STX (ASX) Predictions please expectations?

Originally posted by gerfovitch: ↑

Hi all,

I am still a silent long-term reader (joined HotCopper in 2007) benefitting from many valuable posts on here from the experienced O&G people (many thanks again - you know who you are!). Out of interest, I looked up when I bought my first shares and it was on 30.11.2006, so I consider myself as one of the longtermers on here. It just surprised me that not all of my shares are in the green despite the recent run as I bought my first share close to 30c. However, I averaged down the last decade (I can't believe it myself) to ~13c. Thus, I was really happy when Strike announced the Wagina find and suddenly my holding was balanced after so many years which I was not sure about. Many times, I was close to write it off. And this is why I wanted to reply to recent actions and why I think the current shareprice is appropriate to what happened the last few weeks/months.

First jump in share price // Wagina discovery: I read a post in which mir911 told the story about his on site visit and that Tony Cortis, the lead geo, explained that he was very conservative in setting the chance of success (COS) at 69% for WE-2. He mentioned, that the main risk was that the upper sections were depleted or only filled with tight or fizz gas (please do not nail me down on this, I am nott 100% sure about his wording and can't find the post itself, if someone is more experienced in the search function ...). If this was not the case, Kingia and High Cliff (KHC) were very likely filled with conventional gas as well. At least, this is how I recap this post and it perfectly made sense to me why the share price jumped after the Wagina find as I think it was not only about the find itself, but more about the people in the know who immediately knew that COS for the main sections (KHC) increased dramatically. I assume that this was the trigger for John Poynton as well to put his private money on the shelf, which was the trigger for retail buyers as a reaction.
Second jump // staggering Kingia results: All is said on this one and "staggering" result is the most excitement you can get out of Stuart Nicholls (SN). I remember the discussion when Strike farmed into WE-2 and our wildest dreams where to get close to Waitsia discovery. We all know, that typically the wildest dreams on HotCopper are not very likely to become reality. But with 97m gross and 41m net pay the discovery exceeded Waitsia just with the Kingia section, which resulted in a sudden jump in share price from ~13c to 22c and then it peaked at around 29c. And this directly goes back to the share price discussion: from ~6c in mid July to ~29c in late August, this is an "staggering" short-term increase in share price of nearly 500% in only 6 weeks. If someone complains about share price action right now, I need to assume a lack of experience in stock markets or that the person is caught by the vision that Strike unfolds to all of us. And I belong to the latter one: I myself was every time pretty much surprised and slightly disappointed when the share price went down or sidewards after the ongoing very positive results (another discovery in High Cliff and the upgrade of the already superior find in Kingia).
Sell off and sidewards // upgrade in Kingia and High Cliff discovery: From my point of view, the exceptional outcome of Kingia was the "challenge" for the High Cliff results, which I assess as very positive on its own. However, reading through all the comments only here on HotCopper, the crowd was expecting an even greater discovery at High Cliff, which was just not very realstic and brings me back to typical market behavior and exaggerations in the short-term; both up and down. Traders used the situation to jump off the board as they knew that the bull journey only continues, if the HC results were as good as Kingia or even better. And again, people in the know used this situation to accumulate more as the real value of Strike increased dramatically again at both events. However, one can argue now that "staggering" outcome at HC was already factored in the share price and as it came down "only as a conventional gas discovery" (which would have been great before drilling campain started), the market sold off and lost short-term interest. Same is slightly true for the significant upgrade of Kingia net pay to 58m. This is exceptional, but the market already valued the Kingia as one of the best ever finds in Australia, so it was more like the cherry on the cake. However, I thought that this would add some additional cents, which it didn't. I guess, there are several reasons: one is the fear of some that a capital raise (CR) is around the corner, another might be that some fear bad news regarding Jaws or a lack of newsflow in the near future. For me, none of the reasons are frightening as I don't see a CR at current share price levels a bad thing as it would finance to make the vision reality (especially the fairway bought from UIL, which turned out to be a genius masterstroke from SN and is one of the main reasons why I think STX is valued ~ double as WGO).
Short/medium/long term view:
In the short-term (upcoming 2-4 weeks), I see the chart building out a flag. I expect the price to break the flag at the top side if we see compelling flowrates at WE-2 and sincerely hope that the people who drive the share price will know about tube/choke size limitations and that Strike will put out a hypothetical flowrate to benchmark against the monster 90 mmscfd at Watsia. If the flowrates are disappointing, the price might break to the lower levels and test first 22c and then 17c, which I really do not see as very likely. I much more expect that flowrates are close to 50 mmscfd based on all the information so far (high pressure, super permeability, net pay sand to drive a bus through, etc.) and that the share price will break the 30c and end up in the range fo 30-40c.
In the medium-term (upcoming 3-6 months), I expect Strike to book the reserves, fund appraisal drillings in WE-2 and other Perth basin blocks (not necessarily via a CR, I think SN already showed skills in alternative funding options and there are many, especially in this environment with very low interests), farm out some of the other Perth basin plays and put out a compelling portfolio in Western Australia alone. Regarding share price action, it depends on the outcome of Jaws and on potential takeover bids coming in. Let's put Jaws out of mind a second and assume that no takeover bid flows in, then I think we will trade in the range of 35-45c for a few months as this is a (IMO very) conservative take on the NPV of Strike. In this case, I assume that the value of UIL fairway is undervalued and with each new activity in the Perth basin, the real value will unfold and materialize after a while in the share price of Strike. Jaws is really boiling my head: one the one side I like to keep my faith in it, the team and the careful process which they decided to take. On the other hand, I rather try to think of it sceptical to keep my feet on the ground. If Jaws comes in good, we might reach the goal to become a mid-tier company sooner than later. The current valuation of Strike - all IMO - is neglecting Jaws, which means to me that if it proves to be commercial, it really will drive the market cap. If it doesn't, we will only see a short drop in the share price as most of market already thinks bad of it. This is good for all longtermers as chances to win are higher than to lose.
In the long-term (6-36 months), there are more than many uncertainties like general economic climate, evolution of gas and oil prices, alternative energy sources to arise, and many others. But assuming that these things remain stable (which they won't, but to judge on future development, we need to take it ceteris paribus), I see Strike being fully funded and pockets filled with several projects that will drive us closer the goal of a mid-tier that acutally makes money. SN as the captain of this small ship becoming a big tanker is one thing that makes me sleep well. All he did so far was exceptionally professional management with clear statements, timings, and one eye on shareholder value as well. This guy has a vision and wants to become the CEO of a big company and he just kicked it off.

