The co-development agreement, which was signed with AMCI and Nebo Central Coal, allows the parties to individually undertake operations in areas that overlap as gas production zones of a petroleum lease and coal mines in an overlying mining lease.

In addition, the deal includes the evaluation of a possible joint degassing project based on the Carborough Downs Joint Venture mine, CH4 said.

AMCI is the owner and operator of the Carborough Downs mine in central Queensland.

CH4 said successful exploration at Annandale last year indicated the area has potential to deliver additional gas reserves.

Last month, CH4 announced it had started pilot testing of wells in the Annandale area. These pilot wells have now been dewatering for about six weeks, with two of the three wells each delivering early gas production in excess of 100,000 cubic feet of gas per day and rising.

CH4 said the third well was showing good water flow rates in excess of 300 barrels of water per day. The well is now undergoing a pump upgrade to increase the rate of dewatering to accelerate gas desorption.