The Quarter started with the award to the Company of new ATP 2062 on 1 October 2020 in what must be close to record time, for 1,414 square kilometres of new acreage contiguous to PL231 (see Figure 1 below*). The new block (which we are calling "Rolleston-West") contains the highly prospective Bandanna Coals which have shown good CSG potential to the north at Mahalo and to the south at Acadia, as well as previously identified conventional gas targets. Interestingly, the geology of the block includes two plunging noses, with the coals in the target area at depths within the CSG sweet spot, that is between 300 metres and 650 metres. It is planned to explore and develop Rolleston-West in conjunction with neighbouring Reid's Dome, as a single integrated project.
Seismic has been previously acquired over the eastern area of the permit and this, together with the results of sampling by coal companies exploring in the area, enables us to move to drilling in the block without preliminary exploration. We are currently preparing to drill two wells in the permit, to be undertaken in conjunction with the Phase 2 Campaign at Reid's Dome.
$14.5m capital raised
The end of September Quarter saw the Company raise $9.5m through a private placement, and this was immediately followed by a Share Purchase Plan extending the same terms to the Company's eligible shareholders, namely the purchase of a maximum of 27,272 shares at $0.55 per share. The Plan was heavily oversubscribed, with subscriptions of nearly 250% of the $2m target sum. Nearly $4.9m was raised, bringing the combined equity raisings to nearly $14.5m, enabling the Company to move rapidly into its Phase 2 exploration and appraisal campaign.
The Phase 2 Campaign
The Phase 2 exploration and appraisal campaign for the Reid's Dome Project aims to provide additional data to secure a significant certified reserves booking and enable field development planning and infrastructure design for commercialisation of the Nyanda area.
Two "step out" wells from the successful Nyanda-4 well were drilled during the Quarter, Nyanda-7 approximately 2.5km to the north, and Nyanda-8 approximately 2.2km to the south-west of Nyanda-4 (see Figure 1 below). The new drilling has confirmed confidence in the extent of the resource in the Nyanda area, with both wells intersecting good quality, gassy coals with seams of similar thicknesses and depths to Nyanda-4, and in a promising sign for producibility, evidence of open fractures.
CURRENT QUARTER UPDATE
Since the end of the Quarter production testing has commenced at Nyanda-4 and Nyanda-7 (on 19 and 25 January respectively), while the Services Rig has just completed installation of the pump at Nyanda-8 and the surface facilities are currently being connected. The flow data to be provided from these tests will be a key input into development planning for the field.
The results so far from Nyanda-4 and Nyanda-7 are looking so promising that the Company is starting base-line environmental studies for the development (including Central Processing Facilities), thus ensuring our aspirational timetable in Target 2023 remains on track.
The forecasted La Nina weather pattern has led State Gas to bi-furcate its drilling programme, and the remaining wells (on both PL231 and Rolleston-West) will be drilled once the wet season weather risks have abated. This has proved to be a wise decision as more than 12 inches (300 mm) of rain fell at site in the 3 weeks after Christmas alone4. We expect that this wet weather should abate by mid to late March in which case we will re-commence the programme to drill and test production at the central (Serocold) and northern (Aldinga) areas of the project.
Excitingly, as part of the Phase 2 re-commencement, State Gas will embark on the first work at Rolleston-West.
The market for gas is the most promising it has been for quite a while. The Asian LNG spot price is running at historically high levels, and there is an expectation that the go-ahead for a major new gas-fired power station, part of the Federal Government's "gas led recovery", will be announced in March or April this year. A new power station is likely to take at least two years before it is commissioned, adding to the strength of domestic demand in 2023. Target 2023 has never looked more prescient.
The results to date show that the aspirational goal set out in Target 2023 has never looked closer to being a reality. The 6 months covering last quarter and the coming one are indeed critical to the beckoning future.
State Gas is well placed to complete its Phase 2 Campaign. At the end of the Quarter the Company had cash at bank of $12.47m, after raising new equity of $5.96m (net of costs) during the Quarter ($14.43m including the preceding Quarter), and expending $1.45m in Project development costs, and $0.57m in other costs.
*To view tables and figures, please visit:
About State Gas Limited
State Gas Limited (ASX:GAS) is a Queensland-based developer of the Reid's Dome gas field (PL 231), which includes both CSG and conventional gas, originally discovered in 1954 during oil drilling prior to the existence of a pipeline network and an east coast gas market. The Reid's Dome field is located in the Bowen Basin in Central Queensland on the apex of the Springsure-Sericold Anticline. State Gas is sole Operator of PL 231, which is well-located 30 kilometres southwest of Rolleston, approximately 47 kilometres from the Queensland Gas Pipeline.
Chief Executive Officer
Phone: 0439 608 241
Phone: 0458 517 850