Diona-1 Well Drilled to 2,479m, 100 Bcf Net Gas Resources Identified
Xstate Resources has reported a promising gas discovery at its Diona-1 well in Queensland, updating prospective resources to 200 billion cubic feet and securing funding for upcoming appraisal and production testing.
- Diona-1 well drilled to 2,479m with significant gas shows
- Updated prospective resources of 200 Bcf gross, 100 Bcf net to Xstate
- Funding of A$3.82 million secured for appraisal and flow testing
- Disposal of US assets reduces abandonment liabilities
- Flow testing planned for early April 2026, with pipeline connection anticipated
Gas Discovery at Diona-1
Xstate Resources Limited (ASX – XST) has delivered a significant update from its Diona-1 well in Queensland’s Surat Bowen Basin. Drilled to a depth of 2,479 metres, the well encountered a substantial overpressured gas column within the Permian sandstone formations, including the Tinowon and Wallabella sands. While the primary target formation was disappointing, the deeper zones revealed promising hydrocarbon potential.
Wireline logging confirmed 116 metres of gross pay with 23 metres of net pay, though the full extent of the Wallabella Sandstones remains to be fully assessed. These findings underpin an updated prospective resource estimate of 200 billion cubic feet (Bcf) gross, with 100 Bcf net to Xstate, reflecting a meaningful potential Basin Centred Gas (BCG) play.
Funding and Forward Plans
To advance the project, Xstate secured A$3.82 million in funding to support appraisal activities and production testing scheduled for the first quarter of 2026. The company plans to perforate and stimulate the Diona-1 well by the end of March, with flow testing results expected in early April. Pending successful outcomes, the well will be connected to a nearby pipeline for an extended production test, marking a critical step toward commercialisation.
Strategic Asset Disposal and Financial Position
In a strategic move, Xstate disposed of its Californian assets during the quarter, effectively eliminating exposure to abandonment liabilities associated with those interests. Although the US assets contributed modest production, they generated no net income, making the disposal a prudent step to streamline the company’s focus and reduce future financial obligations.
Financially, Xstate ended the quarter with a cash balance of A$2.91 million. Exploration expenditure on the Diona-1 project totaled A$2.44 million, reflecting the intensive drilling and evaluation activities undertaken. The company acknowledges that current cash reserves cover less than one quarter of operating costs at present burn rates but expects cash outflows to decrease as appraisal progresses.
Outlook and Market Implications
Managing Director Andrew Bald highlighted the significance of the Diona-1 well, noting the involvement of Non-Executive Director Greg Channon in identifying the prospect. With the US exit behind it, Xstate is singularly focused on unlocking value from the Diona project over the coming year. The upcoming flow testing will be pivotal in confirming commercial viability and shaping future development plans.
While the prospective resource estimates remain internally generated and unrisked, the 32% overall chance of commercial development offers cautious optimism. Further drilling may be required to fully realise the resource potential, but the current findings position Xstate as a company to watch in the Australian gas exploration sector.
Bottom Line?
As Xstate prepares for flow testing, the market awaits confirmation of commercial gas flows that could redefine the company’s trajectory.
Questions in the middle?
- Will flow testing confirm commercial gas production from the Diona-1 well?
- What are the next steps if initial production tests are successful or fall short?
- Could Xstate pursue further capital raises or partnerships to accelerate development?
