Xstate Resources reported progress on its Diona-1 well stimulation in Queensland’s Surat Bowen Basin, facing slow fluid recovery that paused operations while artificial lift options are reviewed. The company raised $1.69 million during the quarter and ended with $1.25 million cash.
- Two-stage stimulation completed on Diona-1 well targeting upper formations
- Recovery of completion fluids slower than expected, leading to well shut-in
- Review underway for artificial lift methods to enable unimpeded gas flow
- $1.69 million capital raised to fund completion works
- Cash balance at quarter end $1.25 million with exploration expenditure of $2.79 million
Diona-1 Well Stimulation Progress and Fluid Recovery Issues
Xstate Resources Limited (ASX:XST) and joint venture partner Elixir Energy (ASX:EXR) have completed a two-stage stimulation of the Diona-1 well within the Taroom Trough on ATP 2077 in Queensland’s Surat Bowen Basin. The stimulation targeted the upper Tinowon, Black Alley, and Banadana formations. However, the process to remove completion fluids, using a technique called rocking that leverages reservoir overpressure estimated at around 4,300 psi, has recovered only about 45% of the 6,400 barrels of fluids, with progress described as slow.
Due to this sluggish recovery, operations were suspended and the well shut in while alternative artificial lift methods are evaluated. At shut-in, a significant 1,900-metre column of stimulation fluids remained in the well, yet gas continued to flow to surface despite the hydrostatic head. This ongoing gas flow highlights the reservoir’s pressure but also underscores the challenge of clearing the wellbore to establish sustained production.
Evaluation of Artificial Lift Options to Unlock Gas Flow
The joint venture has commissioned JJM Consulting to review various artificial lift techniques to expedite fluid removal and enable unimpeded gas flow. This review is currently with the operator for finalisation. Managing Director Andrew Bald expressed confidence in the outcome, stating, “We remain confident we will be back to the Diona well soon to complete the flow back and production testing.” The company intends to flow test the well to determine a commercial flow rate before connecting it to the nearby OGT-owned pipeline, approximately 1 kilometre west of the well pad.
Financial Position and Capital Raising
During the June quarter, Xstate raised $1.69 million to fund the completion works at Diona-1. The company incurred $2.759 million in completion costs during the period, with exploration expenditure totalling $2.792 million. Cash reserves dropped to $1.248 million by quarter’s end. The company acknowledges that its current cash runway covers less than half a quarter at recent expenditure levels, but forecasts significantly lower activity ahead and maintains the option to raise further equity if necessary.
Payments to related parties amounted to $161,000, covering directors’ salaries, superannuation, office rent, and additional consulting work. No new tenements were acquired or disposed of during the quarter, and no farm-in or farm-out agreements were entered into or active.
Exploration Tenure and Outlook
Xstate holds a 51% working interest in the Diona block within ATP 2077, the largest block in the permit. The joint venture with Elixir Energy continues to focus on unlocking the gas potential of the Diona-1 well. The company’s competent person, Greg Channon, a geoscientist with over 35 years’ experience, supervises technical information and confirms compliance with ASX disclosure standards.
The key near-term catalyst remains the outcome of the artificial lift review and subsequent flow testing. Successfully establishing a commercial flow rate would enable connection to existing pipeline infrastructure and mark a significant milestone in advancing the project towards production.
Bottom Line?
Xstate’s next steps hinge on overcoming fluid recovery challenges at Diona-1, with artificial lift solutions and flow testing poised to determine the project’s commercial viability.
Questions in the middle?
- Which artificial lift method will the operator select to clear the remaining completion fluids?
- What sustained flow rates can be achieved once the well is fully cleared and flow tested?
- Will Xstate need to raise additional capital if completion works extend beyond current forecasts?