Catching up on the Quarterly and HC posts this week. Totally agree about the 45mins - a really comprehensive update. The bandwidth of activities seems to have grown exponentially over recent months. It's been a rapid and impressive transformation from a determined explorer back in 2019 to the stated vision of becoming Australia's first integrated gas, renewable energy and fertiliser company. The big difference to back in mid-2019 is that the Company has a boot full of cash to match the growing ambitions.
Interesting to note that from a market cap (MC) of approx. $90m two years ago, there has been an increase in MC value of $600m -> $650m, primarily funded by $42m of new equity capital over the period. That is a significant value multiplier and if the Company and its management team can achieve a similar value multiplier on the $80m of fresh capital (placement + SPP) then, as shareholders, we are in good shape with plenty to look forward to.
Support for the recent raise is certainly reassuring, against the clamouring of many voices and stakeholders around the energy and carbon transition. STX appear to be forging a sensible transition pathway that is gaining advocacy and building broad investor support. Without the latter, particularly for a pre-revenue Company, the risks would be extreme.
The March Quarterly is a fabulous backdrop and the lens for which the upcoming WE4 flow test results are likely to be viewed. The shift in emphasis and focus to Greater Erregulla and Strike's 100% acreage is now most apparent. A strong WE4 flow test result IMO, will be a key plank in the increasingly robust technical assessment that STX could be sitting on an enormous low-cost gas resource in the Permian Gas Fairway. This huge potential gas endowment is the cornerstone of Strike's now well-articulated vision. The flow test could be the catalyst that engages both industry and market interest in South Erregulla and STX's vast 100% PB acreage. The potential resource base in these permits dwarfs the current WE discovery. The SE/GE resource opportunity has the potential to transform STX into a serious WA industry player and bring the Company's stated ambitions right into the forefront of investor considerations.
As multiple posters have alluded to, it's increasingly likely that Phase Two gas processing will source supply from Strike's 100% permits. A positive WE4 flow test will bring significant expectation to the planned Q4/21 spud of South Erregulla. IMO success with this exploration well and it's game, set and match for Phase Two gas sourcing.
Unfortunately, what is potentially a period of considerable expectation for STX shareholders, as SE/GE activities take centre stage in 21/22, has the binary (negative) implications for our EP469 JV partner. The penny may not have dropped for these long suffering shareholders but IMO the unmistakeable risk is - were SE1 to be a success for STX - our partner may end up being consigned only to participation Phase One processing. IMO this 'sword of damocles' would likely cap any Permian Basin value to their one and potentially only GSA, providing a measly Dcf valuation, with future cash flows heavily discounted due to increasing macro thematic industry headwinds.
How utterly frustrating would it be, to be stranded with 155Pj, when your partner (STX) is prioritising development of a multi-Tcf opportunity on their 100% permits across the Permian Gas Fairway and building out, unfettered and uncapped, their integrated WA gas, renewable and fertiliser story. I cannot comprehend why the JV partner's leadership is playing Russian roulette with this scenario with a >50% probability. IMO it's a massive risk that, together with further material funding (CRs) to come, will continue to suppress their languishing SP. Hopefully for our EP469 JV partner shareholders I'm wrong but a positive WE4 flow test is as much a negative as a positive for the. Why - because of the misalignment of both parties in the PB and what a positive flow test means for Strike's future focus and prioritisation towards their 100% Greater Erregulla permits. Respectfully, IMO, the one and only question our EP469 JV partner shareholders should fixate on is how did they let this misalignment fester to the point that, if certain events transpire, it could lead to a value destroying outcome. This is way more fundamental that waiting for some magical next announcement that will right past imagined injustices or venting on HC, anchoring arguments to dodgy analysis or alternative realities - in summary, 'barking up numerous wrong trees'.
And as a further reminder as to why investors apply a different lens to both companies. Back in May 2019 the companies had market caps around $70m - $90m. Across two years, one raised $42m of fresh equity and grew the market cap north of $700m. The other raised $65m of fresh equity and grew the market cap to $220m. Maybe it's time to pause and consider this dog won't hunt. The investment tribe does appear to have spoken.
With the boot full of cash that STX now has, it's going to be a busy time and I expect we'll have to set regular time aside to keep up with the announcements and hopefully positive news flow, starting with next month's WE4 flow test. As other posters have noted I'm sure we are in for new surprises too. Not sure where they will come from but noting the last two 'staggering' years, we should expect the unexpected. And hopefully a few vanilla updates on well spuds, TD's being reached and resources/reserves being added.
GLTA and hopefully another quarter with just as much progress as Q1.
Cheers
Adaltiora
STX Price at posting:
37.5¢ Sentiment: Buy Disclosure: Held
(20min delay)