Zephyr Energy- Paradox paradise…

Zephyr has provided initial results from the production test on the State 36-2 LNW-CC-R well at the Company’s flagship project in the Paradox Basin, Utah, U.S.  

During the production test, the well was tested at multiple flow rates in order to gather data to determine the flow capacity of the well, to provide an early estimate of potential resource volumes, and to obtain high quality fluid samples. We are pleased to report that the production test successfully delivered on all these key objectives, and, most importantly, the test data gathered suggests that there is more than sufficient deliverability for a commercial well. 

Initial production test observations include:

• A peak rate of 2,848 barrels of oil equivalent per day (“boepd”) (11.9 million standard cubic feet per day (“mmscf/d”) and 856 barrels of oil per day (“bopd”)) on a 18/64-inch choke setting, which was achieved with no material drop in bottom hole pressure.
• During a separate, planned 48-hour period of stable flow, the well delivered steady production rates averaging 3-4 mmscf/d and 200-400 bopd (700-1,066 boepd total), at a choke setting of 8/64-inch, with no material drop in bottom hole pressure.
• Well test data and interpretation suggest that there is more than sufficient well deliverability for a commercial well.
• Data gathered from a fibre optic cable run along the length of lateral suggests that inflow of hydrocarbons across the length of the lateral is occurring, indicating the potential for a much larger reservoir volume to be drained compared with the initial completed interval of 130 feet in the previous production test (as announced on 6 September 2024).
• Elevated condensate-yields were observed (in a range of 60-200 barrels of oil (“bo”) per million standard cubic feet (“mmscf”) with an 85 bo/mmscf average).  While liquid yields will vary across the field area and in time as the reservoir pressure drops during field production, the overall elevated liquid yields are expected to be a significant driver of enhanced project economics.
• Water cut was less than 0.5% throughout the duration of the test. This continued evidence of limited water production is another potential boost to the well’s economics by reducing the need for expensive water disposal processes.
• Produced gas and condensate fluid samples have been collected and a detailed fluid laboratory analysis is currently underway to further characterise the field’s fluid fill and composition. 

The well test results suggest that the chosen completion strategy (hydra-jet abrasive perforation and matrix acidisation) was highly successful, and the test data results fit well with the Company’s P50 estimate of reservoir properties.  It should be noted that no fracture stimulation was performed to achieve this excellent well deliverability result. Fracture stimulation could offer further upside potential for both the well, and for the broader Paradox project development.

Further results from the production test, including estimated ultimate recoveries, will be announced when available.

Colin Harrington, Zephyr’s Chief Executive, said:
“I could not be more pleased with the initial results from this latest production test.  Our team has worked exceptionally hard to crack the code to deliver highly economic production from this under-explored basin, and with today’s news I believe we have made huge strides forward. 

While the early results on this single well are fantastic and demonstrate commerciality, I am even more encouraged when considering the potential implications for the broader development of our Paradox project.”

Initial thoughts are that this is an exceptional set of test results, more obviously after I’ve spoken to Colin Harrington but he will be delighted. Delighted because the rates were higher than expected and with a higher condensate yield and of course having hydrocarbons through the entire length of the lateral is great for field economics, ie fewer wells and really opens up the Paradox Basin. More later… 

Angus Energy

After the successful commissioning of the booster compressor announced on 16 April 2025, Angus has been conducting well tests to determine the optimum configuration of the plant and wells to increase production. These tests are ongoing, and Angus will update on progress and plans in due course.

As announced on 22 February 2024, Angus Energy entered into a Financing Facility with a subsidiary of Trafigura Group PTE Ltd (“Trafigura”). The terms of the Facility are unchanged from those of the term sheet summarised by the Company via RNS on 20 December 2023, being a 5-year loan, with a twelve-month grace period on principal repayment and then approximately even amortisation from March 2025. Production variability during the first quarter of 2025, before the booster compressor was commissioned, has resulted in the first principal repayment of £1.25 million, being deferred as part of ongoing discussions with Trafigura about resculpting the repayment schedule.

