Zephyr Energy (AIM:ZPHR ) has raised £2.25m at 0.55p to fully finance its maximum funding obligations for drilling the State 16-2 dual-use well on its acreage in the Paradox Basin, Utah.
The Rocky Mountain oil and gas firm focused on responsible resource development said with funding now secured, it remains on track to spud the well before the end of the year.
The company, formerly Rose Petroleum, said the proceeds will also be used for future lateral drilling on the Paradox project and to fund potential acquisitions at a time ‘significant opportunities arising in the Rocky Mountain region of the US upstream oil and gas markets’.
Of the funds raised, around £1.15m is conditional on the approval by shareholders of resolutions to provide authority to the directors to issue and allot further new ordinary shares on a non-pre-emptive basis at a general meeting to be convened by the company.
Commenting on the anticipated spud, Colin Harrington, Chief Executive of Zephyr, said:
“We expect the processing and interpretation of the data acquired to take place early in the New Year, following which we hope to be in a position to commence commercial drilling operations utilising the 16-2 wellbore shortly thereafter.”
Harrington stated that the Board of Zephyr believes that the spudding of the 16-2 well will be “the catalyst to finally unlock the significant potential of the Company's Paradox asset.”
He said the process was aided by the best-in-class research and grant partners, the dedication and commitment of the management team and the Board’s role in the placing.
Shares in Zephyr Energy have increased over 70% in value since August 2020 and were trading 10.34% lower this morning at 0.65p.
Zephyr said State 16-2 dual-use well’s primary objective will be to acquire a comprehensive data set across the Cane Creek reservoir with the aim of developing more efficient and less environmentally impactful oil production strategies for the northern Paradox Basin.
The well has also been designed to facilitate re-use which could allow for future drilling of a horizontal appraisal lateral from the wellbore after initial data has been processed and evaluated.
Given the significant commercial benefits of potential well re-use, Zephyr has agreed to fund up to $1m of incremental costs should the cost of the well go above the University of Utah's Energy & Geoscience Institute’s $2m committed funding agreed earlier this month.
The spudding of the dual-use well is only conditional on customary permitting, and with detailed design work already underway, drilling is due to commence by the end of this year.
The Board told investors while it had considered various funding options, including a debt facility with Booner Capital LLC as detailed in a previous announcement, it has concluded that the Placing represents the best outcome to fund this stage of the Paradox project.
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