Comet Ridge Announces December 2023 Quarterly Activities Report

Source: 1/31/2024, Location: Not categorized

• Gas Sales Agreement with CleanCo Queensland Limited approved by its shareholders.
• Mahalo North 3P Reserves increased by 35% to 149 PJ.
• Mahalo North approvals (Petroleum Lease application, and Queensland and Federal environmental applications) progressing within various government departments.
• Mahalo Joint Venture progressing through Concept Select phase this quarter, to be followed by Gas Production, Processing and Transport FEED (managed by Santos as Development Operator).
• Additional Gas Sales Agreement negotiations continued during the quarter.
• $7.8 million of cash at end of December 2023 (unaudited).

1. Mahalo Gas Hub Area, Bowen Basin, QLD
Comet Ridge holds 100% equity in three project areas in the Mahalo Gas Hub area, and a 57.14% interest in the Mahalo Joint Venture Project (with Santos QNT Pty Ltd (Santos) holding 42.86% as Operator). These projects are close to existing pipeline infrastructure and the main natural gas demand and hub centres in Queensland, being Gladstone to the east and Wallumbilla to the south (see Figure 1).

The current net acreage position for Comet Ridge across the Mahalo Gas Hub is substantial at 1,450 km2 , with a large portion of these blocks sitting over the Mahalo Gas Hub’s high quality, shallow fairway (see Figure 2).

This fairway has been extensively appraised and, importantly, has produced 1.4 MMcfd (million standard cubic feet of gas per day) from a lateral pilot well (Mira 6) drilled only 924 m in coal. Further confirmation of the high productivity fairway has been demonstrated from the Mahalo North 1 pilot well (in ATP 2048, Comet Ridge 100% equity), which has achieved a very impressive gas flow of 1.75 MMcfd from a single vertical pilot production well intersected by a dual lateral well.

Certified Gas Reserves and Contingent Resources
Comet Ridge’s share of 2P Gas Reserves and 2C Contingent Gas Resources at the Mahalo Gas Hub is a very material 406 Petajoules (PJ) as shown in Table 1 below. On a 3P Gas Reserves and 3C Contingent Gas Resources basis, Comet Ridge’s share is 827 PJ.

Project Development Activities
Comet Ridge is developing its Mahalo Gas Hub assets to provide meaningful gas supply for the east coast gas market, commencing with initial planned production from Comet Ridge’s 100% owned and operated Mahalo North and the larger, Santos operated, Mahalo Joint Venture Project (COI interest: 57.14%). These significant gas reserves will be further supplemented by development of gas resources from Comet Ridge’s other 100% held permits, Mahalo East and Mahalo Far East.

Mahalo Joint Venture (Comet Ridge 57.14%)
The Mahalo Joint Venture (JV) participants, Comet Ridge and Santos, are progressing the Concept Select phase for the development of the Mahalo JV Gas Project. The development pathway has been streamlined over the past 12 months with APLNG exiting the project, and with Comet Ridge (40% to 57.14%) and Santos (30% to 42.86%) acquiring a proportional share of APLNG’s 30% equity. Santos is now the Development Operator of the project.

The Mahalo JV Gas Project has approvals in place for gas extraction and processing requirements, with the final step a new ~80 km pipeline connection to both Jemena’s Queensland Gas Pipeline (for domestic gas supply) and to GLNG’s pipeline to its Gladstone LNG facility. The pipeline connection will require a Queensland Government pipeline licence and landholder access arrangements.

Santos, as Operator, continues to progress through the Concept Select phase of the project, which is aimed at optimising the planned sales gas offtake rate, selecting key technology for gas and water processing facilities, and identifying the number of wells to be drilled in the first phase of the development. The JV is considering a large diameter transmission pipeline and is evaluating the concepts that have been applied at Santos’ successful nearby operations for gas and water plant design. Preliminary field layouts and well designs have been completed and are currently under Joint Venture review. It is anticipated that the Concept Select phase will be completed late Q1 2024 as a precursor to a full Front End Engineering Design (FEED) for the Mahalo Field.

FEED studies will be undertaken by Santos on gas field infrastructure (including well layout, well design) in parallel with the pipeline approval and design process. Once completed, Comet Ridge will be able to utilise this pipeline connection for its share of Mahalo JV gas production as well as production from its 100% owned Mahalo North, East and Far East projects. Combining all Mahalo Hub gas into one large diameter pipeline provides economies of scale for the transportation of natural gas to the connection points for both domestic gas and LNG markets.

