State Gas Limited (STGSF) Half Yearly Report and Accounts

Since the beginning of this fiscal year, State Gas Limited (ASX:GAS) (OTCMKTS:STGSF) has been singularly focussed on bringing online the world's first, in situ CSG to CNG pilot plant ("the Plant") at its Rolleston West Project, close to the Rougemont 2/3 dual lateral well. The Plant will allow State Gas to compress appraisal gas from the Rougemont 2/3 well and ship it to customers in specifically designed gas trailers, This process is generally referred to as a virtual pipeline. I am pleased to report that the CNG plant is now complete and in advanced stages of commissioning.

In January, we restarted the production testing of the Rougemont 2/3 lateral which had been shut-in following the completion of initial testing in June last year. We had expected a degree of re-charge given the high inherent permeability of the coals. The amount of water being produced exceeds the initial water production when the well was shut-in. This indicates that Rougemont 2/3 is draining a greater amount of coals. When de-watering is completed, this should result in even higher production than forecast.

The Company expects to shortly sign a formal initial offtake agreement for delivery of CNG. While initial volumes will be small, this will support an orderly ramp up of production in the plant. As previously reported, initial cargoes of CNG will be used by a local coal mine as part of its ongoing trial of hybrid engine technology in its mining trucks. The provision of CNG using virtual pipeline gas trailers is a bundled gas supply solution, which reflects significant added value when compared to raw gas from the traditional pipeline network.

The Plant will have substantial available capacity (total processing capacity 1.7TJ/day) and the Company is now actively following up incremental sales leads for its CNG. The revenue from initial CNG sales will be very welcomed and contribute to the capital needed to bring Rougemont into full scale production in time for 2025/26, the year in which the forecast gas shortfall in the east coast market is most dire.

Capital management will remain a key focus of management as the company enters into the exciting production phase of its existence. State Gas is confident that its CNG can support Queensland's coal industry in its efforts to reduce its own emissions by converting its heavy vehicle fleet and other plant from diesel to gas. The Company is now working to identify other use cases for CNG which would be incremental to supporting the large potential customer base in the Queensland coal industry.

The Company has a highly prospective portfolio of gas acreage in the Southern Bowen Basin, which is in close proximity to productive gas projects which are targeting similar coal measures. These exploration areas are close to critical pipeline infrastructure and in conjunction with initial revenues from CNG sales, positions the Company well for continued exploration, appraisal and development.

Richard Cottee
Executive Chairman

*To view the Half Year Report, please visit:
https://abnnewswire.net/lnk/R5M81V6E

Doug McAlpine
Chief Executive Officer
Phone: 0488 007 889
Email: doug@stategas.com

Richard Cottee
Executive Chairman
Phone: 0458 517 850
Email: richard@stategas.com

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