted gas at the historic Powerline Road facility, Zephyr's Board has been working with potential third-party processing companies regarding potential proposals to fund, install, operate (and own) the plant in exchange for a tariff-based structure levied on throughput volume. Its goal is to minimize our upfront capital expenditure related to infrastructure, while at the same time engaging an experienced operator to run the plant. The solution will likely be comprised of modular, skid mounted units which can be deployed fairly quickly (as little as just 8-12 weeks) when it is ready to sell volumes. Clearly, the key is having detailed knowledge of the range of volumes, hence the need to undertake a production test on the well first.
Was going through my old posts as sure I’d mentioned something about the pipe being more difficult the further down they got. Couldn’t find it unless it was someone else that said it. But did spot I’d mentioned sidetrack several times and a long while back!
TC that was my thinking. Something has to give and the reward would easily outweigh the cost. They know they have good hydrocarbons at that point so that risk has gone. Can’t see the insurance paying for a full sidetrack or even a re drill. They may pay out the equivalent to the remaining work if they strike a deal and then it’s up to Zphr to cover the rest.
I did say that there would be disappointment if all the pipe wasn’t pulled and ready for a test. Doesn’t look like a test anytime soon either.
The sidetrack was mentioned by me on here a while back. Others have also mentioned it. They’ve had over 6 months of reworking this well. The plug should have been pulled on their current approach ages ago. Now they are at the mercy of the insurers and moving towards winter. Even if they get the go ahead they still need a rig contract which could also take months.
I see that they are now going to sub contract the facility for the gas out and although it shouldn’t cost them too much will be another small slice off the profits. But the facility is a long way off if they don’t have wells to produce from. It’s not been mentioned but I can possibly see another raise for a re drill. The status quo needs to be broken somehow otherwise they’ll never achieve shareholder value with just non ops.
They are dragging this out to the latest day in September for the Half Year Report in the hope that operations can actually give them something positive for investors to hear. Lets hope they have something.
Satellite images have shown continued activity but need info from the company to confirm what they have actually achieved.
It is a half year report. So maybe we will find out how much state 36 has cost so far?
I don’t think anyone will be happy if all the pipe has still not been pulled and new pipe has been (or is being) installed.
Ezhik, as Argyle says. The Dominion pipeline is a major pipe. I have put links up before as to where gas and liquid pipelines run. One ran from Moab in the south directly to the greentown gas facility. Dominion, I assume, have recommissioned this southern pipeline and also built a pipeline north to Green River.
Now, Zephyr have gathering pipelines on their acreage (we do not know current operational status of these as we’ve never been told). State 16 however does not have a gathering pipeline in close proximity so they need to tie that in. The gathering lines all go to the processing plant. Again we don’t know how much equipment is operational here. What needs doing or what needs commissioning. Only then will they be able to sell dry gas into the pipeline network.
I have asked about water and pipelines before both at presentations and via email and had blank responses. So no idea what they plan. It will be needed and trucking is not the cheapest. They do have some disposal wells courtesy of their acreage purchase.
I would stick state 16 as a producer on the back burner. It was only a short lateral and they have the salt issues to overcome but this will happen once they have their internal pipeline/ facility/ more testing. It will be a producer but not ‘near term’. They also plan to explore the overlying layers from this which is something I said many many months ago and was confirmed when they applied for further drilling permits here for the state 16-3.
I think the plan will be as follows: Test (eventually) 36-2. Once rates known spec and start construction/ recommissioning of gas facility. Parallel to this drill state 16-3. Hope that pipeline permit approved and fit this in to tie state 16 to acreage network. Once all this complete can produce from state 36. Test from state 16, both 2 & 3. And also depending on further infrastructure commissioning also produce from federal 28.
I’m not sure how all the timelines will work exactly but can see everything overlapping in a semi parallel way ONCE state 36-2 is tested.
Side note. JD you can guarantee the words ‘near term’ and ‘responsible stewards’ will appear in the half year report!
I think being in a closed period with half year results they had to issue that rns as the pipeline info would have been into the public domain by the time results were released. The improved pipeline infrastructure is important to Zephyr as it was always used as a potential hold up with supply from the paradox. Now nearing completion we can also assume that testing and recommissioning of the pipeline south to Moab is also being implemented by Dominion. Thus removing any potential gas sales blockages.
Now it is up to Zephyr to complete their test and get a shift on.
We hope for ‘substantial’ news on progress from state 36 next week. And a ‘near term’ test imminent. Anything less than this will be a major disappointment to shareholders. Let’s see what we get…
“ Jumping along the getting to market a little further (Ive forgotten) - have we contracted to update and refurb the gas handling plant and what extra permits and/or other kit is needed for each site to get gas flowing? ”
Short answer is No and we need the state 36 test before anything progresses. Can’t remember the last time we had a company presentation but they haven’t told us anything new in ages or any forward plan.
Ezhik, i said the same a few weeks back. However, they probably still wouldn’t have permits. The permit for Zephyrs pipeline from state 16 has been outstanding all year and the same with the state 16-3 drill permit.
Maybe this will give them a hurry up….
Argyle, I was thinking the same!
So surprisingly a completely separate company has managed to complete something ahead of schedule while zephyr is still pulling bent pieces of pipe out of the ground.
Unbelievable Jeff.
Paul also said a couple of weeks and this will be a completely different company. I think that was 6 weeks ago so I wouldn't read much into 'a couple of weeks'.
All of the equipment and facility testing was gas from well casc-1ST1 so I expect this to be the one producing first and being ramped up. There has been no mention of casc deep-1 being opened up yet (plugs were pulled ) although you would like to think they have started doing this now that production has commenced and gas has a place to go.
Hopefully people can find more info from the company as it is progressed.