Strike Energy Faces Market Softening with Strategic Production Cuts and High Capex

Progress on South Erregulla Project

Strike Energy has reported significant advancement on its South Erregulla 85 MW Peaking Gas Power Project, reaching 72% completion as of 31 December 2025. The project remains on schedule for its targeted commissioning date of 1 October 2026. Key milestones include the installation of main control panels and generator exhaust systems, as well as the commencement of transmission pole construction, with 43 of 52 poles installed by late January 2026. Civil works at the Northern switchyards have also begun, setting the stage for mechanical completion and gas introduction forecast for the second quarter of calendar year 2026.

Operational Optimisation at Walyering

At the Walyering Gas Processing Facility, production was 1.59 petajoules (PJ) during the quarter, generating $16.6 million in gas sales revenue at an average realised price of approximately $7.36 per gigajoule. Notably, Strike has strategically reduced production to around 10 terajoules per day from January 2026, leveraging favourable market conditions to purchase third-party gas to meet firm sale obligations. This approach aims to optimise supply reliability and value, reflecting a nimble response to the evolving Western Australian gas market.

Further operational enhancements include the successful installation of a heat exchanger during the December maintenance shutdown, which has deferred the need for compression equipment until Q2 CY26. This deferral is expected to improve operational efficiency and cost management.

Exploration and Drilling Plans

Looking ahead, Strike has secured the Ensign 970 drilling rig for its Walyering West-1 well, with spudding planned for early Q2 CY26, pending final regulatory approvals. Success at this well could provide upside to current supply and cash flow forecasts, underscoring the company’s commitment to expanding its Perth Basin portfolio. Concurrently, Strike is progressing an independently certified reserves and resources update for its West Erregulla and Erregulla Deep projects, expected to complete in Q1 CY26, which will inform future development pathways.

Financial Position and Market Context

Strike’s capital expenditure for the quarter was approximately $66 million, predominantly allocated to South Erregulla development and Walyering facility upgrades. Despite this investment, the company maintains a robust liquidity position with $69.5 million in cash and $6.3 million in undrawn debt facilities, totaling $75.7 million in available funding. This liquidity supports ongoing operations and development activities through the medium term.

The Western Australian gas market continues to soften, with spot prices averaging $6.42 per gigajoule during the quarter, down 3% from the previous period. The Australian Energy Market Operator forecasts supply gaps emerging from 2030, driven by declining production from existing fields and coal-fired power station retirements. These dynamics highlight the strategic importance of Strike’s projects in contributing to future domestic gas supply and system reliability.

Safety and Environmental Stewardship

Strike maintained a strong safety record throughout the quarter, with no major health, safety, or environmental incidents reported during intensive construction and operational activities. Additionally, the company advanced its Cooper Basin abandonment program, successfully decommissioning five wells and progressing towards licence relinquishment, demonstrating responsible asset stewardship.