Strike shares sink as well testing disappoints

Perth Basin gas producer Strike Energy says it is disappointed with well testing results from its South Erregulla project, but will use the data gathered to guide the project’s modelling.

John Poynton-chaired Strike revealed this morning that South Erregulla-3 well did not flow as expected after the company perforated Kingia sandstone on February 5.

The SE-3 well was initially interpreted to be overbalanced, with Strike mobilising nitrogen to move it to an underbalanced state; a move that did not yield gas flow when the plug was removed on February 8.

The company ran tests and interpreted that it had encountered possible gas-water contact in the SE-3 well. Gas and fluid samples have been collected for further analysis.

Managing director and chief executive Stuart Nicholls said the result was disappointing.

“The SE-3 flow test has not matched its petrophysical interpretation, which is disappointing,” he said.

“Further analysis and data collection is ongoing, and Strike is reviewing the potential to return to the well.”

Strike said the samples and pressure gradients collected from SE-3 would be vital in guiding the South Erregulla subsurface model.

SE-3 is the lowest of the three wells penetrating Kingia sandstone at South Erregulla, with the SE-1 and SE-2 wells measured higher up the geological formation.

Strike said it would begin testing at SE-2 in the coming five days.

“Upon completion of the testing program, Strike will review its subsurface model and reserves and resources which will inform the path to the phase one development,” the company said.

Strike also plans to drill the Walyering-7 and Erregulla Deep-1 wells in the current half.

Today’s news is a significant blow for Strike, which recently notched gas sales agreements with South32 and AGL from South Erregulla pending a final investment decision at the project.

The market reacted accordingly, with Strike’s share price plummeting as much as 27 per cent in early trade.

The company is already producing gas in the Perth Basin, supplying the domestic market from its 100 per cent owned Walyering project.

Walyering and South Erregulla are two among the four projects that make up Strike’s government-endorsed gas acceleration strategy: a plan to bring four domestic gas projects to commercial production by the middle of the decade.

The plan also includes the West Erregulla project, in which Strike is a joint venture partner with Hancock Prospecting, and the earlier stage Ocean Hill project.

Mr Nicholls said Strike had recently moved to acquire 3D seismic data from Ocean Hill, in a move that could guide the location of the Ocean Hill-2 contingent appraisal well later in 2024.

Strike shares were trading 27.3 per cent lower this morning at 30.5c.

It comes less than two weeks after Strike was admitted to the S&P/ASX 200 index.