South Erregulla no write-off for Strike

Strike Energy has not given up on developing a standalone gas project at its South Erregulla project in the Perth Basin, despite recent drill rig disappointment in the area.

Gas producer Strike’s share price plummeted in February off the back of news that it had intersected water with gas during drilling of well two at South Erregulla.

A subsequent, third well didn’t flow at all, in a result which company chair John Poynton labelled disappointing when the company released its half-year financials.

The results followed a commercial discovery well at the South Erregulla one well.

Addressing investors this morning following the release of its quarterly report, Strike managing director Stuart Nicholls said the company believed there was still potential for commercial development at South Erregulla and was reviewing its reserves and plan.

 “We are finding a high degree of complexity throughout the Permian structures [at South Erregulla], and we continue to find our geological models are evolving as every penetration comes through,” he said.

“What is positive is that we do see a reserve in the eastern compartment of South Erregulla, which we will look to support a standalone development there.”

Mr Nicholls said Strike expected to have full details on a development at the project by mid-year.

The news on South Erregulla came off the back of a significant quarter for Strike, where the producer achieved record sales of $18 million – up 22 per cent quarter on quarter.

The company’s Walyering project, which came into production in September 2023, exceeded its nameplate production capacity on February 4.

Strike is currently preparing to drill the Walyering-7 appraisal well, and its Erregulla Deep exploration well.

It is also pushing towards a final investment decision at its West Erregulla field in the third quarter of the year, held under a joint venture with Hancock Prospecting, and acquired 3D seismic data at the earlier stage Ocean Hill project during the quarter.

Under current state policy Strike’s onshore projects are required to supply all gas into the state’s domestic market, rather than produce LNG for sale in overseas markets.

The Australian Energy Market Operator (AEMO) has warned of a looming gas shortfall in WA in the years ahead, leading to an expansion by Woodside Energy of its contributions to the local market from its LNG-producing assets in the state’s north west.

Mr Nicholls said he was in regular conversation with other Perth Basin operators – including Hancock and Mineral Resources – as they move to get the state’s policy settings overturned and seek to reduce costs through rig sharing at their respective projects.

He said the recent move by Woodside should not impact a government decision on its mooted move to allow LNG export exemptions for onshore producers – a move Strike believes would foster investment in the burgeoning gas sector.

“I would implore the state government to look five years ahead of where they want to be, and look at the levers that are available to them today,” he said.

“If the domestic gas market doesn’t have a reason to replace restrictions and constrictions on companies, then we should be able to stimulate the way that we want to, through the export regime.”

Strike shares were trading up around one per cent this morning.