However, I need to say to myself every day again not to sell my house and buy Strike shares from it that there are many risks out there and nothing is certain, which is why the share price needs to develop over a certain period and comments like "then we will see 2-3$ soon" are nothing more than dreams. This will take time, but it may come and as others, I am not aware of a better opportunity than Strike at the moment, which is why it is the biggest part of my portfolio by far.

Let the good news and WE-2 keep flowing!

Cheers,

Gerf

Expand

gerfovitch,

Relativities ..... if STX was still 6c I'd agree with you that there is probably not a better risk adjusted opportunity on the market.

However at current prices there may well be better upside opportunites albeit the risk is much higher as the story is a little earlier in those compared to STX's profile. I've moved a small % of funds accordingly. To put it in context I may lose >50% where those funds have gone but I may make 100x if things go well. The numbers are nt like that for STX.

People should keep looking - assumptions are dangerous.

Stay hungry.

(20min delay)
Last 21.5¢		Change -0.005(2.27%)		Mkt cap ! $616.0M

Open	High	Low	Value	Volume
22.0¢	22.5¢	21.0¢	$4.542M	20.80M

No.	Vol.	Price($)
2	343465	0.215
11	966575	0.210
16	1114535	0.205
16	1600122	0.200
20	1202513	0.195

Price($)	Vol.	No.
0.220	563407	9
0.225	2088301	16
0.230	1977058	23
0.235	680357	15
0.240	2370819	20

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