Kinetiko Energy Ltd (ASX:KKO, OTC:KKOEF) continues to stride towards becoming a key source of gas to help feed South Africa’s insatiable, and growing, demand for new energy sources.
An important step in fulfilling its strategy focused on advanced shallow conventional gas and coal bed methane will come within weeks with maiden gas reserve certification estimated to be received by the end of July.
Further enhancing the strategy is exploration success which points to the potential for increases in gas resources and reserves with KKO also stepping up exploration efforts and seeking further gas-prospective tenements.
Gas reserves certification
Kinetiko expects to receive the Sproule independent gas report before the end of next month after a delay to enable the assessment of recent strong gas results from core wells in the Southern and Northern extents of its prospective geology.
This report was engaged to assess potential certification of maiden gas reserves over the small proof-of-concept gas production field at Amersfoort in ER271.
Recent exploration success determining gas desorption levels in core wells in ER270 and ER272 is expected to establish the potential for further increases in gas resource and reserves certification as pilot production wells are drilled in these areas.
Potential growth in resources
Kinetiko CEO Nick de Blocq said: “With careful consideration of recent promising gas results from core wells in both the Southern and Northern extents of our prospective geology, we are delighted to share that the Sproule independent gas report is anticipated to be delivered in the coming weeks.
"This report was initially commissioned to provide an assessment of the potential certification of maiden gas reserves only over the small proof-of-concept gas production field at Amersfoort in ER271.
"We are particularly encouraged by the recent exploration success, which has revealed substantial gas desorption levels in core wells in our new exploration acreages within blocks ER270 and ER272.
"This success sets the stage for significant potential growth in gas resources and reserves certification as we proceed with pilot production plans in ER271 and the drilling of the permeability-test and eventual production wells in these areas.”
Accelerated exploration
As exploration is accelerated the company has spudded core wells 272-05C and 272-06C, which are about 12 kilometres from South Africa’s largest synfuels refinery and 8 kilometres from substantial gas intervals discovered in completed core wells 272-01C and 272 02C.
Continuing this exploration success will increase the potential that gas-producing fields can be established in close proximity to the Secunda refinery operated by Sasol which could be a substantial off-taker of gas.
Location of core wells in proximity to Sasol Synfuels Refinery.
Seeking new prospects
Kinetiko is also aiming for further gas growth by seeking new tenements with prospective geology.
As such, it has completed environmental assessments and approvals in readiness to apply to the Petroleum Agency of South Africa (PASA) for the grant of ER320 which comprises 2,383 square kilometres of prospective geology.
If granted this would increase the company’s total amount of rights by more than 62%, which would then be applied to seek an upgrade of the total gas resource.
The application is anticipated to be lodged with PASA by about the middle of next quarter following regulatory public communication protocols.
Strong cash position
Supporting the current efforts and future plans is Kinetiko’s strong cash position, which has been maintained due to low-cost exploration.
Since the start of the last quarter of 2022, the company has successfully drilled and completed six core holes which have all returned significant gas results.
In addition to exploration success, the drilling program has been executed on time and all being accomplished for approximately A$600,000 in total driller’s costs.
As a result, KKO remains in a strong financial position with more than A$5.1 million in cash estimated at June 30, 2023, and an additional A$1.3 million available as part of the Industrial Development Corporation of South Africa (IDC) joint venture contribution.
With further cash contributions projected to be made by the IDC over the next six months, the company is fully funded to continue its accelerated exploration into 2024.