Kinetiko Energy Achieves Major Breakthrough in South African Gas Resources

Kinetiko Energy Achieves Breakthrough Gas Flows with Optimized Drilling Strategy

Game-Changing Results Boost Commercial Potential at Brakfontein

Kinetiko Energy (ASX: KKO) has achieved significant success with its latest production test well at Brakfontein, marking a critical milestone in the company's journey toward commercialising its South African gas assets. The recently completed well 271-KA03PT10 delivered impressive initial results, achieving a peak gas flow rate of 370 Mscfd during choke testing and confirming a substantial 144m net pay zone from a total depth of 417m.

These strong results validate Kinetiko Energy's revised drilling approach and substantially enhance the outlook for the company's planned micro LNG pilot plant, which is set to receive gas from a cluster of wells including 271-KA03PT10. Similar to how Vital Metals secured funding to advance their critical resource project, Kinetiko Energy breakthrough in South African gas resources represents a significant step forward in energy development.

Technical Success Validates Optimized Drilling Approach

The impressive performance of well 271-KA03PT10 can be directly attributed to Kinetiko Energy's implementation of optimized drilling procedures, which were developed based on detailed recommendations from flow assurance experts Oilfield Technologies Australia (OT). These adjustments included:

• Reduced water volume during drilling
• Elimination of HV foam
• Carefully controlled down-hole pressure

These technical modifications addressed permeability and gas flow challenges encountered in previous wells, with Executive Chairman Adam Sierakowski noting the immediate impact:

"We are very pleased that the optimisation procedures have delivered immediate success, with strong initial gas flows from 271-KA03PT10. This outcome confirms the value of the technical adjustments implemented this year and demonstrates the capacity of Brakfontein to deliver commercial volumes."

Advancing Toward Commercial Production

The successful well at Brakfontein represents more than just a technical achievement—it marks a significant step toward commercial production. Located within 500 metres of historic production test wells, 271-KA03PT10 is positioned to become part of the initial cluster of producing gas wells that will supply the planned micro LNG pilot plant.

Extended flow rate testing is currently underway to determine a stabilised flow rate, with results expected in the coming weeks. Meanwhile, the drilling rig is already being mobilised to the next production test well site, with spudding anticipated within 7 days. This aggressive exploration approach mirrors strategies seen in other resource companies, such as Austin Metals' identification of gold targets near their recent discovery.

Understanding Net Pay Zone: Why It Matters to Investors

For investors new to natural gas exploration, the concept of a "net pay zone" is critical to understanding a well's potential productivity and economic value.

What is a Net Pay Zone?
The net pay zone refers to the total thickness of hydrocarbon-bearing rock within a well that can effectively contribute to production. Unlike the gross thickness, which includes all rock types encountered, the net pay specifically identifies productive reservoir rock containing commercially viable amounts of hydrocarbons.

Why It Matters:
The 144m net pay zone confirmed in well 271-KA03PT10 is significant because:

1. Larger Production Potential: Thicker pay zones typically correlate with greater production volumes over a well's lifetime
2. Economic Viability: More productive footage means better return on drilling investment
3. Field Development Planning: Confirms the substantial resource potential within Kinetiko's acreage

For Kinetiko Energy investors, the substantial net pay thickness (144m of sandstone between 199-395m) indicates robust resource potential and supports the company's commercial development plans. This resource definition phase is crucial, similar to how Matsa Resources hit high-grade gold in their exploration efforts.

Future Plans and Timeline

Kinetiko Energy is executing a clear, structured plan to advance from successful testing to commercial production:

1. Immediate Next Steps:

   • Complete extended flow testing on well 271-KA03PT10 (results expected within weeks)
   • Mobilise rig to nearby site for production test well 271-KA03PT-6 (spudding within 7 days)

2. Near-Term Objectives:

   • Establish a producing cluster of wells at Brakfontein
   • Supply gas to the planned pilot micro LNG plant
   • Achieve maiden LNG sales

This accelerated development approach aims to quickly establish production capacity and generate initial revenue while continuing to optimise drilling techniques based on ongoing analysis. In the resource exploration sector, securing regulatory approval is often critical, as demonstrated when ZMI secured drilling approval for their massive untested anomaly.

Investment Thesis: A Unique Energy Play in Africa's Power Hub

Kinetiko Energy breakthrough in South African gas resources presents a compelling investment case as a gas developer positioned in South Africa's primary power-producing region. The company has established a substantial resource base with 6 Tcf of 2C contingent resources (alternatively described as 2.8 Tcf of 1C contingent resources), creating a world-class onshore gas opportunity.

The investment thesis is strengthened by:

1. Strategic Location: Proximity to existing power infrastructure and aging coal-fired plants positions Kinetiko to capitalise on South Africa's energy transition

2. Proven Resource: Maiden gas reserves with positive economics confirmed in 2023

3. Commercial Pathway: Clear progression from successful well testing to micro LNG production

4. Technical Validation: Recent drilling success confirms the effectiveness of optimised well completion techniques

5. Energy Security Driver: South Africa's urgent need for reliable, cleaner energy creates strong demand for domestic gas production

Why Investors Should Track Kinetiko Energy's Progress

Kinetiko Energy breakthrough in South African gas resources places the company at an inflection point, transitioning from exploration to production with several compelling reasons to follow its development:

1. Near-Term Catalysts: Extended flow test results from well 271-KA03PT10 and drilling of the next production test well (271-KA03PT-6) will provide crucial data points in the coming weeks

2. First Revenue Approaching: The planned micro LNG pilot plant represents Kinetiko's pathway to maiden revenue

3. Technical De-Risking: Successful implementation of optimised drilling procedures substantially reduces operational risk

4. Strategic Significance: As South Africa seeks to diversify its energy mix away from coal, domestic gas production offers both economic and environmental advantages. This mirrors opportunities in other resource sectors, such as Great Western Exploration's major discovery in the copper-gold space.

Key Takeaway:
Kinetiko Energy breakthrough in South African gas resources has positioned the company to capitalise on South Africa's energy transition with its technically validated gas resources. The successful production test well at Brakfontein demonstrates commercial potential and confirms the effectiveness of the company's optimised drilling approach. With a clear pathway to first production through the planned micro LNG plant and multiple near-term catalysts, Kinetiko represents a distinctive opportunity in the energy sector with significant potential upside as it transitions from explorer to producer.

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