Taroom Trough Strategy Gains Momentum as Drilling Campaign Approaches
Elixir Energy (ASX: EXR) has delivered a productive quarter as it advances its strategic position in Queensland's prolific Taroom Trough, where the company holds the largest net acreage position with approximately 2,000km² (503,000 net acres) and 2.6 TCFe of independently certified net 2C Contingent Resources.
The company's 'fast follower' strategy positions Elixir to capitalise on nearby developments and ongoing investment activity in the region, particularly from major players like Shell, which continues significant drilling and appraisal work in adjacent areas.
"It has been a productive quarter, with key management positions now filled to take our refreshed Strategic Plan forward. I am energised as we move into a very busy period toward the end of 2025, which may indeed lead to a rewarding one for our shareholders." – Stuart Nicholls, Managing Director & CEO
Key Operational Highlights Signal Upcoming Drilling Activity
The quarter saw several critical developments that position Elixir Energy for its upcoming two-well drilling campaign in Queensland:
- Appointment of Chief Operating Officer Kingsley Rudeforth from Strike Energy, bringing valuable operational and technical discipline
- Progress toward completion of farm-in transactions with XState Resources and Santos
- Preparation for drilling of the Diona-1 conventional exploration well and the material Lorelle-3 appraisal well
- Identification and implementation of approximately 30% reduction in total recurring costs from previous FY
- Solid financial position with $10.4 million in cash and net receivables, sufficient to fund Phase 1 of the Strategic Plan
Elixir's methodical three-phase strategic approach is designed to mature its substantial gas resources, with plans to commence production and convert over 150 BCF of 2C resources into 2P reserves by the end of 2027.
Understanding Basin Centred Gas Plays: Why Lorelle-3 Matters
A key focus of Elixir Energy Queensland gas development news is testing the Basin Centred Gas (BCG) play concept in the Taroom Trough. Basin centred gas accumulations are large gas-bearing formations found in the deeper portions of sedimentary basins. These formations have three distinctive characteristics:
- They typically show higher-than-normal pressure
- They lack a traditional water contact boundary at the lower edge
- The rock formations have low permeability (meaning gas doesn't flow easily through them)
The significance for investors is that proving the BCG model could substantially enhance the value of Elixir's deeper, central acreage. The Lorelle-3 well, planned to be drilled to 3,600m, includes an expanded evaluation program specifically designed to prove this play concept.
Evidence supporting the BCG model already exists – previous drilling, including the Daydream-2 well (the deepest in the Trough to date), produced gas without water. This characteristic is a key indicator of basin centred gas systems.
Success at Lorelle-3 would enable better comparison with global analogues like the highly productive Montney Basin in Canada, potentially attracting international investment to Elixir Energy's Queensland gas development projects.
Near-Term Catalysts and Development Timeline
Elixir Energy has a busy schedule of operational activities planned, similar to other explorers like S2 Resources launching multi-project drilling campaigns:
| Timeframe | Key Milestone |
|---|---|
| Q3 2025 (August-September) | Diona-1 conventional exploration well drilling |
| Q4 2025 (November-December) | Lorelle-3 appraisal well drilling |
| Q1 2026 | 200km 2D seismic acquisition in ATP2057 |
| Next quarter | Expected grant of Potential Commercial Area (PCA) application over ATP2044 |
| October-November 2025 | Receipt of $3.8 million R&D tax refund |
| Ongoing | Progress on joint venture establishment with both Santos and XState |
The Diona-1 well is particularly noteworthy as a conventional target with a 55% geological chance of success. Strategically located between existing oil and gas fields, Diona presents a potential fast-to-market opportunity with infrastructure advantages, including an existing flange on the Waggamba gas pipeline.
