Australian Oil advances Surat Basin restart after Emu Apple-1 stays dry

Emu Apple-1 intervention delivers dry oil production

Australian Oil Company Limited (ASX:AOK) has turned a well intervention into its clearest operating result of the September quarter: Emu Apple-1 continued producing at about 14 barrels of oil a day after clean-up, with no water cut. The result came after a condensate backwash and acid wash intended to remove paraffin build-up and improve productivity.

The company says fluid levels remain more than 100 metres above the downhole pump intake, indicating communication between the well and reservoir. Production during the quarter ranged between 10 and 20 barrels a day as clean-up continued. The next step is to apply the intervention learnings to Emu Apple-2 and -3, with field surveys completed and planning underway for further treatment and hydraulic pumping. The update extends the thread from the Emu Apple-1 intervention, which had previously reported production of 10 to 20 barrels a day without observed water cut.

Major-4 and Riverslea move towards restart

At the Major Gas Field, Australian Oil advanced on-ground work needed to bring the existing Major-4 well back into production and continued negotiating a gas sales agreement. Gas sales are expected to begin after those works and negotiations are completed, while resource assessments are being used to determine production rates, resource size and operating parameters. The company says it expects a sales agreement and completed resource reporting to support the booking of reserves.

Riverslea is also moving through the practical stages of a restart. Additional crude assays from Riverslea-3 are being incorporated into a proposed lifting agreement with IOR Energy, while plans for Riverslea-1 pump reactivation and Riverslea-3 free-flow production have advanced. Civil works, a new skimmer tank and the redeployment of equipment from Emu Apple are expected to be completed in the December quarter, although regulatory approval remains part of the restart pathway.

California improves while portfolio role comes under review

California provided a more immediate, if less strategic, operating lift. Following maintenance at the Reclamation Board wells, production reached approximately 350 mcf a day, with compression identified as a potential route towards combined flow rates of about 500 mcf a day. CityGate gas prices exceeded US$3 per MMBtu during the quarter, producing breakeven and, in selected periods, positive cash flow from the Californian operations.

That improvement has not settled the portfolio question. Australian Oil says the California assets are expected to remain profitable at current gas prices but lack the high-impact potential of its other opportunities, and is continuing its review of the acreage. Meanwhile, discussions are continuing over additional Surat Basin acreage and high-impact international exploration concessions, both of which remain at negotiation or evaluation stage.

Funding buys time but not unlimited runway

The quarter brought A$1.404 million in cash receipts, comprising A$1.104 million from the second tranche of the April capital raising and a further A$300,000 investment from incoming Executive Chairman Thomas Streitberg. The raising issued 380.8 million shares at A$0.0029 each, alongside options exercisable at A$0.006 until 30 June 2028. Streitberg will receive his director and executive remuneration in share-based compensation, according to the company. His appointment and investment were previously reported in the executive chairman appointment.

Australian Oil finished 30 September with A$1.415 million in cash. Net operating and investing outflows totalled A$525,000 for the quarter, including A$122,000 spent on exploration and evaluation, leaving the Appendix 5B's estimated funding period at 2.70 quarters based on relevant outgoings. That gives the company room to pursue its December objectives, but the timetable is finite: Major-4 sales, Riverslea's regulatory pathway and the next Emu Apple interventions will need to translate into operating cash flow rather than remain a sequence of preparations.