Kinetiko Reports $2.28M Cash, First Well Fails to Yield Commercial Gas

Mixed Outcomes from Initial Well Testing

Kinetiko Energy Ltd (ASX: KKO) has provided a comprehensive update on its ongoing five-well gas production test program in South Africa's Mpumalanga Province. The first well, ER 271-23PT, drilled to a depth of 463 meters, concluded in October 2024 but failed to produce commercial quantities of gas during choke testing. Geological analysis suggests this well intersected a small, well-sealed compartment, an anomaly in an otherwise gas-rich region.

Despite this initial setback, Kinetiko remains confident in the program’s overall potential, citing extensive historical data and the presence of substantial gas resources across its tenements. The company emphasises that the shallow conventional gas reservoirs it targets have consistently demonstrated gas-bearing porous sandstones, reinforcing optimism for the remaining four wells.

Strategic Positioning and Ongoing Drilling

The second well, ER 271-KV06PT, commenced drilling in late October 2024 and is strategically located just 41 meters from a core well with significant gassy sandstone and coal gas desorption values. Initial geological assessments indicate the presence of a small, well-sealed compartment here as well, but the company is proceeding with the extended flow testing phase designed to capture critical reservoir data over up to 90 days per well.

Each well in the program is positioned near key energy infrastructure, including pipelines and transmission lines, which enhances the commercial viability of the project and supports efficient gas delivery to potential off-takers. This proximity is a key advantage as South Africa seeks to diversify its energy mix away from aging coal-fired power stations.

Financial Health and Operational Efficiency

Kinetiko reports a strong financial position with no debt and approximately AUD 2.28 million in available funds as of December 31, 2024. The company has managed to keep drilling costs for the first well under AUD 500,000, reflecting the cost-efficiency of targeting shallow conventional gas reservoirs. This low-cost approach allows for a multi-well exploration program that can rapidly test and develop commercial gas fields.

During the quarter, Kinetiko also resolved the return of original investment funds from its joint venture with Afro Gas Development Pty Ltd and the IDC, further strengthening its cash reserves. Operationally, the company has maintained a strong safety record with no incidents reported over nearly 14,000 person-hours of drilling activity.

Leadership Transition and Future Outlook

At the end of 2024, CEO Nick de Blocq stepped down after three years at the helm, with Director Rob Bulder appointed as interim CEO. The board is actively seeking a permanent replacement to lead Kinetiko through its next phase of accelerated exploration and initial production. The leadership change comes at a critical juncture as the company aims to convert its 6 TCF contingent resource into certified reserves and expand its footprint in South Africa’s evolving energy sector.

Looking ahead, the results from the remaining four wells will be pivotal in de-risking the project and validating the commercial potential of Kinetiko’s gas fields. Success in this program could significantly increase the company’s resource base and position it as a key supplier of cleaner, reliable energy in a market facing urgent power shortages.