Angus remains confident in the gas reserves and potential of the Saltfleetby Field and is investigating options to increase production through workovers, new drilling as well as potential acquisitions to strengthen the financial position of the Company.

Ongoing tests are important and we should know results before long, meantime payments to Trafigura are delayed slightly.

Blog from Tuesday 6th May

WTI (June) $57.13 -$2.11, Brent (July) $60.23 -$1.90, Diff -$3.10 +21c
USNG (June) $3.55 +7c, UKNG (June) 78.9p +2.25p, TTF (June) €33.49 +€0.71

Oil price

After falling to new lows last week after Opec+ went early with the meeting and named and shamed overproducing countries and bashed a swift 411/- b/d for June production. With Iraq and Kazakhstan on the naughty step the Saudis are dishing out some unfamiliar medicine. 

But today the market has rallied, by over two dollars after Diamondback Energy, the largest independent in the US now stated that ‘production has peaked in US shale and it expects onshore rigs to drop by 10% in Q2 and then to worsen through the year, describing it a tipping point for US oil production. 

Serica Energy

Serica noted on Friday the announcement by EnQuest Plc confirming that EnQuest does not intend to make a firm offer for Serica. As a result of the announcement, EnQuest is bound by the restrictions contained in Rule 2.8 of the City Code on Takeovers and Mergers.

While there would have been strategic and financial benefits to the combination, in light of current market volatility an agreement on terms that would have been in the best interests of shareholders was not possible at this time.

The Board remains very confident in Serica’s standalone ability to generate significant cash flow and deliver shareholder value and highly competitive shareholder returns from its balanced portfolio of oil and gas assets. Delivering sustainable operational improvement remains paramount. In parallel, the Company continues to pursue its clear growth strategy, as detailed in the 2024 full-year results, progressing numerous organic growth opportunities across the portfolio as well as actively screening a number of cash-generative and value accretive M&A opportunities in both the UK North Sea and other geographies.

So on Friday just before the Bank Holiday weekend the potential nuptials between EnQuest and Serica were called off. My feeling is that whilst there was plenty of industrial logic to the deal and also tax synergies to boot they in particular shouldn’t be a reason for doing a deal.  

Serica to me seems to have the better long term attributes to be able to cope with the present day problems of investing in energy investments, particularly in the North Sea. They have less debt (no leverage) less exposure to decommissioning and over 50% in gas compared to EnQuest who are 100% oil and with a substantial business in SE Asia. 

So now it’s all over and for Serica it is business as usual, and indeed they have a number of near term catalysts with which to move forward strongly. This includes Triton getting back up and running with the addition of exciting new wells, maximising opportunities ahead with Kyle and new BKR wells, and shifting to the Main Board.

Finally although this was the bid situation that took the market’s eye recently I am convinced that the Serica M&A team won’t just have been running the slide rule over Enquest, they have the incentive of being strong, well financed and have been looking at many opportunities and will continue to do so. With a Target Price of 250p I remain very happy to have Serica in the Bucket List…

Challenger Energy Group

Challenger has provided the following operational update, and to advise of the exercise of warrants.

Eytan Uliel, CEO of Challenger Energy, said: 
“One-third of the way into the year, I can report that 2025 is progressing to plan. We’re on track to see 3D seismic acquired over AREA OFF-1 later this year, on track to complete our technical work on AREA OFF-3 and launch a farm-out process for that block in the second half of the year, and we’re progressing the sale of the Trinidad business. Our balance sheet is strong, our work programs are fully funded, and we have no need for additional capital any time in the foreseeable future. Overall, we’re pleased with how Challenger Energy is currently positioned, and we look forward to sharing news as the rest of the year unfolds.”

All is going well at CEG right now, as CEO Eytan Uliel states the 3D seismic for AREA OFF-1 should be acquired later this year ready to move on its process whilst at AREA OFF-3, where seismic has already been run and reprocessing and interpretation should be complete later this year.

