Strike Energy has moved South Erregulla into final commissioning and lifted West Erregulla’s net 2P reserves by about 20%, but the project-heavy year came with sharply lower earnings and operating cash flow. The company is now relying on execution, financing and new production to convert a larger asset base into cash generation.
- South Erregulla 85 MW project reached 94% completion and entered commissioning
- West Erregulla net 2P reserves rose 20% to 251 PJ
- FY26 revenue fell to $62.8 million and underlying EBITDA to $17.6 million
- Operating cash flow dropped to $6.4 million as capital spending accelerated
- Hancock and Macquarie funding pathways add capacity but remain conditional in part
Strike Energy Limited (ASX:STX) is approaching its most consequential operating transition yet, but it is doing so with a weaker earnings base. The company’s South Erregulla 85 MW gas-fired power project reached about 94% completion at 30 June and moved into commissioning, while West Erregulla’s net 2P reserves increased by approximately 20% to 251 petajoules. Against that progress, FY26 sales revenue fell to $62.8 million, underlying EBITDA dropped to $17.6 million and operating cash inflow slumped to $6.4 million.
South Erregulla moves into final commissioning
Strike says the South Erregulla upstream facilities and power station achieved mechanical completion in June, with gas introduced and all 20 generating units commissioned. The remaining work centres on the Western Power network connection, grid commissioning and Australian Energy Market Operator performance testing, with practical completion forecast for 31 October 2026 and approval to generate targeted in late Q4 calendar 2026.
The 85 MW facility is designed to earn revenue from electricity sales and Western Australia’s Reserve Capacity Mechanism. Strike says the 2026/27 capacity price implies about $18 million of annual capacity revenue for the project, rising to approximately $31 million at the 2027/28 price, before electricity sales. Those figures are indicative of the opportunity rather than realised income: capacity payments depend on successful commissioning, testing and approval for commercial operations. The company has also identified third-party grid infrastructure, gas supply and equipment performance as material project risks.
West Erregulla gains scale and a development route
West Erregulla offers Strike a second major growth leg. An independently audited review lifted the company’s net 2P reserves to 251 PJ and net 2C contingent resources to 48 PJ, with the latter primarily associated with Erregulla Deep. Post year-end, Strike selected Hancock Energy’s proposed Belisama Gas Processing Facility as its preferred processing solution, targeting 43.5 terajoules a day of processing capacity net to Strike, upstream FID in FY28 and first gas in calendar 2029.
The pathway is supported by an implementation agreement and a binding fixed capacity charge for processing, according to the annual report. Strike and Hancock have also agreed in principle to a commercial loan of up to $30 million for Strike’s pre-FID activities, subject to binding documentation, a gas processing agreement, senior lender consent and other conditions. Macquarie separately made an additional $30 million available, with the amount drawn on 7 September 2026. The funding improves near-term flexibility, but it also leaves Strike managing a more heavily leveraged balance sheet and a financing structure with multiple secured lenders.
Walyering remains the earnings base
Walyering supplied the group’s only material revenue during FY26, producing 5.90 petajoules of gas and condensate and generating $62.8 million in sales, including third-party gas purchased and on-sold under existing contracts. Revenue declined from $72.7 million, while third-party gas purchases rose to 2.37 PJ as Strike worked to meet firm supply commitments. Additional heat exchange and compression infrastructure lifted production to approximately 15 TJ a day from March 2026, and the company is targeting a ramp-up towards 20 TJ a day.
The Walyering West-1 well added maiden 2P reserves to the field booking after recording a stabilised flow rate of about 11 million standard cubic feet a day from the C1 Sand. Strike is progressing front-end engineering and design for a tie-in, but the annual report cautions that the field’s production mitigation measures may not deliver the targeted ramp-up or enough additional gas to avoid further supply or funding pressure.
Higher project spending reshapes the balance sheet
Strike’s net loss narrowed to $27.2 million from $157.3 million, helped by the absence of the prior year’s $117.7 million impairment charge. That improvement masks a cash-intensive expansion: investing outflows reached $162.9 million, including $151.3 million for property, plant and equipment, while total borrowings stood at $157.7 million at year-end. Cash was $46.3 million, and the directors said their forecast supported preparation of the accounts on a going-concern basis, assuming South Erregulla is commissioned and discretionary spending remains controlled.
The financial story therefore turns on timing. South Erregulla must move from commissioned machinery to approved commercial operations, Walyering must maintain supply while its newer infrastructure beds in, and West Erregulla must convert an agreed pathway into binding documents and an FID. Strike’s renewed leadership under Managing Director and CEO Shelley Robertson and Chair Nev Power has set a clear operational agenda; the next test is whether the portfolio can begin funding itself before debt service and development commitments narrow the company’s room to manoeuvre.
Bottom Line?
Strike has more reserves, infrastructure and funding capacity than a year ago, but the investment case now rests on commissioning South Erregulla and advancing West Erregulla without further weakening liquidity.
Questions in the middle?
- Will South Erregulla complete grid and AEMO approvals in time for capacity revenue to begin as planned?
- Can Walyering and Walyering West-1 deliver enough production to support firm gas commitments and operating cash flow?
- Will Hancock’s proposed funding and processing arrangements become fully binding ahead of West Erregulla’s targeted FY28 FID?