Reserve Certification and Funding Key as State Gas Advances Amid Coal Sector Challenges

Exploration Success at Rolleston West

State Gas Limited has marked a significant milestone in its Rolleston West Project with the successful drilling and completion of two new vertical wells, Rougemont-5 and Rougemont-6. Both wells intersected approximately eight metres of net coal within the Bandanna Formation, confirming the lateral continuity of coal seams across a broad area. This geological consistency supports the company’s strategy to develop a commercially viable coal seam gas (CSG) resource in Queensland’s Southern Bowen Basin.

The new wells are situated near the existing Rougemont 2/3 dual lateral well system, which produced saleable gas in the latter half of 2024. Gas shows encountered during drilling reinforce the prospectivity of the formation, and production testing commenced in July 2025 to evaluate flow rates and permeability. These results are expected to enhance the company’s 2P reserves and 2C resources, providing a firmer foundation for project economics.

Independent Reserve Certification and Strategic Implications

To underpin its development plans, State Gas has engaged Netherland Sewell & Associates Inc (NSAI), a globally respected independent certifier, to prepare a Competent Persons Report for the Rolleston West Project’s 2P reserves. NSAI’s assessment, due by the end of September 2025, will provide an authoritative verification of commercially recoverable gas volumes. This certification is pivotal for State Gas as it seeks to secure a petroleum lease, negotiate pipeline access to the Gladstone to Wallumbilla network, and attract financing partners.

The establishment of certified reserves will also support the company’s ongoing efforts to commercialise its high density natural gas (HDNG) technology. The HDNG facility at Rougemont remains on standby, ready to process gas from production testing and future wells. This innovative plant, combined with virtual pipeline technology, aims to deliver pipeline-quality gas to customers in remote areas, including coal mines seeking cleaner fuel alternatives.

Financial Position and Capital Management

State Gas has improved its financial footing during the quarter, receiving the balance of a $5.5 million Frontier Gas Exploration Grant and an interim insurance payment related to a legal dispute over land access. These inflows, alongside disciplined capital management and overhead alignment, have ensured sufficient funds to meet current commitments. The company is also pursuing further research and development (R&D) tax credits linked to its pioneering HDNG pilot plant, which could materially strengthen its balance sheet in coming quarters.

Despite challenging macroeconomic conditions in the coal sector, State Gas remains optimistic about the commercial potential of its dual fuel engine technology trials. These trials, supported by HDNG, aim to reduce emissions and operating costs for large mining trucks, offering a compelling value proposition for Queensland’s coal industry.

Outlook and Market Positioning

Looking ahead, the company’s priorities are clear, secure NSAI’s reserve certification, finalise funding arrangements including R&D claims, and ramp up production testing results. The recent settlement with a landowner has removed a key operational hurdle, allowing uninterrupted progress on site. State Gas’s integrated approach; combining exploration success, innovative gas processing technology, and strategic partnerships; positions it well to meet growing energy demand on Australia’s east coast.

As natural gas continues to play a critical role in the energy transition, particularly for industrial users and mining operations, State Gas’s Rolleston West Project and HDNG capabilities could become increasingly relevant. Investors will be watching closely for the upcoming reserve certification and production data, which will provide clearer insight into the project’s commercial viability and growth trajectory.