Quarterly Activities Report
Brisbane, Oct 31, 2022 AEST (ABN Newswire) - The September 2022 Quarter (Quarter) and the subsequent month of October have been eventful for both the energy sector and State Gas Limited (
ASX:GAS) (STGSF:OTCMKTS).
The Australian gas market has continued to perform very strongly. The average Wallumbilla spot price across the Quarter was $26.38/GJ (June quarter: $27.31 /GJ) indicating that while the market has seen greater stability than in the previous quarter, pricing has not materially decreased. Current Federal Government forecasts indicate ongoing high prices for the immediate term.
In this context your Company is focussed on developing its projects and commercialising its resource as quickly as possible. With full control over its key projects (Reid's Dome and RollestonWest), your Company is also developing strategic partnerships to maximise its outcomes.
CNG trucking 'virtual pipeline' project
A key focus of the Company during the Quarter has been to commercialise its proven gas resource at Reid's Dome (PL 231) as soon as possible. The Company is planning to truck compressed natural gas to the market, delivering into the high pressure pipeline network some 60km away. The Company has secured key equipment items (the compressor and dehydrator) and is working through the necessary approvals and arrangements for a Q1 2023 start.
Rougemont-3 drilling
During the Quarter the Company commenced, and has subsequently completed, its dual horizontal well Rougemont-3 within State Gas' 100%-owned Rolleston-West Project (ATP 2062).
Targeting the Bandanna Formation coal measures (in commercial production at the Arcadia Valley to the south-east), the well is to confirm the gas production potential of the Rougemont area. Rougemont gas will support the development of an export pipeline from Reid's Dome and supercede the CNG virtual pipeline infrastructure which may then be redeployed to service other stranded gas assets.
Rougemont-3 consists of two laterals drilled sub-horizontally through highly permeable coal seams identified by the previously-drilled Rougemont-2 well. The laterals connect to the Rougemont-2 vertical well, enabling the vertical - dual horizontal well system to be tested as a single unit.
As previously advised, the laterals successfully achieved their intended extent with at least 97% within the target coal seams, resulting in more than 2400m exposure to the reservoir. Gas shows (99% methane) in drilling fluid during drilling of the laterals averaged a very promising 20%, across both laterals, indicating the coals are gas saturated, a good sign for gas production once testing starts.
Testing of the combined Rougemont-2 and -3 well pair will commence once Rougemont-2 has been recompleted and a new pump installed. This is expected in the next few weeks, subject to weather conditions. Testing will commence with the water level in the wells being drawn down slowly to optimise production. Initial gas flows are expected to commence within the next 2-3 months and peak gas flows are expected in about 6 months.
New ATP 2068 issued
As announced in the previous quarter , State Gas has developed a strategic partnership with Santos through a joint venture for new acreage in the area. Santos holds interests in gas production and exploration tenure across a broad area of the southern Bowen Basin and operates the Arcadia Valley fields to the east of State Gas' projects. This joint venture creates an alignment of ownership interests across the gas resource in the majority of the southern Bowen Basin, providing the opportunity for coordinated and synergistic development of the whole region.
The joint venturers (State Gas subsidiary State Gas (CQ) Pty Ltd 35%; Santos QNT Pty Ltd (65%) were appointed preferred tenderers of two areas in the most recent Queensland Government acreage release program announced in May 2022. On 11 July 2022 new Authority to Prospect 2068 was issued to the joint venturers for one of the areas (PLR2021-1-2), with second area (to be ATP 2069) to follow completion of native title processes, expected later this, or early next, year.
Planning for first activities on both tenures is underway with Santos.
Export pipeline
Your Company continues to progress work towards an export pipeline from Reid's Dome, which will enable significantly larger gas deliveries than is possible with trucking. Last quarter's route survey work identified a preferred route exiting the Reid's Dome area to the north, passing through the Rougemont area to one of the two high pressure pipelines to the east.
During the Quarter additional on the ground survey work was undertaken, to confirm the viability of this northern route. The next steps will involve detailed survey work and the commencement of the approval processes.
Carbon Management Joint Venture
Work during the Quarter for State Gas' Carbon Management Joint Venture in Central Queensland focussed on establishing the landholder relationships which will be critical to a successful project, and identifying a suitable location for the initial boreholes.
The Carbon Management Joint Venture will initially investigate the potential of the Buckland basaltic ignimbrite within and nearby to Reid's Dome for a range of ex-situ mineral carbonation purposes. In addition, the Joint Venture will seek to apply the process currently being implemented by Carbfix in Iceland, which is described as a natural and permanent storage process that turns CO2 into stone underground in less than two years. The Carbfix in situ mineralisation process is one attracting significant international attention, with the US Department of Energy demonstrating the technology at Washington state, and Rio Tinto recently announcing a project in Minnesota, USA.
Events after the Quarter end - Strategic Investment and a new Board
Notably, the Company has attracted strategic investment from leading energy sector entrepreneurs the St Baker Group. Trevor St Baker and his son Philip have made a strategic investment, participating in a $7 million equity raising to support the Company's growth projects, outlined further below. In conjunction with this investment the Company's former major shareholder, Triangle Energy (Global) Ltd, reduced its shareholding to 10.1% (on a fully-diluted basis), attracting a new institutional shareholder and resulting in a more balanced share register.
Philip St Baker and Jon Stretch, both highly experienced energy market executives, joined the board of State Gas, bringing new market focussed expertise to the Company's leadership.
Financial Position
Since the end of the Quarter and as noted above, the Company has raised $7m in funds, of which $185,000 is subject to shareholder approval at the upcoming Annual General Meeting.
Immediately prior to the $7m equity raising during October, the Company had net funds of $1.23m after expending $1.58m in Project development costs and $0.41m in other costs during the Quarter.
*To view the full Quarterly Report, please visit:
https://abnnewswire.net/lnk/OLI6680X
About State Gas Limited
State Gas Limited (ASX:GAS) (OTCMKTS:STGSF) is a Queensland-based gas exploration and development company with highly prospective gas exploration assets located in the southern Bowen Basin. State Gas Limited's mission is to support east coast energy markets through the efficient identification and development of new high quality gas assets.
It will do this by applying an agile, sustainable but low-cost development approach and opportunistically expanding its portfolio in areas that are well located to gas pipeline infrastructure.
State Gas is 100%-owner of the contiguous Reid's Dome (PL-231) and Rolleston-West (ATP 2062) gas projects, both of which contain CSG and conventional gas. The Projects, together some 1,595km2 , are located south of Rolleston, approximately 50 and 30 kilometres respectively from the Queensland Gas Pipeline and interconnected east coast gas network. State Gas intends to accelerate commercialisation of these assets through the application of an innovative virtual pipeline ("VP") solution which will see the Company transport compressed gas by truck to existing pipeline infrastructure or to an end user.
State Gas also holds a 35% interest in ATP 2068 and ATP 2069 in joint venture with Santos QNT Pty Ltd (65%). These two new areas lie adjacent to or in the near vicinity of State Gas and Santos' existing interests in the region, providing for the potential of an alignment in ownership interests across the region over time and enabling synergies in operations and development.
State Gas is also participating in a carbon capture and sequestration initiative with minerals explorer Rockminsolutions Pty Ltd in respect of EPM 27596 which is located on the western border of ATP 2062. This project is investigating the potential of the unique basalts located in the Buckland Basaltic Sequence (located in EPM 27596) to provide a variety of in-situ and ex-situ carbon capture applications.
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