Colorado
Zephyr is actively pursuing transactions in the prolific Denver-Julesburg Basin (the “DJ Basin”) located in Colorado and Wyoming.
Overview
Zephyr is evaluating transactions which will provide the company with near-term, low-risk horizontal development drilling exposure in the prolific DJ Basin. Located in Colorado and Wyoming, the DJ Basin is a world class, liquids-rich resource play currently undergoing a major resurgence as vertical production is replaced with one, two and three-mile horizontal well developments, with over 4,000 horizontal wells drilled to date. Moreover, there is significant infrastructure in place with available capacity, as well as ready access to service providers and contractors.
Zephyr’s management team and partners have extensive experience delivering production from horizontal development in the DJ Basin.
In November 2019, the Group announced that it had entered into a Letter of Intent (“LOI”) with Captiva Energy Holdings II, LLC (“CEH”) in respect of a potential working interest acquisition in the McCoy lease in the Denver-Julesburg Basin (“DJ Basin”) in Weld County, Colorado, U.S. (the “McCoy acquisition”).
The McCoy acquisition would provide the Group with near-term, low-risk horizontal development drilling exposure in the prolific Niobrara resource play, and on acreage contiguous to other major DJ Basin operators including Occidental Petroleum Corporation, Great Western Operating Company LLC (a subsidiary of Great Western Petroleum), and Crestone Peak Resources. The DJ Basin is a mature oil and gas basin currently undergoing a resurgence as vertical production is replaced with successful one-, two-, and three-mile horizontal well developments. The McCoy lease is located in an active part of the DJ Basin and a horizontal redevelopment of the existing productive lease is proposed.
While the potential acquisition continues to meet the Company’s key acquisition criteria, the timeline for development has been put on hold by the current operator of the project while an expansion of the project is considered. Zephyr will continue to monitor progress and will look to make an investment decision once a firm development schedule is established and if revised terms can be negotiated. In the meantime, given the amount of forthcoming activity on the Company’s Paradox and Williston projects, the Board did not seek to negotiate an extension to Zephyr’s existing option on the McCoy acquisition beyond the expiry date of 30 June 2021. That said, the seller of the McCoy asset has confirmed that the Company will be given a right of first refusal for participation in the project, should the seller seek funding once development plans are solidified.