Goldman Sachs initiate STX at Buy

The big boys are now jumping on board, Goldman Sachs initiate STX at Buy

Strike Energy (STX) is on the cusp of transitioning from a gas
explorer to a producer through the Walyering development which
we expect to be online in mid 2023, following five years of
exploration success in the Perth Basin building substantial ~1,000
PJ of reserves and resources.
We believe STX is well-positioned to benefit from Western
Australia’s energy transition and offset the sudden gas supply
shortfall as offshore fields experience reserve write downs, facilities
experience unplanned downtime, and coal plants struggle to
maintain baseload power, recently leading domestic spot gas prices
to double to A$9/GJ. We expect STX will generate stable earnings
following Walyering’s commissioning, and ramp up to ~150 TJ/d net
gas production and ~A$350m EBITDA by 2027 through staged low
capacity additions capitalizing on elevated near-term spot prices.
We initiate STX at Buy with our 12m PT of A$0.55/sh (derived by
70% fundamental valuation derived by risked NAV and 30% M&A
valuation derived by unrisked NAV) implying 25% upside vs 16% for
our coverage on:
n Near term earnings inflection: Set to grow operating cash flow
after five years of exploration and gradually ramp up to
~A$350m over the next five years.
n Potential exploration and appraisal upside: Targeting over
500 PJ of gas through a drilling campaign over the next year.
Key risks: Western Australia gas price weakness, project execution
schedule delays & cost inflation, regulatory change impacting gas
exports and fiscal policy