Coalbed methane (CBM) developer Tlou Energy (ASX: TOU) has announced a sizeable upgrade in gas reserves at its wholly-owned Lesedi and Mamba projects in Botswana, with 2P (proven and probable) reserves increasing by 944%.
The company reported last Wednesday that 2P reserves were upgraded significantly from 3.9 billion cubic feet of gas to 40.8 bcf, while 3P (proven, probable and possible) reserves grew by 63% to 426.6 bcf. Tlou Managing Director, Tony Gilby said the upgrade reinforced the commerciality of the two projects.
“This reserves upgrade provides continued confidence for the company to invest in additional appraisal activities aimed at further increasing certified gas reserves,” he said.
“Adding reserves, and planning for grid connection, reinforces the company’s objective to become the first company to sell power generated by CBM gas in Botswana,” Gilby added.
The updated reserves certification is based on independent assessor SRK Consulting’s review of exploration activities in 2017, which included a 260-kilometre seismic survey and thickness data from two newly drilled core holes. Gas compositions, as well as data from a third recently drilled hole, were not incorporated in the assessment as samples are still being analysed. However, SRK considered there to be no material impact (other than improved confirmation) when the final data becomes available.
Tlou also noted that the upgrade did not include an assessment of contingent resources in the Lesedi and Mamba project areas, which will be the subject of a later review. Gilby said the recent seismic survey and drilling campaign, along with its Selemo pilot wells producing sustained gas flows for a substantial period of time, confirmed the huge potential for gas production in Tlou’s project areas.
“Ongoing work to assess this potential continues in tandem with planning for connection to the regional power grid,” he said.
Tlou shares were up 13.3% to A$0.17 by afternoon trade on Wednesday.
CBM power plant re-tender
The company’s share price had been tracking along the A$0.25-$0.26 mark since mid-January but dropped down to A$0.16 at the start of last week after revealing it had been asked by the Botswana government to re-submit its tender, along with another bidding company, for the development of a 100MW CBM-fuelled power station in Botswana.
Shares started to recover two days later when Tlou announced it had met with Botswana’s mineral resources ministry to discuss why the original tender was cancelled. According to Tlou, some compliance issues could not be met due to a requirement demanding a party that was already in commercial operation. However, the company said it believed the ministry was “amenable to amending the tender document as required”.