Almost out of the woods.

Highlights from Quarterly Report include the following:

- Y16 gas sales of 2,985 TJ up 3.8% from FY15 (2,875 TJ)
- Red Gully Processing Facility (RGPF) achieves 3 Year Lost Time Injury (LTI) free safety record
- Average daily gas production rate of 7.5 TJ/day for the quarter
- Red Gully North-1 (RGN-1) confirmed to be gas bearing
- Remedial cementing solution for RGN-1
- Mineral Resources Ltd (ASX:MIN) acquires ERM Power’s 18.72% shareholding in Empire
- New A$15m revolving capital working facility with Mineral Resources Ltd to refinance ERM debt
- Revenue of A$4.6m for the quarter and A$20.0m for FY16

Importantly, note that:

(1) Red Gully-1, well performance was improved after re-perforation, which resulted in increased production of gas from the upper two production zones and significant productivity improvement in the third production zone. Production levels look to be stable for the remainder of H2/2016, and into H1/17.

(2) the debt refinancing is now "binding", and discussions with Viburnum have now ceased. Effectively, MIN are now "locked in" as partners. Very positive (as it totally removes that debt problem)

(3) RGN-1 testing is "currently underway" (in line with their initial comment of "early in Q3"), with remedial cementing planned for "early Q4" (October?). Contingent reserves 7.5Pj, high condensate yields, and short tie-back.

(4) Receipts from sales will be roughly equal (stable) in Q3, at around $4.6m. Total expenses forecast $3.78m, making us cashflow positive over Q3. Remediation of RGN-1 should be sufficiently covered by natural cashflow without the need for any capital raising.

Aside from the completion of RGN-1 remediation works (October probably) we couldn't of asked for more. The debt refinancing is done, the cornerstone investor is solid (and has deep pockets), farmins are progressing, cashflow is positive, and the outlook for increased production (with tie-back from RGN-1) remains positive.

I won't be letting the naysayers talk me into selling just yet. This company has struggled for many years, and now is the time when the sun is starting to appear from behind the clouds. The Hartley's valuation (revised to a mid 70-cent number) should be "unlocked" in October upon perforation of the newly installed casing.

Sit back and enjoy.

Regards