Risks Loom as Eastern Gas Pursues Commercial Flow in Queensland Projects

Eastern Gas IPO, A Strategic Spin-Out

Eastern Gas Corporation Limited, recently incorporated as a subsidiary of Pure One Corporation Limited (ASX, PH2), has taken a significant step towards independence by lodging a prospectus to raise up to AUD 5.5 million. The capital raising, priced at 20 cents per share for 27.5 million shares, is designed to fund exploration and development activities on its Queensland natural gas assets, while positioning Eastern Gas as a standalone ASX-listed entity.

The spin-out reflects Pure One’s strategic decision to establish a dedicated board and management team focused exclusively on Eastern Gas’ portfolio, enabling sharper operational focus on its high-quality gas assets. Pure One will maintain a substantial 69.4% shareholding, ensuring continuity while allowing its management to concentrate on its core clean technology business.

Queensland Gas Projects with Proven Potential

Eastern Gas holds 100% interests in two key exploration permits, ATP 2051 (Venus Project) in the Surat Basin and ATP 927 (Windorah Project) in the Cooper Basin. Both projects boast independently certified contingent gas resources; 130.3 petajoules (PJ) 2C for ATP 2051 and 330.3 billion standard cubic feet (Bscf) 2C for ATP 927; underscoring their substantial in-ground value.

The Venus Project targets coal seam gas (CSG) within the Jurassic-aged Walloon Coal Measures, a prolific formation with established production in adjacent areas. Despite previous vertical well tests producing gas to surface, commercial flow rates have not yet been achieved. Eastern Gas plans to drill horizontal wells targeting the thick Macalister seam to unlock commercial flow rates and convert contingent resources to proven reserves.

Similarly, the Windorah Project is a basin-centred gas (BCG) play with potential for significant reserves upgrade. Historical wells flowed gas at sub-commercial rates, but Eastern Gas intends to apply advanced hydraulic fracture stimulation and horizontal drilling techniques to improve productivity. The project benefits from a recently awarded 15-year Potential Commercial Area (PCA), extending its development timeline.

Technical Validation and Risk Considerations

Independent technical assessments by Molyneux Advisors Pty Ltd, Sproule Incorporated, DeGolyer & MacNaughton, and Aeon Petroleum Consultants provide a comprehensive evaluation of the projects’ resource potential and risks. These reports classify the resources as contingent, reflecting the need for further appraisal and demonstration of commercial flow rates.

Key risks include the need for permit renewals; ATP 2051 expires in March 2026 and ATP 927 in September 2027; and the inherent uncertainties of gas development, such as achieving sustainable production rates and managing operational challenges. The prospectus outlines these risks candidly, emphasizing the speculative nature of the investment.

Use of Funds and Market Positioning

Funds raised from the IPO will primarily support drilling and flow testing of horizontal wells at the Venus Project, with a smaller allocation for working capital and corporate costs. The company anticipates that successful appraisal will pave the way for commercial development and gas sales, capitalizing on tightening east coast gas supply and favorable market prices forecast between $12 and $15 per gigajoule.

Eastern Gas’ assets are strategically located near existing pipelines and processing facilities, including the Wallumbilla gas hub and Moomba Central Processing Facility, facilitating efficient market access. The company’s valuation at IPO is positioned attractively relative to ASX-listed gas peers, offering investors early-stage exposure to promising Queensland gas resources.

Governance and Leadership

The board comprises experienced industry professionals, including Chairman James Canning-Ure, Managing Director David Spring, and Non-Executive Director Scott Brown. The leadership team brings decades of upstream expertise and corporate governance experience, underpinning Eastern Gas’ strategic ambitions.

Corporate governance policies align with ASX recommendations, emphasizing transparency, risk management, and ethical standards. The company also addresses environmental and native title considerations, with relevant approvals and agreements in place to support responsible development.