TMK Energy’s Reservoir Pressure Nears Critical Point Amid Operational Challenges

Pilot Well Expansion and Production Milestones

TMK Energy Limited (ASX: TMK) has marked a significant operational milestone at its Gurvantes XXXV Coal Seam Gas (CSG) Project by commissioning three additional pilot production wells, LF-04, LF-05, and LF-06, during the March 2025 quarter. This expansion effectively doubles the capacity of the pilot well project, building on the original three wells commissioned in late 2024.

The company reported consistent month-on-month increases in gas production throughout the quarter, culminating in record daily volumes in March. Despite some downtime on well LF-05 due to pump cleanout requirements, overall production performance has been robust, with February and March volumes rising approximately 14% and 10% respectively over previous months.

Reservoir Pressure and Commercialisation Progress

Crucially, TMK’s ongoing reservoir management efforts appear to be bearing fruit. Preliminary results from a pressure build-up test conducted in April 2025 on well LF-02 indicate a significant reduction in reservoir pressure, suggesting the coal seam is approaching the critical desorption pressure necessary for sustained commercial gas flow. The company anticipates final test results imminently, which will provide further clarity on reservoir behaviour and production sustainability.

CEO Dougal Ferguson highlighted the encouraging alignment between production timing, reservoir pressure trends, and project expectations. He noted that the pilot well project is on track to demonstrate commercial gas flows, a key objective for TMK’s 2025 development program.

Capital Raise and Financial Position

Supporting these operational advances, TMK successfully completed a $2.3 million placement in April 2025, issuing approximately 768 million new shares at a 7% discount to the prevailing volume-weighted average price. The capital raise attracted strong support from both new and existing sophisticated investors, providing the company with essential funding to continue pilot operations and advance its 2025 work program.

Financial disclosures indicate TMK ended the quarter with $862,000 in cash and sufficient funding to meet near-term operational requirements. The company also reported disciplined cash management, with reduced cash outflows compared to prior periods.

Strategic Recognition and Government Engagement

TMK’s Gurvantes XXXV project has garnered notable national recognition, underscored by visits from high-level Mongolian government delegations, including ministers responsible for industry, finance, transport, and urban development. These visits highlighted the project’s strategic importance in enhancing Mongolia’s energy independence by providing a cleaner, reliable domestic gas supply alternative to coal-fired power and imported energy.

The government’s endorsement aligns with TMK’s vision to accelerate commercialisation and scale-up of coal seam gas production, reinforcing the project’s role within Mongolia’s broader energy transition framework.

Outlook and Next Steps

Looking ahead, TMK is poised to release final pressure build-up test results, which will be critical in confirming reservoir performance and informing the next phase of development. The company’s ability to maintain production momentum, manage reservoir pressures effectively, and secure ongoing funding will be key determinants of its path toward full commercialisation.

Investors will also be watching how TMK leverages government support and navigates operational challenges such as well maintenance to sustain growth in gas output.