Xstate Resources Limited (ASX:XST) has signed a drilling contract with Ventia Services Group Ltd subsidiary Easternwell Group Operations Pty Ltd to drill the Diona-1 conventional gas well in Queensland’s Surat-Bowen Basin, where Elixir Energy Ltd (ASX:EXR, OTC:ELXPF) retains a 49% stake under a farmout arrangement.
Xstate, which is operating and funding the program, said the rig is scheduled to mobilise on September 21, with spudding (the start of drilling) anticipated around September 26. Shares in Xstate are due to resume trading on the ASX on September 16, following last week’s reinstatement announcement.
Managing director Andrew Bald said preparations were advancing rapidly.
“We are all fully engaged on drilling this well now. The drilling rig has been booked, and work has commenced on the ground in preparation for drilling,” Bald said.
“With the drilling rig being mobilised on the 21st and an expected spud date of 26 September, things are moving very, very quickly,” he added. “All going to plan, we should be seeing early drilling results in the first weeks of October.”
Diona project details
The Diona-1 well will target three proven hydrocarbon reservoirs — the Showgrounds, Tinowon and Wallabella — with a planned total depth of 2,600 metres. The top of the Showgrounds formation is expected at about 2,300 metres, meaning drilling could reach total depth in less than 15 days.
Located between the Silver Springs gas processing facility and the Waggamba gas field, the Diona block is considered a shallow, conventional gas play with liquids potential. Infrastructure is a key advantage: the Waggamba-to-Silver Springs pipeline passes less than 100 metres from the well pad, with a tie-in valve about 1 kilometre away. If successful, this proximity could enable a rapid and low-cost path to market.
Background and outlook
Elixir entered the farm-in agreement with Xstate earlier this year, giving Xstate operatorship and a 51% stake in the Diona block of ATP 2077 in exchange for fully funding the Diona-1 well. Elixir continues to hold 100% beneficial ownership of Blocks A and B within ATP 2077.
The upcoming drilling campaign represents a key milestone for both companies. For Elixir, the carried interest provides exposure to near-term exploration without additional capital outlay, while Xstate is advancing its strategy to establish a commercial foothold in one of Queensland’s most established hydrocarbon basins.
With mobilisation imminent and first drilling results expected in October, the Diona-1 program will be closely watched for its potential to unlock a fast-track gas opportunity adjacent to existing infrastructure.