Strike Energy Limited (Strike - ASX: STX) provides a response to market commentary on, and
value implications of the recently announced up to $1.13 billion acquisition of Mineral Resources
Limited’s Perth Basin gas assets by Hancock Prospecting Pty Ltd.
Strike has a dominant operated acreage position in the highly attractive Perth Basin, where
several TCF (trillion cubic feet) of low impurity, high quality conventional natural gas has been
discovered only 150-350 km north of Perth along major pipeline routes. These pipelines connect
Strike’s gas assets to LNG export terminals in the North and a well-developed and growing gas
market in the south. Strike’s assets also sit inside and along transmission lines for the State’s
Southwest Interconnected System, which supports up to ~5 GW of electricity demand.
Over the past 6 years, approximately $4 billion of Perth Basin company and asset acquisitions
have occurred, more than any other oil and gas basin in Australia over the same period. This
external investor appetite highlights the highly attractive and coveted nature of the natural gas
fields within the Perth Basin.
Hancock’s up to $1.13 billion acquisition of Mineral Resources’ non-independently certified gas
assets has amplified the attention on the Perth Basin with a transaction look through value of
~$2 per GJ of in ground non-independently certified 2C Contingent Resources. This transaction
has highlighted the deep value represented in Strike’s organically discovered portfolio of well
defined, independently certified gas fields and highly prospective exploration acreage.
Currently, Strike is trading on a resource multiple of just under $1 per GJ on its aggregate
independently certified 2P and 2C resource numbers, which does not account for any new
Reserves and Resources that will be defined by the recent Erregulla Deep discovery. This is more
than a 50% discount to the price Hancock has paid for the non-independently certified Lockyer
and North Erregulla 2C Resources, again noting the large amount of fully appraised,
independently certified Reserves in Strike’s portfolio, some of which are already in production.
Gas Acceleration Strategy
In 2023 Strike embarked on its WA
Government endorsed Gas
Acceleration Strategy (GAS),
whereby Strike is targeting
commencement of production
operations from its four current gas
discoveries, acquire several seismic
datasets and drill several exciting
exploration targets. To date, material
progress has been achieved from
the GAS with Walyering in
production, South Erregulla close to
its Final Investment Decision (FID),
Ocean Hill in appraisal, a major new
gas discovery being made at
Erregulla Deep, and West Erregulla
progressing toward FID.
At Walyering, Strike has completed its first full year of production and is now generating more
than $70 million of annual gas and condensate sales. This project which has proven Strike as a
fast, nimble and competent project developer, generates a reliable underlying EBITDA to build
the financial architecture required to progress the second and third phases of its GAS.
At West Erregulla, Strike, as the operator, and its infrastructure partner Australian Gas
Infrastructure Group are committed to taking the project to FID in the near term. The West
Erregulla gas field is a fully appraised, fully permitted, low risk and a high yield development
opportunity that can utilise the LNG export window recently defined by the State. The field and
recent discovery at Erregulla Deep sit inside Production License L25 and EP469 where the
conditions of the production licence require production operations to begin within 5-years of
grant, which aligns with Strike’s development plans.
In early 2023, the highly contested acquisition of the 50% non-operated share of West Erregulla
closed, where Beach Energy, Mineral Resources, Hancock Energy and Strike all participated in
the transaction. Ultimately, the non-operated stake of West Erregulla was sold to Hancock
Energy for ~$450 million, underwriting the deep value in the asset. Since the transaction,
significant value-accretive milestones have been achieved, including securing full permitting
over the West Erregulla gas field, obtaining LNG export allowances, and the notable adjacent gas
discovery at Erregulla Deep.
At South Erregulla, Strike is preparing to take an FID and break ground at its proposed fully
integrated peaking gas power station development. New modelling indicates that the power
station may have a capacity factor far greater than the ~18.8% that was forecast in June of this
year and the associated cashflows may provide a meaningful step change in underlying group
EBITDA generation in 2026. This modelling is being finalised and an updated capacity factor will
be provided at the time of taking FID.
Finally, at Ocean Hill, new high-resolution 3D seismic acquired over the discovery supports the
progression of the field towards appraisal drilling. On success, given the low impurity nature of
the field, plus the location of the nearby DBNGP compressor station, Strike envisages an ultrafast and low-cost development could be progressed, incorporating benefits and learnings from
the Walyering gas project.
Strike’s ambitious GAS is underpinned by its organic cashflow generation, and the $153 million
financing package announced with its long-term financier at Macquarie Bank Limited1
, where it
expects to reach financial close in the near term.
Strike is committed to delivering against the GAS so the Company is well positioned from 2027
onwards to start to deliver meaningful shareholder returns via the cashflow generation from its
highly attractive portfolio of WA energy projects.
This announcement is authorised by Stuart Nicholls, Managing Director & Chief Executive
Officer of Strike in accordance with the Company’s Continuous Disclosure Policy