Strike Energy and Carnarvon Energy to Join Forces in WA Oil and Gas Sector Shake-up

The Western Australian oil and gas sector looks set for a major reorganisation with two of its leading players proposing a strategic partnership.

Onshore Perth Basin specialist Strike Energy (ASX: STX) and offshore oil and gas discoverer Carnarvon Energy (ASX: CVN) have entered into an agreement under which Carnarvon will make an investment of as much as $89 million to acquire up to a 19.9% interest in Strike through a two-tranche placement.

Strike has also revealed it will undertake a non-underwritten share purchase plan to raise up to $10 million with the ability to accept oversubscriptions of an additional $5 million.

Complementary Operations

With a string of drilling successes in the onshore Perth Basin, Strike has become a significant contributor to WA’s domestic power sector.

It has significant growth plans with future developments at the Walyering and West and South Erregulla gas projects.

Carnarvon recently helped open up the potential of the Bedout sub-basin with the formation of a joint venture with Santos (ASX: STO) and Taiwanese energy company CPC to operate the Dorado Phase 1 liquids development, offshore WA.

That project is currently on hold after the JV deferred both Front End Engineering and Design entry and an anticipated Final Investment Decision for the project.

Extensive Gas Portfolio

Carnarvon has taken the stake in Strike on account of its extensive and high-quality portfolio of production, development and exploration gas assets for which it needs capital to develop.

“Following the Bedout JV operator’s recent decision to delay the Dorado development, the Carnarvon board has been assessing value accretive opportunities for shareholders,” Carnarvon chair Rob Black said.

“The Carnarvon board believes the Strike Investment represents an attractive opportunity for the company to help Strike unlock the value in its high-quality portfolio of Perth Basin assets on attractive terms, while retaining full exposure to its own assets in the Bedout sub-basin.”

Largest Shareholder

“We welcome Carnarvon as a strategic partner and Strike’s largest shareholder,” Strike chair John Poynton said.

“Strike has a unique asset base with significant potential and Carnarvon’s investment provides the financial capacity and flexibility to realise this potential.”

“Strike remains focused on executing is revised strategy and remains well placed to support WA’s energy transition through the development of its high-quality Perth Basin assets.”

The company will issue new shares to Strike over two tranches at a price of $0.12 per share, a 19.7% discount to the 10-day volume weighted average price as at 18 July of $0.149.