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KINETIKO ENERGY LTD (KKO) - Unlocking South Africa's Natural Gas Giant
Ever wondered how a small ASX-listed company could be sitting on one of South Africa's largest onshore gas discoveries? Kinetiko Energy (ASX: KKO) is redefining energy exploration with their breakthrough at Brackfontein, delivering an eye-popping 370,000 cubic feet per day peak gas flow from a well just 417 metres deep.
Executive Chairman Adam Sierakowski takes us behind the scenes of this remarkable achievement, revealing how 144 metres of gas pay zone (representing 35% of the well's depth) validates their newly optimised drilling strategy. After facing challenges as first movers in South Africa's onshore gas sector, Kinetiko leveraged global expertise to completely reimagine their approach – and the results speak for themselves.
The company's certified 6 trillion cubic feet contingent resource is just the beginning, with Adam confidently targeting resources beyond 10 TCF. Their strategic partnership with South African energy group FFS Refiners accelerates the path to commercialisation, co-funding development of production clusters that could see first gas sales within just 18 months. The partnership envisions scaling to hundreds of wells, positioning Kinetiko to deliver significant value in South Africa's energy-hungry market.
With drilling underway on their seventh well, a debt-free balance sheet, and consistent news flow expected throughout coming months, Kinetiko stands at the threshold of transforming from explorer to producer. Don't miss this deep dive into one of Australia's most promising energy plays that's unlocking South Africa's natural gas potential. Subscribe to ASX Briefs for more insights into innovative Australian listed companies making global impacts.
Andrew Musgrave Host
Welcome again to ASX Briefs, where we uncover the strategies behind some of Australia's most innovative and ambitious ASX-listed companies, and today we're talking to Kinetiko Energy, ticker KKO, developing onshore natural gas in South Africa. Joining me again is Executive Chairman Adam Sierakowski and we'll cover their recent 370,000 cubic feet per day, peak gas flow at Brakfontein, drilling optimisation and the path to first LNG sales.
Adam, thanks for joining me again and welcome back to the ASX Briefs podcast.
Adam Sierakowski Guest
Thanks very much, Andrew.
Andrew Musgrave Host
Now, Adam, it's been a while since we last spoke, so for listeners that may be unfamiliar with KKO, can you just provide a brief overview of the company?
Adam Sierakowski Guest
Certainly, Kinetiko is focused on developing one of South Africa's largest onshore natural gas fields. The company's made a major onshore discovery that's currently certified as a contingent resource of six trillion cubic feet in a 2C category. But there's more to come, Andrew. We're targeting a resource that will be beyond 10 trillion cubic feet, and our goal is now to deliver that into growing certified reserves and a really strong commercial gas project, probably in the first instance in LNG, for South Africa that needs the energy daily.
Andrew Musgrave Host
Okay and the recent well at Brakfontein delivered a 140-40 metre gas pay zone and a 370,000 cubic feet per day peak flow. So how significant is this result for validating your optimised drilling strategy and broader development plans?
Adam Sierakowski Guest
Yeah, look, Andrew, it's been a fantastic result for the company. Certainly, the 370,000 cubic feet of gas peak flow rate that we achieved is a precursor to a very successful well showing great pressure and great preliminary flow rates. I think of additional significance, as you touched on, is the fact that this is unique geology. I mean, this well was only 417 meters deep. The logging that we conducted has established that 144 metres of that well is gassy pay zone. You know that's circa 35% of that well is potentially going to deliver commercial gas. To the second part of your question, the optimised drilling strategy is something that the company's had to work hard on and I'm sure we'll unpack that in a minute. But this is the first well that deployed that optimized drilling strategy, so to have immediate success is a great result.
Andrew Musgrave Host
Okay, and what does extended flow testing show and what stabilized rates would be commercial?
Adam Sierakowski Guest
Yeah, so we now move to test the flow rates over a period it could be seven days, 14 days, and in fact we may choose to do extended flow rates beyond that but we probably look to expect to update the market inside the next 14 days, and what those flow rates we hope will show is that we're able to flow the gas on a consistent basis and it will settle down to what might be considered a stabilised rate. And that's important, Andrew, because from that data we can then make assumptions around the long-term depletion characteristics of wells such as these.
Andrew Musgrave Host
Now your recent updates indicate that a drilling optimisation study was initiated due to potential gas flow restrictions caused by drilling techniques. Can you share more about this study and how it might improve future well performance?
