Galilee Energy Announces December 2022 Quarterly Report & Appendix 5B

Source: 1/30/2023, Location: Not categorized

• The Glenaras pilot continues to dewater with the reservoir pressure at the lowest levels achieved so far.
• By quarter-end the pilot had achieved a record gas rate of over 100Mscfd.
• Notably for the first time, gas production primarily from the target seams had improved or held steady with concurrent decreasing water rates, and is evidence the pilot is approaching the desorption pressure window.
• Company is well capitalised with net cash of $5.8m at December 31 and no debt.

Galilee’s Managing Director, David Casey commented:
It is very encouraging that the Glenaras project is now seeing reservoir pressure at the lowest levels achieved to date. It is particularly encouraging that we are seeing the gas production rate holding, or in some cases increasing, as water production rates decrease. The pressure sink is now growing faster than it has at any stage and the pilot is beginning to expand the volume of coal below the estimated desorption pressure.

Glenaras Gas Project (ATP 2019) – Galilee 100%
Galilee Energy Limited (ASX:GLL) (“Galilee”) is pleased to provide an update on the Glenaras multi-well pilot programme (“Pilot”) in the Galilee Basin in Queensland (Figure 1). The Glenaras Gas Project (“Project”) is located in ATP 2019, which is 100% owned and operated by Galilee. The Permit covers an area of approximately 3,200km2.

The primary focus of activity in the December quarter was monitoring the depressurisation of the Betts Creek coals and adjacent sands, required to initiate gas desorption and confirm commercial gas production.

In late December 2022, the Pilot achieved a record gas rate exceeding 100 Mscfd. With all 16 wells online and pumping, the declining water rates are indicative of decreasing reservoir pressure over an area not seen previously at the Pilot. Notably, while still predominantly solution gas, this is the first time that the gas rate, and in particular gas primarily from the target seams, has shown an increasing trend, or remained steady with concurrent decreasing water rates. This is evidence that a larger area of the Pilot is approaching the desorption pressure window. Importantly, the reservoir pressure sink has been observed to be both deepening and widening across the Pilot.

In summary, the recent increasing gas production trend demonstrates that the focus of continuing to drive the reservoir pressure lower and getting more coal under the desorption pressure is beginning to achieve the desired results.

The aim of the data being yielded by the Pilot is to underpin the conversion of a portion of the Project’s independently derived and certified Contingent Resource* estimate to a maiden reserve certification.

Kumbarilla Project (ATP 2043) – Galilee 100%
In conjunction with the ongoing assessment of the identified conventional oil and gas leads and the coal seam gas potential of the Walloons Coal Measures, a review has also commenced on the coal seam gas potential of the Bandanna Coal Measures. These Late Permian coals rise to shallower levels on the eastern flank of the Taroom Trough and lie at drillable depths for exploration and development in ATP 2043. Considerable, deepseated structuring also exists within the Permian section inside ATP 2043 that may be conducive to fracture enhanced permeability in the coals.

The Late Permian coals of the Bandanna Coal Measures and its stratigraphic equivalents have long been established as commercial coal seam gas targets with world-class production assets in the Spring Gully and Fairview fields on the western flank of the Taroom Trough and the Scotia and Peat fields on the eastern flank.

Springsure Project (ATP 2050) – Galilee 100%
Acquisition of considerable coal mining borehole data within ATP 2050 and its surrounds, has facilitated a review of the coal seam gas potential of the Bandanna Coal Measures. These Late Permian coals extend through a fairway along the permit’s north-eastern portion and are analogous to the Mahalo Development located 20 km to the east.

The review is confirming the depth of the coal seams, the architecture and thickness of individual seams and the gas contents, to determine where appropriate exploration wells could be positioned to mature the resource to reserves.

This review is being conducted in parallel to the ongoing assessment of the multiple conventional gas prospects and leads which the seismic reprocessing and remapping have identified in the permit. Any material gas discovery at ATP 2050 can be potentially expedited to market, due to its proximity to both conventional gas production facilities and the planned Mahalo coal seam gas development.

New Ventures
During the quarter the Company signed a non-binding memorandum of Understanding (MoU) with Oil India Limited (OIL) to investigate partnering on CSG opportunities in India and Australia. OIL is a state-owned enterprise of the Government of India and is the country’s second largest national oil and gas company. It operates and participates in multiple domestic Indian exploration and production ventures as well as owning a significant international portfolio of assets spread across seven countries and three continents.

Gas Market Update
During the December quarter, gas prices in eastern Australian markets reached record levels with the LNG netback price at the Wallumbilla Gas Supply Hub exceeding $66/GJ in October before ending the period at what was still an extremely robust $33.74/GJ, according to ACCC data. The price movements continue to highlight the need for uncontracted gas resources located in proximity to centres of demand.

The LNG netback price is a measure of an export parity price that a gas supplier can expect to receive for exporting its gas. It is calculated by taking the price that could be received for LNG and subtracting or ‘netting back’ the costs incurred by the supplier to convert the gas to LNG and ship it to the destination port. With tight local gas supply, LNG netback prices based on Asian LNG spot prices currently play an important role in influencing gas prices in the east coast gas market.

The cashflow for the quarter is presented in the accompanying Appendix 5B (Quarterly Cashflow Report).

The Company continues to maintain a strong cash position as at 31 December 2022 of $5.8 million, with no debt.

During the period, the Company spent $3.2 million on exploration and evaluation activities, a substantial reduction versus the September 2022 quarter.

This level of cash outflow was a result of the timing of invoices payable for the unusually intense activity level related to the 6 well drilling programme at Glenaras which was completed during the June 2022 quarter. All drilling, completion and connection costs associated with that programme have now been paid and peak spend with respect to the Pilot has passed and the Company expects spending to significantly moderate in future quarters.

During the quarter, Stephen Rodgers resigned as Company Secretary after eight years’ service to Galilee.

Andrew Ritter was appointed as Company Secretary on November 21, 2022. Andrew Ritter is a Chartered Company Secretary and Fellow of the Chartered Governance Institute with more than 20 years’ experience, having worked with many ASX listed companies across a variety of industry sectors.

The Appendix 5B includes an amount in item 6.1 which constitutes director’s fees paid in the December quarter.

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