Key attributes of the Mahalo JV Gas Project (see Figure 4 below) are:
? Two Petroleum Leases approved (PL 1082 and PL 1083) by the Queensland Government.
? State and Federal environmental approval in place for up to 95 production wells.
? A material volume of gross 2P Reserves (266 PJ independently certified by Comet Ridge) and gross 3P Reserves (458 PJ independently certified by Comet Ridge) in the PL areas alone.
? Additional gross 2C Resource upside (316 PJ independently certified by Comet Ridge) in the three PCA areas further south.
? Targeting an initial production rate of 60 to 70 TJ/d (approximately 22 to 25 PJ/a) which would generate gross revenue of approximately $260 to $300 million annually for the plateau period of the project if the current $12/GJ price cap (for non-exempt gas producers) were to be applied.
? Large scale development of sales spec gas with very low CO2.
? Designed to benefit from Santos’ modular and low-cost approach already implemented at nearby Santos operated CSG fields.

Dataroom Process
Comet Ridge disclosed in the September quarterly report that a dataroom process was established to facilitate project funding requirements. Significant progress has been achieved in the December quarter in relation to various corporate priorities for the Company, starting with project funding and now expanded to infrastructure access, additional gas supply along with funding prepayment and corporate transactions. Comet Ridge’s dataroom has been accessed by several parties who have undertaken the necessary due diligence, and commercial discussions are progressing towards term sheet stage. Whilst this process is, in Comet Ridge’s view, progressing positively, these discussions are at an early stage, incomplete and confidential and there is no guarantee that a final proposal will be received or received on commercially acceptable terms, or that any transaction will eventuate.

Gas Marketing Activities

CleanCo GSA
Comet Ridge and CleanCo Queensland Limited (CleanCo) executed a gas sales agreement (GSA) for supply of gas by Comet Ridge into CleanCo’s Swanbank E gas-fired power station. The GSA received approval from CleanCo’s shareholding ministers in December 2023.

This is Comet Ridge’s first GSA and is an important milestone for the Company. The natural gas will be produced from the Mahalo Gas Hub in Central Queensland, where CleanCo will offtake 3 PJ per annum of natural gas. Comet Ridge and CleanCo have agreed for supply to commence in a 12-month window between 1 July 2025 and 30 June 2026, which will allow Comet Ridge flexibility ahead of a Final Investment Decision (FID) on its Mahalo Gas Hub projects.

Other gas supply opportunities
Following the introduction of the Gas Market Code in 2023, Comet Ridge has received a small domestic supplier exemption from ACCC, which means it is not subject to the price cap under the Gas Market Code. Comet Ridge is progressing discussions with numerous domestic gas consumers, including Orica and several other parties in relation to new gas supply opportunities for coal substitution, industrial use and gas portfolio contracting. It is likely that these opportunities will target gas supply from late 2026 onwards, coinciding with the planned commencement of production from the larger Mahalo Joint Venture project.

2. Corporate Activities

Cash Position and Debt Facilities
At 31 December 2023, Comet Ridge had $7.8 million cash on hand (unaudited).

Comet Ridge’s secured debt facilities with PURE Asset Management remained unchanged at 31 December 2023.

Payments to Related Parties
The aggregate value of payments to related parties and their associates of $250k for the December 2023 quarter (shown in item 6.1 of the attached Quarterly Cashflow Report) relates to the salary of the Managing Director and fees paid to Directors (including PAYG and superannuation payments made on their behalf).

Shares and Performance Rights
At 31 December 2023, the total number of securities on issue was:
• Ordinary shares: 1,015,513,555 (following the conversion of 5,140,470 vested performance rights into ordinary shares after vesting performance conditions were met);
• Performance rights: 4,000,000 following the conversion of the abovementioned performance rights into ordinary shares, the lapse of a further 3,878,280 performance rights whose vesting conditions were not satisfied, and the award of an additional 4,000,000 performance shares, including 1,000,000 to the Managing Director following approval at the 2023 AGM; and
• Warrants: 65,909,091 (no change during the December quarter). By Authority of Board per: Tor McCaul, Managing Director

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