Basin Centred Gas Play Net Contingent Resources
Elixir Energy's Queensland gas development projects include substantial certified resources across multiple permits:
| Permit | Working Interest | Gas (BCF) | Condensate (mmbbls) | Total Gas Equivalent (BCFe) |
|---|---|---|---|---|
| ATP 2044 | 100% | 1,297 (2C) | 11 (2C) | 1,362 (2C) |
| ATP 2077 (A) | 100% | 173 (2C) | 2 (2C) | 184 (2C) |
| ATP 2056 | 50% | 994 (2C) | 11 (2C) | 1,057 (2C) |
| Total | 2,464 (2C) | 23 (2C) | 2,603 (2C) |
These resources represent unrisked contingent resources classified as "Development Unclarified." The resource estimates have been independently evaluated by ERCE in various reports dated between 2024-2025.
Strong Financial Position to Execute Strategy
Elixir finished the quarter with $6.6 million in cash, plus an anticipated $3.8 million R&D tax refund related to qualifying expenditure on the Daydream-2 well, bringing total available funding to $10.4 million. This provides sufficient capital to execute Phase 1 of the company's strategic plan.
Management has also demonstrated financial discipline by implementing a cost reduction program that has identified and begun removing approximately 30% of total recurring costs from the previous fiscal year.
The company's strategic discipline is further reflected in its phase-gated approach, where each investment decision is made only after careful evaluation of the preceding phase's results, ensuring capital is deployed efficiently and with appropriate risk management.
Elixir's Three-Phase Strategic Approach
Elixir Energy's Queensland gas development strategy consists of three distinct phases:
- Phase 1: Securing long-term retention over 100% of Elixir's Taroom Trough acreage
- Phase 2: Proving commercially viable reserves in gas-charged Permian sands in targeted areas
- Phase 3: Collaborating on early production opportunities to drive small-scale development and initial cashflows
Each phase has specific work programs and capital requirements, with disciplined decision-making between phases to ensure optimal use of shareholder funds. This methodical planning approach is similar to what we've seen with EcoGraf's environmental and social planning for resource projects.
Market Conditions Supporting East Coast Gas Development
The east coast gas market continues to show strong pricing fundamentals, with Wallumbilla firm benchmark spot pricing ranging from $9.22/GJ to $17.40/GJ during the quarter. The higher prices occurred during periods of cold weather and low renewable generation in southern Australia, highlighting the ongoing role of natural gas in the energy mix.
Industry activity also remains robust, with Shell's global Board of Directors and Executive Management team visiting Queensland in June 2025, signaling the importance of Australian assets in their global portfolio. This high-level attention aligns with Shell's significant investment in the Taroom Trough region.
Why Investors Should Track Elixir Energy
Elixir Energy represents a compelling opportunity for investors interested in the east coast gas market for several reasons:
-
Strategic Position in a Hot Play: As the largest holder of net acreage in Queensland's Taroom Trough, Elixir is positioned alongside majors like Shell who are actively investing in the region
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Material Resource Base: The company's 2.6 TCFe of 2C Contingent Resources provides substantial upside potential
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Near-term Catalysts: Multiple upcoming drilling events and operational milestones could significantly de-risk and enhance the value of Elixir's assets
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Strong Financial Position: With $10.4 million in cash and receivables, the company is funded for its immediate strategic objectives
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Favorable Market Dynamics: East coast gas prices have shown strength, ranging from $9.22/GJ to $17.40/GJ during the quarter
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Experienced Leadership: Recent management appointments bring proven technical and operational expertise to execute the company's strategy
The upcoming Lorelle-3 well could be particularly significant as it targets similar depths and positioning relative to reservoir zero edges as some of Shell's most successful wells in the region. Success could provide substantial validation of Elixir's acreage position and geological model, potentially accelerating development plans and strategic partnerships.
As gas supply challenges persist on Australia's east coast and major players like Shell continue to demonstrate interest in the region, Elixir Energy's strategic "fast follower" approach provides investors with leveraged exposure to one of Australia's emerging gas plays, backed by a disciplined, phased development strategy and strong technical leadership. Furthermore, this approach to securing majority stakes in strategic projects mirrors strategies employed by companies like Lucapa in diamond projects and Helix Resources in gold exploration.
The company's exploration efforts in the Taroom Trough could potentially lead to significant discoveries, much like Hot Chili's porphyry cluster discoveries have transformed that company's prospects. For investors following Elixir Energy Queensland gas development news, the coming months offer numerous potential catalysts that could significantly revalue the company.
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