Australian Oil Reports 200 mscf/d Gas Flow and $1M Loan Forgiveness Settlement

Stable Production and Operational Challenges

Australian Oil Company Limited (ASX – AOK) has reported steady gas production from its Reclamation Board wells 7 and 8 during the June 2025 quarter, with sustained free flow rates around 200 thousand cubic feet per day. Initial maximum flows exceeded 275 mscf/d, but operational constraints related to compression systems have limited further increases. The company is evaluating installing smaller compressors on each well to enhance output stability and volumes.

Meanwhile, production from the VBC wells was temporarily halted due to third-party infrastructure abandonment. Australian Oil is actively negotiating to reconnect these wells via alternative pipeline systems to reduce operating costs and improve gas flow.

Strategic Review Narrows Focus

A technical assessment of the Borba and Dempsey lease areas has led the board to conclude these assets hold immaterial commercial value. The Borba 1-7 exploration well was found uneconomic due to resource size, gas quality, and distance from pipelines. The Borba leases have since expired, effectively removing them from the company’s portfolio. The Dempsey well, intermittently producing but currently shut in due to integrity issues, remains under review with plans to restart production.

This strategic pruning reflects a shift in focus toward more promising leases within the Sacramento Basin and exploration of new venture opportunities, both domestically and internationally. The company is acquiring new data to identify potential step-out and near-field exploration targets.

Financial Restructuring and Settlement

In a significant corporate development, Australian Oil executed a settlement agreement with former director Gary Jeffery and his associated company, Dungay Resources Pty Ltd. The agreement forgives a $1 million principal loan and accrued interest of approximately $185,000, in exchange for a $28,000 cash payment and issuance of 36 million fully paid ordinary shares. This settlement improves the company’s financial stability and reduces outstanding liabilities.

Despite ongoing negative cash flow from operations, the company’s recapitalized balance sheet positions it to pursue new projects and improve cash generation. Operating costs decreased compared to the prior quarter, and management is focused on cost reduction and cash flow enhancement in Californian operations.

Looking Ahead

Australian Oil’s near-term objectives include reconnecting the VBC wells to adjacent infrastructure, restarting production at Stoney Creek and Dempsey wells, and advancing due diligence on new venture opportunities. The company also plans to continue marketing its project portfolio to attract investment and strategic partners.

With a refreshed operational focus and improved financial footing, Australian Oil aims to navigate the challenges of infrastructure limitations and lease rationalization while capitalizing on emerging opportunities in the energy sector.