Additional non-dilutive funding, a six (6) well Perth Basin drilling campaign and a sneak preview into what lies beneath the surface at South Erregulla. Friday's and today's announcements all delivered in a nearly matter-of-fact way but 2021 is not going to be any normal year for STX shareholders.
It's hard not to embrace hyperbole at these times. IMO 2021 is (finally) going to be the breakout year for Strike that the very loyal shareholder base has been hoping for.
In the face of Covid-19 and all the associated challenges, the Company has laid a tremendous platform this year. The Company's orientation is now fully directed towards a comprehensive Perth Basin play, across multiple permits. The level of proposed activities in 2021 is truly staggering. And the graphic illustration on page two of today's announcement - you can only imagine how many times today that image has been viewed/shared across WA gas market participants.
On a market capitalisation comparison in the oil & gas space, this is where STX sits today:
Woodside $17.7B Santos $10.6B Beach $3.3B Cooper $580m Strike $500m
Looking out beyond 2021 into 2022, where could Strike be? Comfortably fourth? On the podium?
To see Strike move into the ++$$billion market cap level, as an investor you probably need to hold strong conviction across a number of key areas:
Management/Board vision + ambition
Led by SN, there can be no denying the Company's patently high ambition. With the Perth Basin, particularly the increasing prospectivity being identified in the Greater Erregulla permits, they may have found the resource opportunity that matches their ambition. On this subject I totally agree with rperss99, rexsh and others regarding SE. No sell-down and no merger. Thankfully the merger will be consigned to the 'seemed like a good idea at the time' category. Today's quite graphic SE illustration is surely the point of no turning back.
Technical ability
This has been the great transformation (and revelation) over the past 2-3 years. The 2020 STX is a totally different Company to the 2016 STX. Yes, a sobering thought for those invested back in 2016. We nearly take for granted the now, the regular flow of detailed technical announcements and the compelling modelling that continues to play out positively in the Company's PB exploration and appraisal activities. Strike is becoming the primary player in the Perth Basin and publicly leading the technical commentary and gas resource narrative.
Multi-Tcf
The six well drilling campaign will of course confirm the multi-Tcf resource size. However, IMO today is the point where we move from hopefully to very likely. Furthermore, if it occurs, the estimates suggest we will blow past the 1Tcf threshold and there remains the rest of Greater Erregulla to come - the great unknown!
Low cost
This is absolutely essential and the Company, in previous presentations, has been unambiguously bullish in this regard. It is of course the elixir of multi-Tcf meets low cost that makes this whole play so tantalizing.
Market for PB gas
This is a big one and with the potential size of resource that strike could discover, the Company will in part need to build the market. It is future announcements over time in this area that will be the key to unlocking the enormous value that the 2021 drilling campaign may point to. Deliver in this area then BOOM!!
Building tier one relationships
Already we can see the Company is building great relationships (Wesfarmers/Macquarie for example) and this is where the quality of Strike's senior management and Board will play a vital role. The early signs are very promising.
Every investor will form their own views on the above. My conviction is high, which makes me very bullish to the Company's prospects and value potential. By the end of 2021 we could:
- have successfully completed WE3/4/5 appraisal - FID on a stage one development - completed an exploration well in South Erregulla (just imagine the expectation/excitement as we commence a high COS drill into a +2Tcf P10 100% owned opportunity) - completed Waylering (this feels like a free option with everything else happening in the PB) - undertaking the massive Minjiny 3D seismic across Strike's Greater Erregulla permits
Were SE to be a success, Minjiny would take on a whole new level of significance. This could prove to be the most impactful 3D in WA for many years. With all the data obtained from drilling WE2/3/4/5 and SE1 the Company will have a proven model to compare to Minjiny results/interpretation. It is highly likely that Minjiny results, particularly re Wagina and Kingia (results likely sometime calendar H2 2022) will be a very price sensitive announcement.
I'll leave estimates of future value and SP to others. However, IMO I cannot see any other Australian O&G company with anywhere near the value creation upside that Strike has. Plenty of challenges, maybe a few hiccups along the way but on balance what an exciting 12-15 months ahead for shareholders. And for those with the patience to wait for Minjiny results a big 24 months to come.
There has been more than enough comments back and forth between the EP469 participant stock forums. Whatever STX holders think of the other party, we really should be very thankful for the continued funding contribution to the EP469 JV. As discussed elsewhere, every dollar from others, towards WE2/3/4/5 is creating a knowledge base in WE that STX will apply in SE and beyond (through all of STX's 100% Greater Erregulla permits). WE is a nice entree but the main meal and the really large prize is SE/GE and we own 100% of that. Yes, 100%!! If SE comes good, expect Strike to totally realign priorities, activities and future production from their 100% owned permits.
My estimate is that at that some point in 2022 (post Minjiny) STX will be 6-10 times the market cap of the party with the passive, non-operated share in EP469. IMO if/when that occurs a couple of Scots may have some serious explaining to do to shareholders (but that's none of STX concern). For sensible folks the days of comparing the two companies is over. They are on totally different flight paths.
For all the points noted above, IMO Strike has a very rare, very real and exciting near-term (15-24 months) value accretion window that we as current shareholders can truly sit back, hope for that important sprinkling of luck meets good management and enjoy the ride.
What a fabulous year ahead and then with Minjiny - what might that reveal. Maybe even greater treasure across our permits.
Wow - bring on 2021 and GLTA.
Cheers
Adaltiora
STX Price at posting:
28.8¢ Sentiment: Buy Disclosure: Held
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