Xstate Resources (ASX:XST) reports hydrocarbon discovery at Diona-1 Well

Xstate Resources Limited (ASX: XST) has announced encouraging results from its Diona-1 well in the Surat-Bowen basin of Queensland, confirming the presence of hydrocarbons across a substantial Permian section.

The well has intersected an overpressured gas column and several hydrocarbon bearing sandstones, and drilling is continuing to the final target depth of 2,530 metres before a detailed wireline logging program begins.

To provide further clarity, Managing Director Andrew Bald addressed several key questions from investors.

What is the current status of drilling at the Diona-1 well?

The Diona-1 well has now reached a measured depth of 2,479 metres, taking it through both the primary and secondary targets.

The Triassic Showgrounds Sandstone did not contain hydrocarbons. However the Permian sequence intersected a 181 metre interval that is hydrocarbon prone.

Within this section we encountered a significant overpressured gas column which required juggling the drilling mud weights and the circulation of gas out of the hole to keep the well in balance.

The drilling team was thoroughly professional and managed this without a hitch.

The well was logged while we drilled (Logging While Drilling) and this has shown that there are multiple sandstones within the Permian that contain hydrocarbons.

These intervals require further detailed evaluation and will be logged in the coming 24-48 hours.

“The Diona-1 well has proven the presence of (moveable) hydrocarbons across an unanticipated 180m+ (gross) column of the Permian section of this well.”

What encouraging results have been observed in the Permian section?

The Permian section, whilst the lowest probability, has proven to be the most promising section of the well.

A gross interval of 181 metres has been identified as hydrocarbon prone, with pressure and gas flowing surface (under control) providing clear evidence of hydrocarbons.

Several hydrocarbon bearing sandstones were observed, and Logging While Drilling confirmed their presence.

These early results have justified the Company’s plan to carry out further testing through wireline logging which will give us insight as to the porosity and permeability of these formations, both key data points in evaluating the potential of these intersections.

“We cannot rule out that Diona-1 has intersected the updip edge of the Taroom Basin Centred Gas play, which, if present, could offer us the opportunity to prove up a significantly larger unconventional resource.”

How does the proximity to infrastructure benefit the Diona Project?

The location of the project is highly advantageous, as the Diona-1 well sits between the Silver Springs gas processing facility and the Waggamba gas field, which places it close to existing infrastructure.

The Waggamba to Silver Springs pipeline itself passes less than 100 metres from the well pad, with a valve tie-in point situated about 1 kilometre away.

This means that, should commercial quantities of hydrocarbons be confirmed, the project would have a direct and efficient route to market without the need for new long-distance pipelines or additional processing facilities.

What is the geological significance of the Diona-1 structure?

The Diona-1 well is located on a low risk four way dip closed anticlinal structure that targeted multiple stacked reservoirs.

These include the Showgrounds, Tinowon and Wallabella Sandstones, which are historically proven hydrocarbon reservoirs in the region.

The prospect also contains stratigraphic upside, with the Tinowon and Wallabella formations pinching out to the west, and it is positioned on a prominent nose that plunges into the Permian source kitchen.

This structural and stratigraphic setting reinforces the strong potential for hydrocarbon charge.

“The strategy of targeting a multi-stacked play has paid dividends and early signs are that this could be a remarkable outcome for the team and the Company.”

What are the next steps following the current drilling operations?

We have decided to call Total Depth on the well at 2,479m and not drill the final 50 or so metres in order to expedite the logging process.

A comprehensive wireline logging campaign will begin within the next 48 hours.

This wireline logging process will acquire high quality data that will be evaluate the rock and fluid properties, such as thickness, porosity and hydrocarbon saturation.

Wireline logging will also define the extent of the hydrocarbon column and provide the information required to determine whether the Permian reservoirs hold commercial potential.

Once the results are collected and analysed, Xstate will release a final interpretation of the well.

Looking ahead at Diona-1

The Diona-1 well has already delivered evidence of hydrocarbons in the Permian section and confirmed the value of pursuing multi-stacked targets.

The focus now is on completing drilling and conducting a thorough wireline logging program, which will provide a full technical evaluation.

Andrew Bald, Managing Director of Xstate Resources, highlighted that the Company’s approach remains disciplined and data-driven, ensuring that the results are fully assessed before any forward development decisions are made.

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