How Is Australian Oil Reviving California Gas Flows Amid Industry Shake-Up?

Production Gains in California

Australian Oil Company Limited (ASX, AOK) has reported encouraging progress in its California operations during the September 2025 quarter. The company successfully brought the Dempsey 1-15 well back into flowing gas production, initially reaching 300 thousand cubic feet per day (mscf/d) and stabilising above 100 mcf/d. This return to sustained output, alongside steady flows from the Rec Board wells, contributed to an overall increase in gas volumes compared to the previous quarter.

Operational improvements were supported by on-site compression enhancements and a cyclical production strategy designed to optimise well longevity and gas recovery. However, temporary pipeline maintenance by California Resources Corporation (CRC) caused some delivery interruptions, which are now resolved with production expected to fully resume.

Strategic Industry Shifts and Infrastructure Plans

The quarter also saw significant industry consolidation with CRC’s announced $717 million merger with Berry Corporation. This move aims to create a larger, more cost-efficient oil and gas producer in California, coinciding with the state’s easing of environmental regulations and legislative support for increased drilling activity in Kern County. For Australian Oil, these developments could open new opportunities for collaboration and infrastructure access.

In line with this, AOK is advancing plans to reconnect the Malton VBC wells to CRC’s pipeline and compression network, which could enhance gas throughput and reduce operating costs. Additionally, new drilling targets near Rec Board-5 and Rec Board-6 are under evaluation, alongside a potential sidetrack opportunity at Dempsey East, pending technical reviews.

Expanding Horizons with New Ventures

Beyond California, Australian Oil is actively pursuing new ventures in Australia and East Africa. The recent appointment of Neil Taylor as New Business Manager for East Africa strengthens the company’s capability in frontier exploration, leveraging his experience in developing East African portfolios. These efforts align with AOK’s strategy to balance near-term cash flow from established assets with longer-term growth prospects in underexplored regions.

Capital Raising to Support Growth

Post-quarter, Australian Oil secured firm commitments for a two-tranche capital raising totaling $800,000 before costs. The first tranche raised approximately $401,000 through the issue of shares at $0.0021 each, with the second tranche, subject to shareholder approval, expected to raise a further $399,000 at $0.0013 per share. The funds will be directed towards new venture assessments, advancing Californian operations, production optimisation, and general working capital needs.

Sanlam Private Wealth Pty Ltd acted as lead manager for the placement, underscoring investor confidence in the company’s growth trajectory despite ongoing operational and market challenges.

Looking Ahead

Australian Oil’s December quarter objectives include progressing due diligence on new ventures, advancing infrastructure tie-ins to boost gas flows, and restoring full production capacity post pipeline remediation. The company’s ability to navigate regulatory shifts in California and successfully integrate new assets will be critical to sustaining momentum.