Adam Sierakowski Guest
Yeah. So, the company. You know it's a first mover in South Africa. You know we're undertaking something that hasn't been done before, onshore gas in these shallow conventional geological formations. And as a first mover, we encountered challenges in our exploration phase. That happened last year, and a couple of our production test wells failed to flow the anticipated amount of gas. What we then did, Andrew, through the course of this year, is we undertook a significant strategic review. We had the ability to engage global leaders out of our Chevron network in gas assurance testing, and what those laboratory results and tests indicated is that we potentially used a drilling technique which was suboptimal and in fact we've been using that technique for a long period of time. So, the ability to take those results, learn from the laboratory test outcomes and then deploy a new optimised technique for drilling has so far preliminary results are very rewarding.
Andrew Musgrave Host
Okay, and just looking at the partnership with FFS, so you've spoken about a cluster at Brakfontein, so can you just talk us through what the plan is there?
Adam Sierakowski Guest
Yeah, so the well that we've just completed is approximately 500 meters away from a set of five existing production test wells, all of which have successfully flowed gas, and a South African existing energy group, an oil refinery group called FFS Refiners, approached the company some time ago and basically explored the opportunity to take those wells that have the capacity to produce gas and look at our appetite to drill further wells around the existing wells to, in fact, provide for our first production cluster of wells Andrew, and at the moment we're thinking, or the joint venture term sheet that we have in place with FFS refiners, is that we will look to complete seven or eight wells. We've just done six. We're about to spud our seventh, so we're very advanced, and the terrific thing about this relationship is that they will co-fund the development of this field with us.
Andrew Musgrave Host
Okay, and just staying on that FFS partnership. Can you just walk us through that JV.
Adam Sierakowski Guest
Yeah, sure. So, the way the JV is currently structured is that it has a couple of phases. This first phase is one to determine how much gas we think we can get out of a small production cluster. So, as I mentioned, it could be seven or eight wells. We might go and drill a couple more. Once we determine that we've got commercial rates of gas coming out of the ground in phase one, we've got commercial rates of gas coming out of the ground in phase one, we'll move to phase two, which is then to go and take that first cluster into a production phase. So, we'll seek the application rights and permits for production that are necessary, and we're sort of focusing on potentially having gas sales being achieved within 18 months. But importantly, Andrew, they have a bigger vision as does our company to participate in this joint venture and that further phases let's call them three and four that envisages joint funding and jointly developing clusters of wells that go to plus 50 and then into the hundreds of wells.
Andrew Musgrave Host
Okay, now just touching on the financials, you raised $2.2 million in June and have no debt, with funds earmarked for production, testing and development, so how confident are you in your capital position to support the next phase of activity?
Adam Sierakowski Guest
Yeah, look, Andrew, we're always wrapped to get the support that we have done and have continued to do for some very significant shareholders in our register, some of which are based in South Africa and are significant institutions in that country. So that money was raised to drill these two production test wells and to provide the sort of success and commercial flow rates that would enable the company to have successful data to increase its commercial optimisation. So, we're certainly comfortable with how we're going. I mean I mentioned these are relatively shallow wells to drill so in certainly global terms they're quite cheap and we drill the first well under budget and on time.
Andrew Musgrave Host
Okay, now in closing, for shareholders and potential investors, what's the most important message about Kinetiko's current momentum and the months ahead?
Adam Sierakowski Guest
Obviously, this latest result primes the company with an enormous amount of confidence that the months ahead are going to be laden with great news flow. You know we're going to have, as I mentioned, updates on our sustained flow test in the coming weeks. We're spudding the next well, I think within the next week. That will then be completed. We expect before the end of September. There'll be more news flow about its performance and ongoing performance, the growing relationships in the joint ventures that I mentioned and other corporate strategies that we have on hand. So, we think the company is laden with news flow.
Andrew Musgrave Host
Excellent. Okay, Adam. Well, it's been great to chat again. There's obviously plenty going on at the company, so we wish you all the best and look forward to further updates in the upcoming months.
Adam Sierakowski Guest
Thanks so much, Andrew.
Andrew Musgrave Host
And that's a wrap for today's episode of ASX Briefs. A big thank you to Adam Sierakowski, the Executive Chairman of Kinetiko Energy, for sharing these insights.