With the Chevron deal providing cash and potential upside and another likely farm-out maybe next year there is a great deal of upside, I recently doubled my Target Price to 50p which itself could be a bit too low and CEG has a huge amount of upside.

Uruguay AREA OFF-1 (60% Chevron – operator; 40% Challenger)

• The Uruguayan Ministry of Environment is holding public consultations regarding the issuance of requisite environmental permits for the proposed 3D seismic acquisition campaign over AREA OFF-1, as well as over other offshore areas in Uruguay under contract to other industry participants. The Company expects the necessary permits will be issued to allow for seismic acquisition on AREA OFF-1 to start in early Q4, 2025.
• In anticipation of permits being issued, various operators are already in discussions with seismic companies for planned surveys across the Uruguay offshore region. The goal is to optimise the 3D seismic programme timing based on weather, acquisition parameters and integrated operations seeking incident free and efficient acquisition campaigns. The parties associated with AREA OFF-1 (operator Chevron, Challenger) are working collaboratively in this process.

Uruguay AREA OFF-3 (100% Challenger – operator)

• Reprocessing of 1,250 km of 3D seismic data from the previously acquired BP survey is now largely complete. A satellite seep and slick study, a seabed geochemistry study and a multibeam echo sound survey have also been completed, with encouraging complementary results to ongoing seismic work (refer to the Company’s RNS of 5 March 2025).
• The next stage of the Company’s work program for AREA OFF-3, being technical analysis and interpretation ahead of updated mapping, prospect definition and volumetrics, has commenced, with anticipated completion in early Q3 2025. Once finalised, this work programme (similar in scope to that successfully undertaken for AREA OFF-1) is expected to underpin a formal farm-out process for AREA OFF-3 through the second half of 2025.

Trinidad and Tobago

• In February 2025 the Company entered into an agreement for the disposal of the entirety of its operations in Trinidad and Tobago for a total transaction value of $6 million, and potentially up to $8 million (refer to the Company’s RNS of 18 February 2025).
• The agreement for disposal provided for the regulatory approval necessary for closing of the sale transaction to be finalised by 30 April 2025. The Company and the buyer have agreed to a 60-day extension for completion of the sale, to 30 June 2025 following administrative closing uncertainty due to the snap-election called in Trinidad and Tobago in mid-March. The resulting election, held on 28 April 2025, led to a subsequent change of Government.

Corporate

• The Company’s admission to trade on the OTCQB Venture Market in the United States became effective in April 2025 (refer to the Company’s RNS of 2 April 2025), with encouraging initial interest from U.S.-based investors. The Company has and will continue to engage in a broad range of marketing efforts to introduce the Company to new potential investors in the U.S. / North America, as well as continuing to support regular engagement activities within the UK.
• Despite the currently turbulent market conditions and lower oil prices, the Company confirms that it has sufficient funding available to meet all currently projected expenses and work program costs through at least all of 2025 and 2026.

Exercise of Warrants

• The Company has received notification from a warrant-holder to exercise warrants to subscribe for a total of 3,591,338 new ordinary shares of 1p each (“Warrants”) in the share capital of the Company (the “New Ordinary Shares”) with an exercise price of 5 pence per share. The warrant-holder is a service provider to the Company who was awarded Warrants as part of compensation for services – no other options or warrants are being exercised by any Directors / PDMRs of the Company. Accordingly, the Company will proceed to issue the New Ordinary Shares to the warrant-holder for an aggregate cash value of £179,566.90.
• Application will be made for admission to trading on the AIM of a total of 3,591,338 New Ordinary Shares of 1p each (“Admission”). It is expected that Admission will be effective on or around 9 May 2025. On Admission the New Ordinary Shares will rank pari passu with the Company’s existing ordinary shares.
• Following Admission, the Company’s issued share capital will consist of 249,312,660 ordinary shares, with each ordinary share carrying the right to one vote. The Company does not hold any ordinary shares in treasury. This figure of 249,312,660 ordinary shares may therefore be used by shareholders in the Company, as the denominator for the calculations by which they will determine if they are required to notify their interest in, or a change in their interest in, the share capital of the Company under the FCA’s Disclosure Guidance and Transparency Rules.

