Half Year Accounts
Half Year Accounts
Brisbane, Mar 14, 2019 AEST (ABN Newswire) - Your directors present their report on State Gas Limited (ASX:GAS) (the Company) for the half-year ended 31 December 2018.

PRINCIPAL ACTIVITIES

During the financial half-year the principal activity of the Company was the development of PL231.

REVIEW OF OPERATIONS

The net operating loss after income tax for the half-year was $1,054,672.

The December 2018 half year (the Period) has been a particularly pleasing period for the Company. The period commenced with highly experienced exploration geologist, Mr James Crowley BSc(Hons) taking up his position as Chief Operating Officer with the Company. Upon commencement, Mr Crowley undertook a detailed review of the geology of its primary asset, its 60% holding in Petroleum Lease 231. Long recognised as hosting conventional gas targets, Mr Crowley identified the potential for the permit to also contain significant volumes of coal seam gas in the coal measures in the Reid's Dome Beds. The Reid's Dome Beds, a formation approximately 1500m thick, extends throughout the entire permit. The area of PL 231 has not previously been considered, let alone explored, for coal seam gas.

During the previous period, the Company had commenced planning for a drilling campaign to investigate shallow conventional targets identified by the reprocessing of historic seismic data. Following Mr Crowley's review, the Company refocussed its proposed campaign to drill a well to investigate both the coal seam gas and conventional potential of the Reid's Dome Beds, to follow an initial well appraising the Cattle Creek Formation in satisfaction of the Company's Joint Venture obligations.

Gas was first discovered in the area of PL 231 in the AOE-1 well, drilled in 1955. AOE-1 encountered gas in the shallow Cattle Creek Formation within PL 231, a formation containing 3-way dip closed structural and stratigraphic traps with over-pressure. State Gas' first well, Primero West-1, was located approximately 650m west-southwest of AOE-1 and was designed to test the southwestern extent of the Cattle Creek gas sand discovered by that early well, as well as satisfy the Company's obligations under the Joint Operating Agreement.

Primero-West-1 spudded on 10 November 2018, reached its planned total depth of 250m on 15 November, and the rig was released on 18 November. Operations were successfully conducted without safety or environmental incident. The well was plugged and abandoned, as any full-field development of the Cattle Creek Formation within PL 231 will require additional seismic testing to optimise the locations of production wells.

The Primero West-1 well encountered the "Primero" gas sand in the Cattle Creek Formation from 131.5m depth, in line with expectations. Analysis of wireline logs has indicated a net gas-bearing zone of up to 12.5m. Flow testing conducted on the well measured a maximum gas flow rate of 0.436 mmscf/d through a 48/64" choke, in line with expectations. Laboratory analysis has confirmed the gas composition to be 96.7% methane, a result similar to offset well data.

The well was 100% funded by State Gas and completed the Company's sole-funding obligations under the Joint Operating Agreement for PL 231.

Drilling of the Nyanda-4 corehole commenced following completion of drilling of Primero West-1. Nyanda-4 was designed to test the gas potential of the Reid's Dome coals and sandstone reservoirs. It is located approximately 13.5km south of the Primero West-1 well and 50m southwest of Nyanda-1 (drilled in 1987).

Nyanda-4 spudded on 22 November with a planned Total Depth of 1000m. However, as a result of the favourable results achieved from drilling and testing, the well was extended a further 200m to 1200m. Approximately 150m of core was obtained, commencing at 392m depth. The well was also logged, and drill stem tests conducted. The well reached the revised total depth on 30 November and the rig was released on 3 December. Because of the favourable results, the Nyanda-4 well has been suspended for future re-entry and testing, rather than plugged and abandoned as originally planned. As with Primero West-1, operations were conducted without serious safety or environmental incident.

The results from Nyanda-4 have been exciting. Gas was observed bubbling from the coal and hissing from sandstones in Nyanda-4 cores. Numerous gas shows were seen in the logs, associated with both coals and sandstones. Analysis has confirmed 40.4m of net coal in seams up to 4m thick, and a further 25m of carbonaceous shales and thinner coal seams (i.e. <0.3m), indicating 65m of coals and carbonaceous shales (excluding conventional sandstones). Correlation with AOE-1, located approximately 14 km north of Nyanda-4 within PL 231, supports the expectation of additional coals below TD of 1200m.

The coal cores obtained from the well are generally bright black, with good cleating. The cores show open fractures. DST data indicates permeability of the coals in the cored section of the well, and that the Reid's Dome Beds are ~100psi over-pressured compared to hydrostatic.

After 7 weeks' desorption the average gas content from cored samples is 11.6 m3/t, with gas content increasing with ongoing desorption in the laboratory. Gas content for the thickest seams is currently ~13 m3/t. Gas composition data of the latest desorption sample indicates a weighted average composition of 80% methane, with balance CO2. The thickest seam contains 87.6% methane. Within the cored interval, the CO2 content reduces with depth. In the greater permit area, as well as diminishing with depth, CO2 values decline to the north, with the CO2 of AOE-1 at 1,360m being 0.7%. Further analysis of the core samples from Nyanda-4 and well data from both wells is ongoing.

Also during the period, the Company was granted Pipeline Survey Licence 2028. Valid for a period of 2 years, the PSL entitles the Company to enter upon the land covered by the licence to investigate potential pipeline routes. The area of the licence covers a broad area encompassing route options to the Rolleston Gas Plant to the north east, and to the Queensland Gas Pipeline to the south east. The Company has commenced discussions with the owners of both facilities.

At the same time, the Company has increased its interest in PL 231. At commencement of the period, State Gas held a 60% interest in PL 231 and the associated Joint Venture. On 27 November 2018, the Company entered into an agreement to acquire a further 20% interest in the permit and Joint Venture, taking its interest to 80%, with the Joint Operating Agreement continuing in full force and effect. This transfer was registered by the Queensland Department of Natural Resources, Mines and Energy on 4 January 2019.

In addition, in early December 2018, State Gas elected under the provisions of the Joint Operating Agreement for the Joint Venture to acquire the remaining 20% and increase its interest in PL 231 to 100%. Offer and Acceptance Notices were issued on 4 December, and this process is anticipated to be completed in the first half of 2019.

Your Company is looking to maximise the benefit of these results for shareholders. It has received approaches and interest from experienced industry participants to progress the Reid's Dome Gas Project in both partnering (asset-level) and corporate (company-level) transactions. The Company aims to ensure that discussions include all qualified and interested counterparties to maximise the benefit for shareholders.

SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS

On 27 November 2018 the Company entered into an agreement to acquire a further 20% interest in the permit and Joint Venture, taking its interest to 80%, with the Joint Operating Agreement continuing in full force and effect. This transfer was registered by the Queensland Department of Natural Resources, Mines and Energy on 4 January 2019.

In addition, in early December 2018 State Gas elected under the provisions of the Joint Operating Agreement for the Joint Venture to acquire the remaining 20% and increase its interest in PL 231 to 100%. Offer and Acceptance Notices were issued on 4 December, and this process is anticipated to be completed in the first half of 2019.

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About State Gas Limited

State Gas Limited ASX:GASState 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.

http://www.stategas.com

 


Contact

Lucy Snelling
Chief Executive Officer
M: +61-439-608-241
E: lucy@stategas.com

Greg Baynton
Executive Director
M: +61-414-970-566
E: greg@stategas.com



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