How Will Strike Energy Deploy A$103m to Power Perth Basin Growth?

Strategic Capital Injection

Strike Energy Limited (ASX – STX) has secured a substantial capital boost through a strategic placement and a share purchase plan (SPP), collectively aiming to raise up to A$103 million. The centerpiece of this raise is a two-tranche equity investment by Carnarvon Energy Limited, injecting between A$85 million and A$88 million at a discounted issue price of A$0.12 per share. This price represents a near 20% discount to Strike's recent trading average, reflecting a strategic partnership designed to accelerate Strike's growth trajectory in Western Australia's energy sector.

The placement's second tranche and the SPP, which offers eligible shareholders the chance to invest up to A$30,000 each, are both contingent on shareholder approval, expected at a general meeting in September 2025. The SPP also carries the possibility of oversubscriptions up to an additional A$5 million at the board's discretion, underscoring management's confidence in the company's prospects.

Funding Core Projects and Energy Transition

The capital raised is earmarked primarily for advancing Strike's core Perth Basin projects – South Erregulla, West Erregulla, and Walyering. South Erregulla is progressing steadily, with construction on track for first production by 1 October 2026. Notably, the project has undergone a capital budget revision, increasing allocation by approximately A$13 million to accommodate updated design requirements, including a significant rise in Western Power connection costs.

West Erregulla, meanwhile, is poised for a final investment decision (FID) in the second half of 2026, aligning with the 2026 Reserve Capacity Cycle for the 2028-29 capacity year. Strike is actively exploring downstream processing options, including potential partnerships under a Build Own Operate (BOO) model, which could mitigate upfront capital expenditure and position the company as a key player in Western Australia's energy transition.

Walyering continues to generate cash flow but faces production decline challenges. Strike is addressing this with compression installations and plans for a near-field exploration well at Walyering West to extend the production profile. The company is also advancing appraisal activities at Ocean Hill, targeting a low-cost, fast-to-market development opportunity contingent on exploration success.

Strategic Partnership with Carnarvon Energy

Carnarvon Energy's investment is more than just financial; it represents a strategic alignment with a company deeply engaged in Australia's oil and gas exploration landscape. Carnarvon's portfolio includes interests in the Bedout sub-basin, home to Australia's largest undeveloped offshore oil resources. This partnership provides Strike with funding certainty and access to complementary expertise, reinforcing its capacity to support Western Australia's energy security and transition goals.

Post-transaction, Carnarvon will hold up to 19.9% of Strike's shares, becoming a significant shareholder with vested interest in the company's success. Carnarvon maintains a strong balance sheet, ensuring it can continue to fund its own projects while supporting Strike's development plans.

Financial Position and Risks

Following the placement and SPP, Strike's pro-forma capital structure will feature approximately 3.68 billion shares and cash reserves of around A$139 million, complemented by undrawn debt facilities totaling A$143 million with Macquarie Bank. This positions Strike with a total capital capacity of approximately A$282 million, providing substantial financial flexibility to execute its development strategy.

However, the company is transparent about the risks ahead. The completion of the second tranche and the SPP depends on shareholder approval and market conditions. Project cost escalations, particularly related to Western Power's revised scope at South Erregulla, could impact capital requirements. Exploration outcomes at Walyering West and Ocean Hill remain uncertain, and drawdowns on debt facilities are subject to customary conditions precedent.

Strike also faces operational risks inherent in the energy sector, including regulatory changes, commodity price volatility, and the challenges of entering electricity generation markets. The company has outlined these risks comprehensively, emphasizing the speculative nature of the investment and the importance of shareholder support to realize its growth ambitions.

Outlook

Strike Energy's strategic placement and SPP mark a pivotal moment as it seeks to transition from a developing gas producer to a key integrated gas-to-power player in Western Australia. With Carnarvon's backing and a clear capital plan, Strike is well-positioned to advance its tier-one Perth Basin assets, contribute to the state's energy transition, and unlock shareholder value. The coming months will be critical as the company navigates shareholder approvals, project milestones, and market dynamics.