Eco (Atlantic) Oil & Gas

Eco has updated stakeholders on activities in its entry into Block 1 offshore South Africa, located in the proven and highly prospective Orange Basin.

As previously announced, Eco, through its wholly owned subsidiary Azinam South Africa Limited (“Azinam”), has entered into a Farm-In Agreement with Tosaco Energy (Proprietary) Limited to acquire a 75% Working Interest and Operatorship in Block 1 offshore South Africa. The Company is now in the final stages of securing the requisite Section 11 regulatory approval to complete the transfer of the interest and formalize operatorship, which is expected in the near term.

Data Acquisition and Subsurface Intelligence

Eco has now completed the acquisition of Block 1’s substantial volume of 3D and 2D legacy data from the Petroleum Agency South Africa (“PASA”) This purchase includes:

• Two 3D seismic surveys totalling 3,500 km² (2,000 km² and 1,500 km²)
• 20,000+ line kilometres of 2D seismic
• Three key exploration well logs: AF-1, AO-1, and AE-1 (All drilled on the block)

All data is of high-resolution quality and is processing-ready, with no reprocessing or reconditioning required. The seismic surveys offer full coverage across key structural and stratigraphic targets, from inboard gas-prone zones to outboard oil-charged systems.

Historical Well Data and Hydrocarbon Shows

The block benefits from three legacy exploration wells drilled in the late 1980s by Soekor, South Africa’s former state oil company. These include: 

• AF-1: Confirmed gas discovery with tested flow rates of 32.4 MMscfd
• AE-1: Encountered gas shows and oil indications
• AO-1: Provided key stratigraphic data and reservoir markers

All three wells were part of Soekor’s regional Orange Basin program and offer critical calibration for seismic interpretation and future prospect de-risking.

Strategic Asset Overview

Block 1 spans 19,929 km² offshore South Africa, directly abutting the Namibian border. The block extends from the shore to the continental shelf, some 175km offshore then to ~263 km out into deep water, encompassing a full margin transect from the shelf to deep water channel and fan complexes.

Water depths range from shallow shelf (~200 m) to deepwater (~1,000 m), enabling a full spectrum of play types. The acreage is considered geologically analogous to the Kudu gas field to the north and sits immediately south of recent discoveries made by Galp Energia (Mopane), Shell (Graff, La Rona), TotalEnergies (Venus), and Rhino Resources (Capricornus 1-X light oil discovery).

Operational Readiness

Eco will assume operatorship of the block upon final regulatory approval. As the current Exploration Right Budget and Work Plan does not involve field operations, the program proceeds without the need for additional environmental permitting for immediate interpretation and technical work to progress.

Colin Kinley, Co-Founder and COO of Eco Atlantic, commented:
“The Orange Basin has rapidly emerged as one of the most compelling hydrocarbon fairways globally, with recent multi-billion-barrel discoveries adjacent in Namibia extending directly into the geological runway of  Block 1. This asset provides Eco with material exposure across a full-margin basin play-ranging from proven, gas-rich inboard sections to oil-prone targets in the deepwater and ultra-deepwater domain.“

“This strategic acquisition of high-quality 2D and 3D seismic, along with historic well logs deliver massive value to the company. This acquisition is currently conservatively estimated to replace US$50-60 million in acquisition costs required for new exploration. The data quality enables us to aggressively pursue subsurface interpretation and prospect ranking immediately. This dataset provides a robust foundation for accelerated prospect maturation and the opportunity to consider potential farm-out and partnership conversations.”

“In parallel with our South African work program, we are actively negotiating farm-out and drilling participation opportunities on our Orinduik Block in Guyana. We will update the market as those discussions progress. Our Walvis Basin acreage in Namibia, particularly the ultra-deepwater blocks, is also receiving strong interest as Orange Basin real estate becomes increasingly competitive. We continue to engage with industry and government stakeholders to advance partnerships across these core positions. Finally, our interest in Blocks 3B/4B in South Africa-now operated by TotalEnergies-offers unique upside potential, both on completion payment of farm down costs to Eco and importantly drilling the significant resource opportunity assessed on the block.”

