The last financial year has been the year in which State Gas Limited (ASX:GAS) marched towards reserve certification. Production testing at Nyanda-4 (coupled with production log testing) corroborated our theory that seams as deep as 1,100 metres were contributing to our gas flows. We prognosed that as a result of the geological disturbance which created the Dome there would be pathways for the high content gas to migrate to the well bore. This may lead to pockets of gas being trapped in the "cracks", which with concentric drawing down would become interconnected over time. It was pleasing to see flow rates of 700,000 cubic feet /day occur as our first "crack" was encountered.

The production testing at Serocold-1 was showing impressive build-up when the well sanded up. This occurrence is not unusual in coal seam gas and is generally remedied by "sleeving" the well. With the recent over-subscribed and cut-back fundraising completed, the Company intends to instal the "sleeve" at Serocold-1 and re-commence production testing this quarter. The results at Nyanda-7 & 8 initially showed promise but the production climb arrested. The Company believes this is a "skin" issue near well-bore and therefore jetting the requisite seams should restore the production climb. This is being trialled at Nyanda-8 this quarter.

Provided production tests at Serocold-1 and Nyanda-8 produce as expected, the Company should then be in a position to seek reserve certification - the next step to development - heralding our first Gas Sale Contract at a time of an extremely tight market. This Gas Sales Contract will underpin the development funding options.

Your Company believed that the market would tighten significantly in 2023 with price being the market clearing mechanism. Frankly, it is unbelievable that in a market shoulder period the JKM - the Asian LNG spot market indicator - has exceeded A$37/GJ for an extended period, causing the ACCC's Domestic Gas LNG Netback price to exceed A$22/GJ. The Price is Right for State Gas to come on down.

The core holes at Rougemont have been successfully completed. The results at Rougemont-2 were more than exciting with one seam of 2.4 metres showing permeability of 395mD with 96% methane. Just what the Doctor ordered! We intend to put Rougemont-2 into production testing with results expected in the first quarter next year.

As Rougemont is located between Reid's Dome and the gas trunklines to Wallumbilla (the domestic gas pricing point) to the South and Gladstone (the LNG export port) to the North, Rougemont will share infrastructure built for Reid's Dome- economically converting the Rougemont development into a brownfield development.

Richard Cottee

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About State Gas Limited

State Gas Limited (ASX:GAS) is a Queensland-based developer of the Reid's Dome gas field, originally discovered during drilling in 1955, located in the Bowen Basin in Central Queensland. State Gas is 100%-owner of the Reid's Dome Gas Project (PL-231) a CSG and conventional gas play, which is well-located 30 kilometres southwest of Rolleston, approximately 50 kilometres from the Queensland Gas Pipeline and interconnected east coast gas network.

Permian coal measures within the Reid's Dome Beds are extensive across the entire permit but the area had not been explored for coal seam gas prior to State Gas' ownership. In late 2018 State Gas drilled the first coal seam gas well in the region (Nyanda-4) into the Reid's Dome Beds and established the potential for a significant coal seam gas project in PL 231. The extension of the coal measures into the northern and central areas of the permit was confirmed in late 2019 by the Company's drilling of Aldinga East-1A (12 km north) and Serocold-1 (6 km to the north of Nyanda-4).

State Gas is also the 100% holder Authority to Prospect 2062 ("Rolleston-West"), a 1,414 km2 permit (eight times larger than PL 231) that is contiguous with the Reid's Dome Gas Project. Rolleston-West contains highly prospective targets for both coal seam gas (CSG) and known conventional gas within the permit area. It is not restricted by domestic gas reservation requirements.

The contiguous areas (Reid's Dome and Rolleston-West), under sole ownership by State Gas, enable integration of activities and a unified super-gasfield development, providing economies of scale, efficient operations, and optionality in marketing.

State Gas is implementing its strategic plan to bring gas to market from Reid's Dome and Rolleston-West to meet near term forecast shortfalls in the east coast domestic gas market. The strategy involves progressing a phased appraisal prog



Lucy Snelling
Chief Executive Officer
Phone: 0439 608 241

Richard Cottee
Executive Chairman
Phone: 0458 517 850

Link: Annual Report to shareholders

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