State Gas (ASX:GAS) - Bowen Basin gas developer


by Anna Napoli

State Gas Limited (ASX:GAS) Executive Chairman, Richard Cottee provides an update on the company's key Reid’s Dome PL 231 gas project, drill program and timeline to production.

Anna Napoli: Hello. Anna Napoli for the Finance News Network, and joining me now from State Gas (ASX:GAS), Richard Cottee. Richard, welcome to FNN.

Richard Cottee: Thank you, Anna.

Anna Napoli: First off, could you start with an introduction to the company?

Richard Cottee: State Gas has acquired a 100 per cent interest in petroleum lease 231. It's 281 square kilometres, about 47 kilometres from existing pipelines. Interestingly, with pipelines, there's two pipelines within 47 kilometres. So, competition's a dirty word in the pipeline industry, but it's sometimes a good friend to have if you're a producer.

Anna Napoli: Richard, can you tell us a bit more about your project in more detail?

Richard Cottee: We've just finished the core hole on the northern end and Aldinga east at 1A. And last year, we did a core hole in a Nyander4. And basically, what you do with a core hole is you take a core of the cull, put it into a cannister, seal it. The cannister's already got water in it, and you take it to the lab or laboratory. This then enables you to get some of the key parameters of economics of a coal seam gas. What is its gas content? What is its permeability? The higher the permeability, the less you interfere with Mother Nature. The easier the gas can get out, the cheaper the production costs will be.

So the prime thing about the pipeline is that 90 per cent of the time it's done for permitting, and 10 per cent for construction. It takes a little while to do the permitting. And so, what we're trying to do is if these results inform us as we think they are going to, then we can go straight into production testing and hopefully get a pipeline operator to start the permitting, because there's only 5 permitting of the cost.

So all in all, that means that hopefully by the end of next year, we've got reserves. We've got a pipeline ready to be built. And I don't think it's going to be all that hard to get a domestic consumer.

Anna Napoli: So obviously, it's a huge project you're taking on. What are some of the funding requirements?

Richard Cottee: Coal seam gas is actually quite cheap to bring on. Not necessarily do we have to own a pipeline. Do we really have to own a gas processing plant? So the prime funding is actually to get the reserves up, as I said. And that's $10 million. It's not like it's a bridge too far.

Anna Napoli: And Richard, could you provide a comment on the company's share price?

Richard Cottee: My job is to ensure that we keep to this timetable and ensure that the share price accretes in a manner that is appropriate for the risks the shareholders are taking.Given that it's only two years away, that phenomenon called the Valley of Death probably won't occur. It'll be too quick. So I would anticipate that providing these results come, they should be not too bad an accretion. Let me just say that when I joined QGC, it was 20 cents a share, and six years later, we sold it out at $5.75 a share, which wasn't too shabby.

Anna Napoli: And when do you expect to get the results?

Richard Cottee: We should have some of the permeability type numbers indicative next week, but otherwise, it'll be just before Christmas, before the core hole stuff comes in.

Anna Napoli: Richard Cottee, thank you for the update.

Richard Cottee: My pleasure.