Event We attended a 2 day Perth Basin site visit hosted by Strike Energy visiting the Walyering production facility, the Ensign 970 drilling rig, South Erregulla wells and the 3,500ha Precinct/farm which Strike owns above the South Erregulla field. Following a material de-risking period (first production at Walyering and appraisal success at South Erregulla), it was pleasing to see the progress and magnitude of the company’s operations that look to provide much needed gas to the WA domestic market. Key Points Walyering - an impressive, simple operation given high-quality pipeline spec gas (low CO2/inerts, only stripping out water and condensate). Ramp up to contracted gas rates (20TJ/d) has been quick and performance has been impressive with what appears to be lots of redundancy (i.e. potential well deliverability to meet plant nameplate capacity of 33TJ/d). USD denominated GSA and strong oil price is resulting in strong pricing. South Erregulla - South Erregulla-2 was a key de-risking event for the South Erregulla field, beating expectations (with 16m net pay, greater than 14m at the discovery well), on track for FID this CY and first gas end CY24. Lessons from Walyering delays being implemented, plant looking to be fabricated in Canada. The Precinct/farm - of ~3,500ha was an astute purchase in 2022 for $13.5 million given it provides easier land access and allows flexibility for the potential integration of future renewables opportunities (i.e. wind and solar power generation) and decarbonisation initiatives (e.g. CCUS, carbon plantation). We had not previously appreciated the importance of the significant land-holding. West Erregulla - we drove past the well pads that exist on Crown land bordering the Strike Precinct. There was a lack of discussion on the development (we note the current focus is South Erregulla with exploration in EP469 which could add resources), however speculate on activity behind the scenes, i.e. potential MIN/Hancock partnership. General Company/Workforce Observations - appears nimble, future-focused, motivated, proud and empowered, lacking the bureaucracy of larger oil & gas operators. Action We maintain our Buy recommendation and Price Target of $0.62/sh, noting significant upside to the current share price following an important period of de-risking (Walyering production, South Erregulla appraisal success) and upcoming material milestones. It is a busy future ahead for Strike as the company executes on its Gas Acceleration Strategy with up to four sources of production by end-2025 (Walyering already ticked off) whilst progressing potential future activities at the Precinct (i.e. renewables, CCUS). Upcoming Catalysts - South Erregulla-3 appraisal well results (late Nov/early Dec)
- Independent certification of South Erregulla Reserves (target Dec)
- EP469 (West Erregulla permit) exploration drilling (1HCY2024)
- Implementation of Scheme with Talon Energy (target Dec)
- Potential bid(s) for STX, may be prior to exploration drilling in 1HCY24
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(20min delay)