Kinetiko Energy strides toward production next quarter and well-placed for growth after strong half-year operational achievements

Kinetiko Energy Ltd (ASX:KKO is striding towards producing first gas from its Amersfoort Project in South Africa with the granting of gas production rights which will enable pilot commercial field operations to start in quarter two of 2021. During the half-year ending December 31, 2020, the company established a strong foundation to advance its production plans and enhance growth with a number of operational achievements. The company completed the workover of its pilot well, advanced negotiations with offtakers and completed interim funding for the project - with the early conversion of options raising $1.26 million to accelerate planned exploration and development. Notably, the project hosts an independently certified 2C gas resource of 4.9 trillion cubic feet from just a small portion of the 7,000 square kilometre landholding. Pilot gas production In October 2020, the company was granted a bulk gas production and removal permit by the Minister of Mineral Resources and Energy of up to 500 million standard cubic feet of gas per annum for a two-year period from its exploration rights ER56 and ER38 and began planning a short-term pilot gas production program. In mid-February, JV company Afro Energy (49% Kinetiko and 51% Badimo Gas) completed a workover program at KA-03PT along with well KA-03PT2. Flow rate testing will now follow for well KA-03PTR, with the expectation that pilot gas production will commence in the second quarter of 2021. The company intends to seek full production rights for ER56 as soon as possible as well as the certification of maiden gas reserves. Amersfoort exploration potential During the December half year, the company completed a third high-resolution aeromagnetic and radiometric survey at the project which confirmed the continuity of gas prospective geology. Interpretation of surveys completed on ER38, ER56 and ER271 covering 965 square kilometres in total identified numerous gas compartments on each of the exploration rights - with some of the largest up to 22 square kilometres in size.  A total of 37 potential gas compartments have now been identified, representing just 21% of the project’s total exploration potential. This has increased the company’s confidence that similar geological features will extend over the entirety of the 7,000 square kilometres of exploration rights granted or applied for. Afro Energy exploration rights and application. Offtake negotiations ongoing The company is in advanced negotiations with potential gas off-taker(s) of small and intermittent gas production from KA-03PTR and possibly KA-03PT2. This would involve off-takers purchasing gas at an on-site transfer point, compress it to the required pressure utilising their own compression equipment and transferring this to their CNG trailers for transportation to existing gas-based industries In the Johannesburg region.  Standalone South African producer Kinetiko has continued to promote the potential of the Amersfoort project to be developed at scale as a standalone onshore gas producer close to markets in South Africa that continue to be subject to constrained and affordable energy.  The country is hungry for energy having experienced regular and widespread blackouts in recent years with domestic gas prices among the highest in the world at between US$7-10 per gigajoule and the country’s energy crisis has been deepened by no capacity to increase gas imports. Amersfoort is strategically positioned close to gas pipelines, high voltage transmission lines, road and rail as well as end-users (mining, industry, manufacturing, transport and domestic customers) as well as 10 major power stations within 300 kilometres. The company is confident that it has the existing funds, and cash flow from production, to help serve southern Africa’s urgent need for new energy sources by focusing on advanced shallow conventional gas and CBM opportunities.