Exciting times for Block 1 which is fast becoming the next most ‘compelling hydrocarbon fairways globally’ and as neighbours make multi-billion-barrel discoveries next door to the North which ‘extend directly into the geological runway of Block 1’. 

With a great deal of expensive data worth tens of millions of dollars this block is clearly been fast-tracked towards partnership, a resource report and in due course target selection and with final approvals expected soon, Eco shareholders, who are a canny bunch are expecting great things and why not?

Eco remains focused on disciplined, value-driven exploration, with its strong exploration team and entrepreneurial drive, and is committed to sourcing leading technical opportunities and to deliver substantial long-term value to its shareholders through partnerships and high impact exploration wells.

Corporate Presentation

Eco also announces that a new Corporate Presentation has been published on its website and is available at the following link: https://www.ecooilandgas.com/investors/results-presentation/

Star Energy

Star has announced that it has signed a memorandum of understanding with Veolia, Europe’s decarbonising energy leader, to develop large-scale geothermal projects. The new partnership will help to deliver the UK’s net zero goals by using the constant, reliable, renewable and low-carbon energy source from the ground. This geothermal energy will replace the fossil fuel energy that is currently used to supply heat to district heating schemes, commercial buildings, hospitals and education campuses.

As almost a third of the final energy consumed in the UK is used as heat in the domestic, commercial and public sectors, resulting in over 40% of the UK’s carbon emissions, there is an urgent need to tackle carbon emissions from heat if the country is to meet its net zero goals. Geothermal heat is more energy efficient than many low-carbon alternatives, requires a much smaller surface footprint, will offer significantly greater longevity and is a potentially lower-priced solution. As a result of the lower electrical power needs of geothermal systems, they offer a solution insulated from power pricing and, in places where alternative electrified solutions like electrical heating or high power heat pumps are more difficult to connect due to insufficient grid capacity, they provide a low carbon alternative.

Working together, Star Energy and Veolia will develop geothermal solutions using advanced modelling and simulation, hydrogeological and seismic studies, and access to geothermal heat using directional drilling. The systems will utilise proven technology in operation in many parts of the world, with demonstrable environmental and end user benefits. In many cases the systems can be attached to existing customer heating networks with minimal need for changes.

John Abraham, Chief Operating Officer, Industrial, Water & Energy UK, Ireland & Nordics, Veolia, said:
“Veolia has a proven track record of delivering carbon savings through district heating, and our plan is to increase the number of district heating schemes in the UK – aligned with our global GreenUp strategy. So we particularly welcome this new partnership that will be able to deliver significant carbon savings in a sector where delivery can be complex. We know that geothermal energy is attractive, both from an economical and emissions perspective, when compared to other renewable and fossil fuel solutions. By working together we will be able to deliver the significant benefits of low carbon heat that is needed across a wide range of domestic, commercial and public sector applications.”

Ross Glover, Chief Executive Officer of Star Energy, said:
“Star Energy is playing a key role in the UK’s transition to sustainable and predictable heat provision, and geothermal has an important role to play in the UK’s energy transition by providing a home-grown, predictable, renewable heat option for businesses and households, contributing to the Government’s 2050 net-zero ambitions. We look forward to working with the Veolia teams, and developing new projects using our unique expertise, gained over decades in the energy sector. Through partnerships such as this, we fully expect our geothermal business to grow significantly as it delivers to customer requirements to secure and decarbonise their energy supply.”

There is little doubt that Ross Glover is putting some shift here at Star and if the geothermal markets grows he will have positioned the company very well indeed. But in any long term and uncertain market such as this it is impossible to put any numbers on the potential. Thank goodness he went banko on the oil before it was all shut down…

Original article   l   KeyFacts Energy Industry Directory: Malcy's Blog