Zephyr Energy’s Salt Wash project will tap into thriving helium market

Zephyr Energy has highlighted potential significant exposure to the lucrative US industrial helium market from revival of a partially developed Utah project. The Rocky Mountain oil and gas company has proposed farm-in to a minimum 75% working interest in a 1,047-acre leasehold position at Salt Wash Field.

Discovered in 1961, the previously producing asset with proven oil, gas and helium reserves, sits three miles south of Zephyr’s Paradox project.

The company announced in October that Salt Wash Field has a thin, 15-feet oil rim, above which is an inert gas cap. An approximately 500ft of gas column consists of some 72% nitrogen, 22% hydrocarbon gases, and 1.4%-1.7% helium content.

Revived interest as helium booms

The field historically produced 1.65 million barrels of oil and 11.7 billion cubic feet (BCF) of gas prior to abandonment in 2014; the oil rim was largely produced, but the market for natural gas and helium wasn’t supportive of continued development.

However, a decision to farm-in to the Salt Wash Field was made to increase Zephyr’s oil and gas resource potential, and to achieve exposure to a US industrial helium market in which prices touched US$1,000 per million square cubic feet.

There are discovered, proven helium resources in the Leadville Formation, with further opportunity for upside through three deeper helium exploration targets successfully proven in nearby Paradox Basin.

Field offers strong rewards

Zephyr’s board believes economics for the Salt Wash project are attractive for helium content alone, notwithstanding further upside from oil and gas development.

It forecasts the Salt Wash project to include net helium discovered resource potential of 0.07-0.19 BCF in Leadville Formation alone, and net helium un-risked, prospective resource of a further 0.04-0.66 BCF (including exploration targets).

The board suggests an estimated net present value at a 10% discount rate (NPV-10) of circa US$58m, with the risked upside case having an NPV-10 of about US$120m.
As per farm-in agreement terms, Zephyr confirmed two initial payments of US$300,000 each made to the incumbent leaseholder with the company’s intention that a dual-purpose Leadville Formation delineation well be drilled; this ‘commitment’ well, to be spudded before June 30, will also test three additional helium exploration targets and other potential hydrocarbon-bearing reservoirs. Seeking shareholder value

CEO Colin Harrington added: “While helium is a new addition to our resource exposure, many nearby Paradox Basin oil and gas operators are already producing co-mingled helium in commercial quantities, and there is an active local offtake market for produced helium.

“While Zephyr is not looking for helium to become our primary focus, we do believe the Salt Wash project has significant and currently unrecognised potential value and can further utilise our team’s significant experience in the Paradox Basin.”