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On Friday, analysts at Canaccord Genuity raised their target price for exploration and production company Zephyr Energy (LSE:ZPHR) from 14.0p to 16.0p following the release of the group's highly anticipated 36-2R production test results.
The results from Zephyr’s second production test of the State 36-2R well, located in the Paradox acreage in Utah, demonstrated a peak production rate exceeding 2,100 barrels of oil equivalent per day. This production included approximately 1,590 barrels of gas and around 510 barrels of condensate/light volatile oil, with the condensate yields showing an upward trend towards the end of the test.
Canaccord Genuity described the outcome as a "very strong result" that approached the upper end of Zephyr's projections. They highlighted that the results indicate a promising commercial profile using non-hydraulic stimulation techniques, which present a lower risk and cost-effective method for future development within the Paradox acreage.
The analysts, who have assigned a 'speculative buy' rating to Zephyr's stock, noted that the company is now in the process of seeking a financial partner to expedite the development of the Paradox project. The data obtained from drilling the State 16-2, 36-2, and 36-2R wells, combined with 3D seismic data, core samples, and recent production test results, is seen as a strong asset in attracting potential partners.
Furthermore, Canaccord Genuity suggested that success at the Paradox project could also serve as a catalyst for attracting interest in Zephyr’s adjacent Salt Wash helium play. This potential for broader interest underscores the strategic importance of the positive production test results and the ongoing efforts to advance the Paradox project.
