Quarterly Activities Report
Quarterly Activities Report
Brisbane, April 30, 2021 AEST (ABN Newswire) - The March 2021 Quarter saw the beginning of a defining half-year for State Gas (ASX:GAS). In January we commenced production testing the newly drilled Nyanda-7 & Nyanda-8 wells, and re-established production testing at Nyanda-4.

Quarter Highlights:

- Production testing commenced at Nyanda-7 and Nyanda-8 wells, and recommenced at Nyanda-4

- Nyanda-4 achieving up to 700,000 standard cubic feet of gas production per day

- Encouraging gas production levels at Nyanda-7 and Nyanda-8

- Commencement of civil works for drilling of Rougemont wells on new Rolleston-West Project (ATP2062)

Logs of the Nyanda-7 provide further positive data for future gas production, with approximately 38.2 metres of net coal confirmed (compared with 30.9 metres at Nyanda-4), with numerous open fractures apparent through the coal seams. Since the commencement of production testing the well has produced nearly twice as much water as did Nyanda-4 during the same period of its initial testing, with the pathways through the coals created by the open fractures the likely explanation for this enhanced production. These fractures are expected to enhance permeability and future gas production. With no offset wells to help the de-watering process (as is common for early-stage production tests) we expect Nyanda-7 will take longer for significant gas flows to eventuate. Nonetheless, it is currently producing approximately 5,000 cubic feet(cft) /day. As de-watering commonly takes between 3-6 months, we are anticipating that the well will begin to show its worth by the end of this financial year.

Gas production at Nyanda-8 is increasing and currently approaching 50,000 cft/day, and likewise, should pass the expected economic threshold by the end of this financial year.

The corehole drilling undertaken by the Company at its Reid's Dome Project has shown exceptional gas contents in deep coals. The dome structure in the geology of the area indicates natural uplift, and as a result, fracturing, of the formations. These fractures (evident in the image logs obtained to date in the wells), suggest the potential in these deep coals for not just enhanced production pathways, but also "free gas" in the fractures available to be liberated during production. This potential has been corroborated by the production behaviour of Nyanda-4. In this regard, where natural fractures were intersected in the well, production reached over 700,000 cft/day, after which production resumed at the economic rate of around 100,000 cft/day. This production pattern suggested that the free gas in the intersected fractures had been drained. We prognose that this is the rate at which gas is produced from the natural matrix of the coal. Over time, the coal should shrink through production of gas and water, enhancing permeability by connecting an increasing number of fractures. When this occurs we expect to see sustained higher production rates.

On April 7 we re-commenced production testing of Serocold-1, reducing the water level and pressure through pumping to enable gas production. The well has commenced producing measurable volumes of gas even though the water level has not yet reduced below the top of the coal - an extremely positive sign.

Whilst fully appraising PL231 is important, particularly given the urgent need for more east coast gas in 2023 (as the ACCC has observed), the additional contribution from the Company's new Rolleston-West Project (ATP 2062) could define State Gas as a meaningful participant in the Australian Gas Market.

On April 29, the civil works within ATP 2062 necessary to provide access to the Company's two proposed Rougemont wells commenced. The target formation for the Rougemont wells is the Bandanna Coals, which have proved economic (even without the geological advantages of plunging noses) to the north and south of our acreage. The Rougemont wells will be logged and tested to determine the thickness and permeability of the coal seams, and cores will be taken to assess gas content.

Within Rolleston West we have sizeable acreage of over 1400 square kilometres (nearly 8 times the area of PL 231). Accordingly, should the core-holes prove successful ATP 2062, the Rolleston West Project will be developed as part of the development of Reid's Dome/PL 231, sharing certain infrastructure and benefits from economies of scale. We are anticipating meaningful results at Rougemont in June. What a transformation this may prove.

Financial Position

At the end of the Quarter the Company had cash at bank of $6.27m, after expending $6.14m in Project development costs, and $0.07m in other costs.

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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.




Lucy Snelling
Chief Executive Officer
Phone: 0439 608 241
e-mail: lucy@stategas.com

Richard Cottee
Executive Chairman
Phone: 0458 517 850
e-mail: richard@stategas.com

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