Why Carnarvon Is Betting $89M on Strike Energy’s Gas Growth

Strategic Investment Overview

Carnarvon Energy Limited has announced a significant strategic investment in Strike Energy Limited, acquiring up to a 19.9% shareholding through a subscription agreement valued at $89 million. This move marks a notable shift in Carnarvon’s capital allocation strategy, replacing a previously considered capital return with a direct stake in a complementary energy player focused on Western Australia’s gas markets.

The investment price of $0.12 per Strike share represents a substantial discount of nearly 20% to Strike’s recent volume-weighted average price, underscoring Carnarvon’s confidence in the value proposition presented by Strike’s portfolio.

Unlocking Value in Western Australia’s Gas Sector

Strike Energy’s portfolio includes production, development, and exploration assets across the Perth Basin, with key projects such as the South Erregulla 85 MW gas-fired peaking power station, the Walyering domestic gas project, and the West Erregulla gas project. The injection of funds from Carnarvon, alongside other financing arrangements, is expected to fully fund these initiatives, enabling Strike to advance its development pipeline and exploration opportunities like Ocean Hill.

For Carnarvon, this investment offers exposure to the growing domestic gas and electricity markets in Western Australia at a time of increasing demand. Importantly, Carnarvon retains full exposure to its own Bedout Sub-basin assets, including the Dorado liquids project, while maintaining a robust balance sheet with over $96 million in cash and significant carried interests.

Governance and Strategic Collaboration

In recognition of the strategic nature of the investment, Carnarvon will have the right to nominate a representative to Strike’s board following the initial tranche of investment, providing a platform for closer collaboration. Additionally, Carnarvon secures participation rights in future equity offers, although these rights come with voluntary escrow and conduct restrictions for 12 months, reflecting a commitment to stable and aligned shareholder engagement.

Carnarvon’s chairman, Rob Black, emphasized the complementary nature of the investment, highlighting the opportunity to unlock value in Strike’s high-quality Perth Basin assets while advancing Carnarvon’s own development goals. The partnership signals a potentially transformative alliance within the Western Australian energy sector.

Looking Ahead

The investment will proceed in two tranches, with the first $52 million tranche completing shortly and the second tranche of up to $37 million contingent on Strike shareholder approval expected in September 2025. This staged approach introduces some execution risk but also allows for measured integration of the investment.

Overall, Carnarvon’s strategic pivot towards a significant equity stake in Strike Energy reflects a broader trend of consolidation and collaboration in the Australian energy sector, as companies seek to leverage complementary assets and capital to meet rising energy demand.