Kinetiko Energy Ltd (ASX:KKO, OTC:KKOEF) has passed a major milestone on declaring maiden gas reserves of 6.4 BCF at its South African joint venture gas fields with its 49% share totalling 3.1 BCF.
Significantly, this reserve, representing “one of the most significant and exciting moments in Kinetiko’s corporate journey to date in South Africa”, according to CEO Nick de Blocq, represents just 0.2% of the overall holding of Afro Energy in which KKO holds 49%.
An independent gas reserves and resources report from Sproule B.V. has also resulted in a 20% increase in 2C Contingent Resource to 6.0 TCF gross (KKO share 3.0 TCF) and there is an expectation for significant further upgrades from adjacent application exploration right (ER 320) when granted.
A concurrent Prospective Resource 2U has been calculated at an additional 5.8 TCF Gross (2.8 TCF for KKO), convertible to Contingent Resource based on further exploration drilling.
Positive economics
These reserves and resources confirm positive economics and enormous scalability for the company in a nation that is hungry for new energy sources.
"It should be well understood that the maiden gas reserve was issued on the basis of a very small project," de Blocq said.
"The area considered is minute by comparison to our overall geography (about 0.2%) and yet the economics work out to be substantially positive with 2P certification for the project at about 6.4 BCF of gas.
"Each time Kinetiko adds commercial production plans within its exploration rights, it will be able to grow reserve certifications by eventual orders of magnitude, with assumptions based on increasingly positive economics driven by deeper wells in the south with potentially higher flow rates, and larger gas contents and better geophysical properties of the sediments to the north.”
Independent report
The main objective of the independent Sproule report was to confirm that the geological setting making up Kinetiko’s, through its 49% shareholding interest in Afro Energy, granted exploration rights would produce positive economics, which has been confirmed.
Maiden gas reserve certification has been assessed over the company’s planned 30-well pilot production cluster as part of its Industrial Development Corporation (IDC) of South Africa joint venture (SPV Project) and calculated to deliver positive economics.
The SPV Project is to be in a cluster of wells covering about 6.8 square kilometres, which forms 0.2% of the granted rights and prospective geology.
“Reflects upside” of reservoirs
"The company also requested an updated resource assessment due to the results and consistency of recent exploration,” de Blocq said.
“The new resource assessment has reflected the upside of the sand-driven gassy reservoirs and returned a substantial 20% increase in 2C Contingent Resources to just over 6 TCF.
“It has also added a similar level of Prospective Resources (2U ~ 5.8 TCF) which will move into the contingent category as further exploration confirms the geological potential.”
Sproule B.V. is an independent sub-surface consultancy based in Calgary, Canada.
The evaluation of the natural gas reserves and resources in South Africa of Licences ER270, 271 and 272 which, at the date of the report, are wholly owned by Afro Energy, which is in turn held 49% by Kinetiko and 51% by Badimo Gas.