Carnarvon’s Growth Strategy Hinges on Operator Moves and Exploration Timing

• Strategic investment in Strike Energy for up to A$89 million
• Maintains robust cash position of approximately A$97 million post-investment
• Plans to resume Bedout Sub-basin exploration drilling in 2026
• Dorado development timeline under review amid operator corporate activity
• Ceases previously planned capital return in favor of Strike investment

Strategic Investment in Strike Energy

Carnarvon Energy Limited has taken a decisive step to reshape its portfolio and exposure to Western Australia’s energy market by entering into a subscription agreement to acquire up to 19.9% of Strike Energy Limited’s issued capital for up to A$89 million. This move follows an extensive strategic review and due diligence process, reflecting Carnarvon’s confidence in Strike’s high-quality gas assets in the onshore Perth Basin.

The investment price of $0.12 per Strike share represents a nearly 20% discount to Strike’s recent trading average, offering Carnarvon an attractive entry point into a sector poised for growth amid rising domestic gas and electricity demand.

Strong Financial Position Supports Growth

Despite committing a significant portion of its cash reserves to this investment, Carnarvon retains a robust balance sheet with approximately A$97 million in cash post-transaction and zero debt. Additionally, the company benefits from a US$90 million carry on Dorado development costs, providing further financial flexibility.

This strong capital position enables Carnarvon to continue advancing its core assets, including the Dorado oil and gas field and the Bedout Sub-basin exploration portfolio, without compromising liquidity.

Exploration and Development Outlook

Carnarvon remains committed to progressing exploration drilling in the Bedout Sub-basin, targeting a 2026 campaign pending environmental approvals and rig availability. The Bedout JV’s prospective resources are substantial, with estimates of 9 trillion cubic feet of gas and 1.6 billion barrels of liquids, underscoring the basin’s potential to underpin future gas export developments.

Meanwhile, the Dorado development timeline is under review due to ongoing corporate activity involving the project operator. Carnarvon is actively exploring options to accelerate the project, which remains a significant asset with world-class resource potential.

Capital Management and Shareholder Returns

In light of the Strike investment, Carnarvon has ceased pursuing a previously announced capital return, signaling a strategic prioritization of growth opportunities over immediate shareholder distributions. The company retains the capacity for an on-market buyback of up to 10% of shares but has not yet executed any purchases under this program.

Operational costs remain modest, funded primarily by interest income from cash holdings, reflecting prudent financial management during this phase of portfolio transformation.

Looking Ahead

Carnarvon’s dual exposure to two of Australia’s most promising basins, the onshore Perth Basin via Strike and the offshore Bedout Sub-basin, positions the company to capitalize on evolving energy market dynamics. The coming months will be critical as the company navigates operator corporate developments and regulatory approvals that will shape the pace of exploration and development activities.

Bottom Line?

Carnarvon’s strategic pivot into Strike Energy and sustained financial strength set the stage for a transformative growth phase, but key operator developments will be pivotal to watch.

Questions in the middle?

• How will the operator’s corporate activity impact the Dorado development timeline and investment decisions?
• What are the specific plans and contingencies if environmental or rig availability delays Bedout drilling beyond 2026?
• Could Carnarvon consider further capital deployment or partnerships to accelerate its exploration and development ambitions?