State Gas Strengthens Balance Sheet and Advances Rolleston West Development

R&D Refund Bolsters Financial Position

State Gas Limited (ASX:GAS) fortified its balance sheet with a $4.1 million Research & Development tax concession refund received in July 2026, following a lengthy Australian Taxation Office review. This infusion enabled the company to retire outstanding working capital loans and improve cash reserves to approximately $1.6 million. The refund, tied to the development of its High Density Natural Gas (HDNG) pilot plant, provides crucial funding to advance multiple projects across its portfolio.

Rolleston West Project Advances with Cost Efficiencies

The company substantially completed a Concept Study for its Rolleston West coal seam gas project during the quarter, revealing a significant reduction in capital cost estimates from earlier assessments. The study outlined a phased development capable of delivering 10 to 30 terajoules per day of pipeline-quality gas into the Queensland Gas Pipeline, supporting both domestic and export markets. State Gas aims to convert its independently certified 30.2 petajoules of 2P reserves into commercial production, with the study underpinning financing and gas sales negotiations.

Interest from potential farm-in partners remains positive, with several parties conducting technical and commercial due diligence on the project’s resource base and production potential. The company continues to engage selectively with domestic and international investors attracted by Queensland’s proximity to LNG export infrastructure.

HDNG Technology Gains Traction with Foundation Customer

State Gas secured conditional support from a Queensland coal mining company to adopt its HDNG technology, targeting a multi-year supply contract for six to twelve mine haul trucks. The company has submitted a formal funding proposal to Queensland Treasury’s Low Emission Investment Program (LEIP) to offset initial capital costs. Successful government endorsement would bolster wider adoption of diesel/natural gas dual fuel solutions across the Bowen Basin mining sector, potentially reducing fuel costs and Scope 1 CO₂ emissions amid volatile diesel prices.

Land Access Dispute Progresses to Trial

The long-running land access dispute relating to the Rolleston West Project advanced with a court-directed mediation in July 2026 failing to reach a commercial settlement. State Gas remains committed to enforcing access rights while seeking a resolution that avoids setting unsustainable compensation precedents. The matter now proceeds toward trial in the Land Court of Queensland, with expert evidence being gathered. The dispute presents a legal risk that could affect project timelines and costs.

Opposition to Domestic Gas Reservation Scheme

State Gas formally opposed the proposed Domestic Gas Reservation (DGR) Scheme released for consultation in May 2026. The company argued the scheme’s design risks severe industry disruption without clear evidence of a supply crisis. It advocates for policies that encourage new producers like itself to bring gas to market through investment-friendly conditions rather than mandating oversupply from large LNG exporters at sub-commercial prices.

Outlook and Strategic Focus

Entering the September quarter, State Gas is focused on finalising the Rolleston West Concept Study, supporting farm-in partner diligence, advancing HDNG funding negotiations with Queensland Treasury, resolving the land access dispute, and progressing petroleum lease applications. The company’s portfolio of conventional and unconventional gas assets is strategically positioned to benefit from growing LNG demand and domestic energy needs, while its improved financial position provides a stronger platform to execute its development strategy.