Strike Energy has taken a final investment decision on its South Erregulla 85 MW peaking gas power station and confirmed significant gas discoveries at Erregulla Deep and Walyering East-1, positioning the company for growth amid a strategic leadership transition.
- Final investment decision for South Erregulla 85 MW peaking gas power station
- Significant gas flow testing confirms discovery at Erregulla Deep
- Potential new gas discovery at Walyering East-1 with promising reservoir characteristics
- Environmental approvals secured for West Erregulla upstream infrastructure
- CEO Stuart Nicholls departs; Executive Director Jill Hoffmann assumes acting CEO role amid strategic review
South Erregulla Project Moves to Execution
Strike Energy Limited has marked a pivotal moment in its development trajectory with the final investment decision (FID) for the South Erregulla 85 MW fully integrated peaking gas power station. This project, aligned with Strike's Gas Acceleration Strategy, is set to deliver firming power into Western Australia's South West Interconnected System (SWIS) starting October 2026. With a capital expenditure of approximately $137 million and an expected operating life of 21 years, the project boasts a pre-tax net present value (NPV8) of $250 million and an internal rate of return (IRR) of 27%, underpinned by robust capacity credit pricing that has surged 57% year-on-year.
The power station will connect to an existing 132 kV transmission line between Geraldton and Three Springs, leveraging Strike's 100% ownership of the strategic 3,500-hectare Precinct above the South Erregulla gas field. The project benefits from existing environmental approvals and is supported by a $162 million committed financing facility from Macquarie Bank, which will refinance existing debt and fund development activities.
Exploration Successes Bolster Resource Base
Complementing the South Erregulla advancement, Strike has reported significant exploration milestones. Flow testing at Erregulla Deep confirmed a substantial gas discovery with stabilized flow rates limited by surface equipment at 53 million standard cubic feet per day (mmscf/d) and a wellhead pressure of 5,515 psi. Meanwhile, drilling at Walyering East-1 revealed a potential new gas discovery featuring 13.4 meters of net gas pay, porosities up to 16%, and reservoir pressures near 4,953 psi. These findings, pending further testing and sampling, could materially enhance Strike's resource portfolio in the prolific Perth Basin.
Environmental approvals for the West Erregulla upstream infrastructure have also been secured, clearing a critical regulatory hurdle for development. The company is preparing for a high-resolution 3D seismic survey (Natta 3D) to better define the Erregulla Deep discovery and the northern extent of the West Erregulla field.
Operational and Financial Overview
Strike's Q2 FY25 production volumes showed a slight quarter-on-quarter decline due to planned maintenance, with gross sales gas production at 2.04 petajoules (PJ), down 12%, and condensate production at 14,010 barrels, down 17%. However, year-to-date figures reflect more than 100% growth compared to FY24, driven by ongoing ramp-up in production and sales. Average realised gas prices increased modestly to $7.34 per gigajoule, while condensate prices held steady at around $122 per barrel.
Financially, total sales revenue for the quarter was $17.53 million, a 4% decrease from the previous quarter attributable to the maintenance shutdown. Capital expenditure doubled quarter-on-quarter to $25.42 million, reflecting intensified development and exploration activities, including South Erregulla procurement and Walyering East-1 drilling.
Leadership Transition and Strategic Review
The quarter also saw a significant leadership change with the departure of CEO and Managing Director Stuart Nicholls after eight years at the helm. Executive Director Jill Hoffmann has stepped in as Acting CEO, guiding the company through a strategic review aimed at maximising shareholder value by reassessing the project portfolio. This transition comes at a critical juncture as Strike advances its gas acceleration agenda amid evolving market dynamics.
Strike's liquidity position contracted to $33.13 million, reflecting the transition to the new financing facility and ongoing capital deployment. The company maintains a strong operational focus on delivering free cash flow from Walyering production and progressing construction at South Erregulla, while continuing appraisal and seismic activities across its Perth Basin assets.
Market Context and Outlook
Western Australia's energy market conditions remain supportive, with gas prices holding at elevated levels despite some softening. The SWIS recorded an all-time operational demand peak of 4,486 MW in February 2025, underscoring the critical role of gas-fired generation in balancing increasing electricity demand and renewable integration. The rising benchmark Reserve Capacity Price further enhances the economic case for Strike's peaking power project.
As Strike navigates its strategic review and executes on its development pipeline, the company is well positioned to capitalise on the growing demand for reliable gas supply and peaking power in Western Australia’s energy transition.
Bottom Line?
Strike’s decisive FID and exploration successes set the stage for growth, but the strategic review and leadership change introduce a watchpoint for investors.
Questions in the middle?
- How will the strategic review influence Strike’s project prioritisation and capital allocation?
- What are the timelines and expected outcomes for the Walyering East-1 production testing?
- How will the new financing facility impact Strike’s liquidity and funding capacity for upcoming developments?