Strike Energy is moving from construction into execution, with its 85 MW South Erregulla power project nearing commercial operations and a 251 PJ West Erregulla reserve base underpinning its next gas development. The opportunity comes with a weaker FY26 earnings result, A$111.4 million of net debt and major funding obligations arriving from late 2026.
- South Erregulla 85 MW project targeting commercial operations in Q4 CY26
- West Erregulla holds 251 PJ of net 2P reserves
- FY26 revenue fell to A$62.8 million and underlying EBITDA to A$17.6 million
- A$111.4 million of net debt at 30 June 2026
- West Erregulla first gas targeted for mid-CY29, subject to FID and approvals
South Erregulla moves toward revenue generation
Strike Energy Limited (ASX:STX) is approaching the point where its largest near-term investment is meant to start producing cash. The 85 MW South Erregulla power project is progressing through construction and commissioning, with practical completion forecast for 31 October 2026 and commercial operations targeted in the fourth quarter of calendar 2026.
The project is expected to add a second earnings stream alongside gas production, combining capacity payments with electricity sales. Strike has illustrated capacity revenue of about A$19 million in CY27, rising to as much as A$42 million in CY29, while electricity sales could generate roughly A$23 million to A$34 million a year under utilisation scenarios of six to 10 hours a day. Those figures are illustrative rather than forecasts, and actual revenue will depend on dispatch, electricity prices, plant availability and operating conditions.
West Erregulla supplies the larger growth target
Strike’s more consequential longer-term proposition is West Erregulla, where its net 2P reserves stand at 251 petajoules following a 20% increase after new seismic interpretation and an independent reserves review. Agreements with Hancock Energy establish a processing pathway through the proposed Belisama Gas Plant, targeting 43.5 terajoules a day of Strike production capacity and first gas in the first half of CY29.
The pathway is not yet a producing project. Strike is targeting an upstream final investment decision in mid-FY28, while the production target remains subject to development work, final joint venture and processing arrangements, FID and other customary conditions. A pre-FID loan of up to A$30 million from Hancock has been agreed in principle, but still requires final documentation and Macquarie consent.
FY26 earnings absorb a project-heavy year
The financial results show the cost of building that platform. FY26 sales revenue fell to A$62.8 million from A$72.7 million, while underlying EBITDA dropped to A$17.6 million from A$41.6 million. Strike reported a statutory loss of A$27.2 million, an improvement on the A$157.3 million loss recorded in FY25, which included a much larger impairment expense.
Walyering production was constrained by natural field decline and compression requirements, reducing own-gas production to 5.9 petajoules. Strike bought and on-sold 2.37 petajoules of third-party gas to maintain firm commitments during softer Western Australian spot-market conditions. Investment, meanwhile, pushed FY26 capital expenditure to A$151.3 million and net assets to A$355.6 million.
Debt service becomes an immediate test
Strike finished June with A$46.3 million of cash, A$157.7 million of book borrowings and A$111.4 million of net debt. It said all debt covenants were complied with, but repayment pressure is moving closer: asset-finance amortisation begins from October 2026 and Macquarie debt amortisation from December 2026. A further A$30 million Macquarie facility was made available after year-end and drawn on 7 September.
That timing puts execution and funding on the same clock. South Erregulla must move through commissioning and into dependable operations, while Strike seeks to advance West Erregulla to FID without allowing development spending and debt service to outrun operating cash generation. The company’s FY27 priorities explicitly include converting South Erregulla into cash flow, servicing debt from operating cash flow and securing funding for West Erregulla.
Walyering recovery offers a nearer-term bridge
Walyering is being positioned as the nearer-term support for the portfolio, with compression now supporting a stated production rate of 20 terajoules a day and 2P sales-gas reserves rebuilt to 16.4 petajoules after production and the latest reserves review. The Walyering West-1 tie-in is progressing through front-end engineering and design, giving Strike an intervention point before West Erregulla reaches its targeted first gas date.
The investment case therefore rests on a sequence rather than a single announcement: South Erregulla must reach commercial operation, Walyering must stabilise, and West Erregulla must clear its financing and FID hurdles. The next hard evidence will come from commissioning performance, debt repayment against operating cash flow and whether the Hancock arrangements convert from a stated pathway into a financeable development.
Bottom Line?
Strike has built a sizeable Perth Basin growth platform, but the next year will test whether new power revenue can arrive quickly enough to support debt service and West Erregulla funding.
Questions in the middle?
- Will South Erregulla reach practical completion and commercial operations on the current timetable?
- Can operating cash flow cover debt amortisation from October and December 2026 while development spending continues?
- When will Hancock documentation and West Erregulla arrangements be sufficiently finalised to support an upstream FID?