Australian Oil Company lifts California gas margins | Stockhead
Cash flow boost: Australian Oil Company is targeting lower California gas costs and stronger output while maintaining its Surat Basin oil focus. Pic: Getty ImagesAOK has implemented cost and operating. . .
Cash flow boost: Australian Oil Company is targeting lower California gas costs and stronger output while maintaining its Surat Basin oil focus. Pic: Getty ImagesAOK has implemented cost and operating efficiency measures across its California assetsStoney Creek continues uninterrupted production under the new strategyRec Board wells are expected to restart after scheduled pipeline maintenanceSpecial Report:Australian Oil Company is driving down costs across its California gas operations to protect margins as gas prices remain supportive. The company says 30 years of California citygate gas price data indicates prices above US$3 are probable over the next six months, a level AOK says is required to sustain operations. A review of 30 years of California gas price data suggests prices above that level are likely over the next six months. Against this backdrop,Australian Oil Company (ASX:AOK)has moved to implement cost reduction and operations measures across its Californian portfolio. Stoney Creek has maintained uninterrupted production, supported by steps to improve performance and keep operating costs down. AOK managing director Kane Marshall said Stoney Creek remained a reliable contributor to the company’s revenue base and the group was focused on extracting maximum value from its assets. “By implementing these cost reduction and efficiency strategies now when gas prices are typically higher historically than the last few months should provide the Company with the best possible chance of operating at a reasonable margin for sustained operations,” he said. Source: US Energy Information Administration; latest EIA table released May 29, 2026. California resetThe update follows AOK’s March 2026 review of options to lift gas flows, cut costs and optimise its California gas infrastructure. That review included potential tie-ins with nearby operators and the possible purchase of compression facilities. AOK says the first stage has shifted from review to implementation, with cost and cost-effectiveness strategies now in place across the portfolio. The next near-term milestone is the planned restart of the Rec Board wells. The wells are scheduled to return to production within the next two months once planned gas pipeline maintenance is complete. Preparations are being made for a safe restart, with AOK expecting the wells to support both production and earnings. The company is also continuing talks with CRC over the potential advancement of the VBC wells. Those discussions include possible integration of VBC and CRC’s Malton wells through AOK’s existing pipeline infrastructure. AOK’s northern VBC wells and southern Rec Board wells sit across its broader California lease position as the company works to optimise infrastructure and production. Pic: AOKSurat focusAOK’s California strategy runs alongside a wider portfolio review. In March, the company said it was considering selling some California leases to sharpen its focus on Surat Basin oil in Queensland. That strategy is centred on Emu Apple-1, where production has been running at 15-20bpd. It is a supplier to Eromanga, a specialist oil refinery which is now one of just two operating in Australia, increasingly viewed as strategic infrastructure in the wake of the Strait of Hormuz closure. Further restart work and exploration are planned in the Surat Basin, giving AOK a second growth pathway beyond California gas optimisation. The result is a more disciplined operating model across the portfolio. AOK aims to keep California gas assets producing where prices support margins, assess infrastructure-led tie-in opportunities, and continue building its Surat oil pathway. The company says it remains focused on conventional oil and gas in the Surat Basin while maintaining a portfolio of producing wells in California. This article was developed in collaboration with Australian Oil Company, a Stockhead advertiser at the time of publishing. This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.