Zephyr Energy announces State 16-2LN-CC well to recommence, crypto-mining facility

7 June 2022

in Mining

Reading Time: 3 mins read

Zephyr Energy shares were down 4.3% to 4.6p in early afternoon trading on Tuesday following the company’s announcement that its State 16-2LN-CC well was set to recommence, facilitated by a co-located crypto-mine facility which is currently under development.

The well is part of the energy firm’s Paradox project in Utah, with liquid volumes produced from the operation set to be sold to refineries in the state, and produced gas volumes to be sold to fuel onsite power generators, which will provide electricity for the co-located crypto-mining facility.

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Zephyr Energy confirmed that its initial one megawatt crypto-mining facility would be funded through existing cash resources or from third-party investment, with facility capital payback anticipated in under two years at current crypto-currency prices.

The crypto-mine is scheduled to launch in around eight to 12 weeks, with well work to be conducted over the term during which the State 16-2LN-CC well is expected to recommence production.

“Over the last twelve months, a growing number of U.S. upstream oil and gas operators (including an immediately adjacent Paradox Basin oil and gas operator) have chosen to co-locate crypto-mining facilities at well sites in order to benefit from the growing demand for natural gas to fuel dedicated sources of power generation,” said Zephyr Energy CEO Colin Harrington.

“Our planned crypto-mining facility will enable Zephyr to meet its near-term objectives – it will allow us to accelerate revenues from the State 16-2LN-CC well, to earn additional revenues from the crypto-mine infrastructure, and to enable a long-term test which will provide valuable information about the well’s production profile.”

Dominion Energy

Zephyr Energy added that it expected to tie its gas production to the nearby gas infrastructure recently bought by US Fortunate 500 group Dominion Energy in the longer term, after Dominion reported its plans to refurbish and expand the natural gas infrastructure running across Zephyr’s territory.

The company is estimated to be available to accept gas volumes from Zephyr’s wells in 2023.

Paradox Expansion

Alongside the energy firm’s work on the State 16-2LN-CC well, it also mentioned it was at an advanced stage of planning for a three-well drill programme on the Paradox project, expected to commence in HY2 2022.

“The coming months will be a period of intense activity on the Paradox project,” said Harrington.

“In addition to the re-start of State 16-2LN-CC well production and launch of crypto-mining operations, we are in detailed planning for our forthcoming three well drill programme.”

“We look forward to providing regular updates as we prepare to commence drilling in the upcoming months.”

Zephyr Energy noted that the well design was completed, with all permit applications submitted and negotiations currently in progress with rig vendors.

“We are hugely excited to embark on the next steps to open up the Paradox Basin resource play,” said Harrington.

“The completion of our highly successful initial well test gave the Zephyr team the comfort to proceed with detailed evaluations of both near and long-term off-take solutions for the gas volumes from the State 16-2LN-CC well.”

“The plan announced today allows us to both accelerate near-term production and benefit from long term gas sales optionality should the economic returns from the co-located crypto-mining facility meet internal expectations.”

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