Xstate Resources (ASX:XST) Diona’s Deep payoff in the Surat-Bowen Basin

In the wake of fresh subsurface data from the Diona-1 well in Queensland’s Surat-Bowen Basin, Xstate Resources (ASX:XST) has sharply upgraded its Prospective Resource estimates, pivoting its geological interpretation from a conventional target to a potential Basin Centred Gas (BCG) play.

The findings reframe the scale and character of the company’s Diona Block, revealing an unconventional hydrocarbon system with considerable implications for future appraisal and development.

Highlights

• Basin Centred Gas (BCG) play interpretation supports a significant increase in Prospective Resources

• Mean Prospective Resource: 100 Bscfe net unrisked to Xstate

• Over-pressured interval with 181m of hydrocarbon shows and 23m net pay identified

• Flow testing preparations underway, targeting completion before Christmas 2025

Xstate’s Diona-1 well was initially designed to test a conventional structure in the Showgrounds Formation.

While that formation showed no hydrocarbons, the deeper Permian interval proved far more consequential, intersecting a gross hydrocarbon zone of 181 metres with wireline analysis indicating 116 metres of gross pay and 23 metres of net pay.

Several lower intervals exhibiting strong gas shows could not be logged, leaving further potential unquantified.

The well data suggests the interval is over-pressured and lacks a water leg, features consistent with the Taroom Trough Basin Centred Gas system, which underpins much of the unconventional gas production in the region.

An internal review by Xstate Resources‘ competent person, Greg Channon, concluded that hydrocarbons may extend across the northern Diona Block, prompting a recalculation of the resource base.

The revised estimates show a mean Prospective Resource of 197 billion cubic feet equivalent (Bscfe) on a gross basis, translating to 100 Bscfe net to Xstate’s 51% interest. The chance of discovery has been assessed at 38%, with an 85% probability of development if hydrocarbons are proven.

Managing Director Andrew Bald said the Diona-1 results had delivered “one of the best possible outcomes for Xstate and its shareholders. The potential for this area to be a Basin Centred Gas play and possible extension of the Taroom Trough changes our interpretation of this region and the Diona block now has the potential to host a very significant size project.”

Located between the Silver Springs Gas processing facility and the Waggamba Gas Field, the Diona Block benefits from its proximity to infrastructure.

The Waggamba-to-Silver Springs gas pipeline runs less than 100 metres from the well pad, with a valve tie-in point only about one kilometre away, providing an immediate logistical advantage should commercial volumes be confirmed.

The results also bring Xstate’s exploration efforts into the orbit of major industry peers, including Santos, Shell, Omega, and Elixir Energy, all active in the Surat-Bowen Basin targeting similar BCG systems.

The ability to confirm the extension of the Taroom Trough into Diona would materially alter the basin’s geological map, with regional implications for exploration strategy and resource valuation.

The company plans to complete and flow test the Permian section before year end, a key step in determining the deliverability of the gas and validating the BCG model.

Should the test confirm sustained flow, follow-up drilling could further define the play’s areal extent and reservoir characteristics.

With infrastructure close at hand and an encouraging geological model, Xstate’s Diona-1 may prove a pivotal well in repositioning the company’s Queensland asset portfolio.

While still at the appraisal stage, the data so far provides a strong technical basis for optimism in a basin long recognised for its gas potential and growing unconventional energy interest.

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