NuEnergy Gas Ltd’s First Gas Production Advances Toward Commercial Sales

NuEnergy Achieves Breakthrough Quarter with First Gas Production on Track

NuEnergy Gas Limited (ASX:NGY) has released its December 2025 quarterly report, revealing significant operational milestones that position the company for its transition from explorer to producer. The report shows completion of all planned wells for the 1MMSCFD Tanjung Enim Early Gas Sales Initiative, with NuEnergy Gas Ltd's first gas production expected in 1H FY26 following successful gas flaring operations across multiple wells.

The quarter marks a pivotal advancement in monetising NuEnergy's coalbed methane (CBM) assets in Indonesia, with gas flows ramping up and a binding sales agreement secured with PT Perusahaan Gas Negara (PGN), a leading Indonesian gas distributor and subsidiary of PT Pertamina.

Major Development Milestones Achieved

Well Completion Programme Delivers Results

According to the quarterly report, NuEnergy successfully completed drilling operations on four critical wells during the quarter:

• TE-B06-001
• TE-B06-002
• TE-B06-003
• TE-B01-003

Gas shows were observed at surface via logging equipment, confirming CBM presence across multiple seams. The company has initiated dewatering operations and commenced gas flaring to establish flow rates and overall well performance. Furthermore, consistent casing pressure and sustained gas flow indicate successful operations.

Commercial Agreements Locked In

The quarter saw completion of crucial commercial arrangements:

The collaboration agreement with PT Beijing Energy Linking, signed in January 2026, represents a significant de-risking of the project. In addition, PT BJEL will finance 100% of field development works at a capped contract price, to be repaid via future gas sales.

Understanding Coalbed Methane: Indonesia's Clean Energy Opportunity

Coalbed methane (CBM) represents natural gas extracted from coal seams, offering a cleaner-burning alternative to traditional energy sources. Unlike conventional gas extraction, CBM production involves removing water from coal seams to release trapped methane gas.

Why CBM Matters for Investors:

• Environmental advantage: Lower carbon emissions compared to coal
• Resource abundance: Indonesia has significant untapped CBM reserves
• Growing demand: Indonesia's expanding economy drives energy consumption
• Import substitution: Domestic production reduces reliance on energy imports

The dewatering process NuEnergy has initiated typically requires several months before commercial gas flows are established. However, this makes the company's progress toward NuEnergy Gas Ltd's first gas production in 1H FY26 particularly noteworthy.

"CBM extraction requires careful water management to maintain reservoir pressure whilst allowing gas to flow. The successful gas flaring at multiple wells indicates effective dewatering operations and validates the geological model."

Strategic Portfolio Positioning

According to the report, NuEnergy operates four Production Sharing Contracts (PSCs) in South Sumatra, Indonesia:

The Tanjung Enim PSC serves as the flagship asset, with the Early Gas Sales Initiative representing the first phase of a broader 25MMSCFD production plan under Plan of Development 1 (POD 1).

The company's strategy involves integrating all PSCs in South Sumatra as a CBM hub to supply sustainable clean energy to the local market. This integrated approach is expected to maximise operational efficiency whilst reducing infrastructure costs across multiple projects.

Financial Position and Capital Efficiency

During the quarter, NuEnergy completed a partially underwritten entitlement offer, raising approximately $3.5 million to fund the Tanjung Enim initiative and advance other PSCs. Development expenditure for the quarter totalled $1.1 million, with no material exploration expenditure incurred.

The company's capital-efficient approach is enhanced by the PT BJEL collaboration agreement, which eliminates the need for significant upfront development capital. Furthermore, it maintains operational control and revenue participation.

The report confirms that no payments were made to related parties or associates during the quarter, maintaining clear governance standards as the company transitions toward production.

Investment Thesis: From Explorer to Producer

What Makes NuEnergy's Value Proposition Unique?

1. Near-term Revenue Generation: 1MMSCFD production target with binding sales agreement
2. Scalable Platform: Clear pathway from 1MMSCFD to 25MMSCFD production
3. Strategic Location: South Sumatra positioning for Indonesia's growing gas market
4. De-risked Development: 100% external financing for major development phase

Market Positioning

The timing of NuEnergy Gas Ltd's first gas production aligns with several favourable market dynamics. For instance, Indonesia's commitment to cleaner energy sources drives demand for CBM solutions.

Additionally, growing domestic gas consumption and import substitution policies favour local production. The established infrastructure in South Sumatra region further enhances operational viability.

The company's integrated CBM hub strategy across its South Sumatra PSCs positions it to become a significant regional gas producer. Multiple development phases provide sustained growth potential beyond initial production targets.

Operational Milestones and Technical Progress

The quarterly report highlights the successful completion of the Early Gas Sales Initiative drilling programme, marking a critical transition point for NuEnergy. Gas flaring activities at wells TE-B06-001 and TE-B06-002 demonstrate sustained gas flow, validating the geological model and confirming commercial viability.

"The completion of all planned wells and successful gas flaring operations demonstrates our technical capabilities and validates our strategy of transitioning from exploration to production. The binding sales agreement with PGN provides revenue certainty as we advance toward first gas sales."

The dewatering operations have reached stable stages across multiple wells, evidenced by consistent casing pressure readings. This technical milestone indicates that NuEnergy Gas Ltd's first gas production is proceeding according to schedule.

Why Should Investors Track NuEnergy's Progress?

Immediate Catalysts (1H FY26)

• First gas sales from Tanjung Enim EGSI
• Revenue generation commencement
• Production ramp-up validation

Medium-term Value Drivers

• POD 1 full development (25MMSCFD capacity)
• Additional PSC developments (Muralim, Muara Enim)
• Hub integration across portfolio assets

Strategic Advantages

• Established partnerships with major Indonesian energy players
• Proven technical capabilities demonstrated through successful well completion
• Capital-efficient growth model via external development financing

The company has effectively transitioned from exploration risk to execution opportunity. Moreover, binding commercial agreements provide revenue visibility whilst strategic partnerships enable scaled development without prohibitive capital requirements.

NuEnergy's position as Indonesia's emerging CBM producer creates compelling exposure to the country's expanding energy market. The combination of secured sales agreements, external development financing, and multiple PSC opportunities establishes a robust growth trajectory for investors seeking participation in Indonesia's domestic energy sector expansion.

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