Xstate’s Diona-1 Drilling Progress Raises Stakes Amid 55% Success Chance

Drilling Commences at Diona-1

Xstate Resources Limited (ASX, XST) has officially spudded the Diona-1 well, marking a significant milestone in its exploration efforts within the Surat-Bowen Basin in Queensland. The well, located in the Diona Block of ATP 2077 where Xstate holds a 51% working interest, has reached a depth of 549 metres with casing currently being run and cemented. The drilling operation is progressing swiftly, with the primary target; the Showgrounds formation; expected at approximately 2,300 metres.

Strategic Targeting of Proven Reservoirs

The Diona-1 well aims to test three proven hydrocarbon reservoirs, the Showgrounds, Tinowon, and Wallabella formations. These formations are known for their potential to contain conventional gas and possibly liquids, making them attractive targets. The well is planned to reach a total depth of 2,600 metres, drilling through these formations sequentially. Following the drilling through the Showgrounds, wireline logging will be conducted to evaluate the reservoir's prospectivity before proceeding further.

Risk-Reward Profile and Market Access

With an estimated well cost of $2.7 million and a 55% chance of geological success, the Diona-1 well represents a compelling risk-reward proposition for Xstate. The gross unrisked mean prospective resources are estimated at 12.5 billion standard cubic feet equivalent (Bscfe), assuming hydrocarbons are discovered in all three targeted formations. Adding to the project's appeal is its proximity to existing infrastructure; the Waggamba gas export pipeline lies directly beneath the well pad, with a valve tie-in point approximately one kilometre away. This closeness offers a potential rapid path to market, reducing development time and costs if the well proves successful.

Operational Excellence and Outlook

Managing Director Andrew Bald praised the operational team for their professionalism and efficiency in mobilizing and setting up the Ventia 101 rig, which is now fully operational at the site. The drilling program is expected to take 7 to 8 days to reach the primary target, with the entire well planned to be completed in under 15 days. The company’s focus remains on unlocking the potential of the Diona project, which sits strategically between the Silvers Springs Gas processing facility and the Waggamba gas field.

Broader Context and Next Steps

Xstate’s Diona project is part of a broader portfolio that includes exploration assets in California’s Sacramento Basin, but the current focus is firmly on ATP 2077 in Queensland. The company’s partnership with Elixir Energy Limited, which retains ownership of adjacent blocks, positions Xstate well to capitalize on discoveries in this prolific basin. Investors and industry watchers will be keenly awaiting the results of the wireline logs and subsequent drilling outcomes, which will provide critical insights into the commercial viability of the reservoirs.