Quarterly Activities Report
Production Testing at Nyanda-4
Production testing re-commenced at Nyanda 4 with the installation of the new pumps designed specifically for the conditions the Company encounters at Reid's Dome. The results have been very exciting, with Nyanda 4 reaching close to 500,000 scf/day after two months of production testing.
This is a stellar result and bodes extremely well for the future of the field.
Award and Grant of ATP 2062
In September State Gas was successful in its application for over 1400 square kilometres of new acreage contiguous to PL231, in what we now call Rolleston-West. The new block, ATP 2062, contains the highly prospective Bandanna Coals, which have shown good CSG potential to the north at Mahalo and to the south at Acadia. Our analysis of previously acquired seismic and the results of coal sampling by coal companies exploring in the area has accelerated our planning, enabling us to commence drilling in the eastern part of the block without preliminary exploration. Interestingly, the eastern area of Rolleston-West has two 'noses' plunging together, which often create stresses beneficial for CSG. As Executive Chairman, my experience at QGC with the Undalla Nose makes me particularly partial to geological noses. The depths of the coals in the target area of Rolleston-West also fall within the geological CSG sweet spot, being between 300 metres and 650 metres in depth.
Rolleston-West was granted ATP status (ATP 2062) in late September in what must be close to record time. This rapid grant will enable the first couple of exploration holes to be added to the next phase of development at the adjoining Reid's Dome project.
Following the excellent results at Nyanda-4 and the award of Rolleston-West, the Company undertook a $9.5 million placement to sophisticated investors in late September. The Board followed up this placement with a Share Purchase Plan ("SPP") to enable all eligible shareholders to participate at the same price. Over one-third of our fellow shareholders elected to participate in the SPP with the average participation being close to $20,000. The Board appreciates this enthusiastic backing by the Company's Owners.
The combined total from the fundraising was $14.5 million which enables the Company to simultaneously appraise Reid's Dome and explore Rolleston-West. The Company envisages that both Reid's Dome and Rolleston-West will be developed as one economic region.
Gas as a Priority Area in Covid Recovery
The Federal Government recently announced Gas as one of the six Priority Areas to power the nation's economic recovery from the Covid-induced recession. The requirement for new gas supplies from 2023 onwards is now a national priority. State Gas, with its large Bowen Basin acreage position and $14.5 million of funding, stands in an enviable position to help meet our Nation's needs.
The Next Phase
The objective of the next phase is to establish the Nyanda Area at Reid's Dome as the initial production hub whilst establishing possible future hubs in the Serocold and Aldinga areas. The productivity of the Bandanna Coals in the adjoining Rolleston-West acreage will also be investigated, with two new wells (to be named Rougemont 1 and 2) to be drilled on the geological noses.
In addition, the export pipeline will be progressed, with further work to be undertaken to select between a northern route (which will pass through Rolleston-West) and a direct route to the south.
State Gas is progressing at pace in ensuring all necessary approvals are in place to start this programme as soon as possible. The physical inspections to provide environmental and Cultural Heritage clearances of proposed wells sites have now commenced, following several days delay from rain. All necessary long lead time items have been sourced, and rigs have already been secured.
The Board is conscious of the predictions of a La Nina weather event this storm season and is taking the appropriate steps to mitigate the potential impacts. The weather situation and its impact on the timing of the programme will be assessed at the time at which all approvals have been obtained, taking into account the mitigation steps taken so far.
At the end of the Quarter the Company had cash at bank of $8.535m, with most funds from the Placement received by 30 September. Following the close of the September Quarter, a further $4.9m was received during October from the proceeds of the Share Purchase Plan. $0.644m was expended during the Quarter in Project development costs, and $0.167m in other costs.
With the substantial progress made during the September Quarter and the activities currently underway and funded, it has been an exciting time to be a Shareholder in State Gas. The vision outlined a little over a year ago is taking shape. We await with eager anticipation the results of the next phase's drilling and appraisal programme.
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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 program in parallel with permitting for an export pipeline and development facilities to facilitate the fastest possible delivery of gas to market. State Gas' current focus has been to confirm the producibility of the gas through production testing of the wells.
State Gas Limited