Strike Energy prepares for Warrego well spud, Petrel Energy closes in on merger

Strike Energy ASX STX Petrel PRL Warrego gas Warrego Energy
Strike Energy has secured a rig to drill the onshore conventional West Erregulla-2 well in early May.

Strike Energy (ASX: STX) has clinched a deal with another Perth Basin operator to mobilise an onshore rig to the region, ahead of a planned drilling program at its 50%-owned Warrego gas project.

Strike, which operates the WA project in a 50:50 joint venture with private UK company Warrego Energy, today announced it would share costs and sequence its drilling program with the unnamed operator in order to mobilise the Easternwell 106 drilling rig to the basin.

According to Strike, EW106 is one of the largest and most powerful land rigs in Australia and is heavily sought after for work in other basins throughout the country.

Thanks to the collaboration, Strike has now been able to confirm an “early May” spud date for its planned West Erregulla-2 well, targeting a gross prospective resource of 1.162 trillion cubic feet (TCF) of gas (on a best-estimate basis).

This is also good news for fellow Australian company Petrel Energy (ASX: PRL), which will gain exposure to the project when it merges with Warrego Energy via a planned reverse takeover.

Warrego reverse takeover

Last month, Petrel announced the signing of a share purchase agreement in which it would acquire all of the shares of Warrego in exchange for about 77% of the issued share capital of Petrel.

Petrel is planning to list the merged business on the alternative investment market (AIM) in London. In its December announcement, the company said this was “likely to occur in a window just prior to, or shortly after, the drilling of West Erregulla-2”.

“With the final due diligence and merger documentation nearing completion, it’s very encouraging to kick off 2019 with such positive developments,” Petrel chief executive officer and managing director David Casey said in today’s announcement.

West Erregulla prospect

Strike also today announced that the reprocessing of 3D seismic for West Erregulla has resulted in an increase in gross prospective resources to 1.162Tcf, making it one of the largest pre-drilled conventional onshore prospects in Australia.

The resource estimate comprises two targets – Kingia-High Cliff, which now has a best-estimate prospective gas resource of 916 billion cubic feet, and the Basal Wagina Fan, with a best-estimate prospective resource of 247Bcf.

“The increase in neighbouring activity from other operators highlights the quality and prospective commerciality of the Kingia-High Cliff trend to the south east of Waitsia [a nearby gas discovery],” Strike managing director Stuart Nicholls said.

“The uplift in pre-drill prospective volumes of the stacked plays points to the increased significance of West Erregulla in becoming a potential key contributor to the Western Australian domestic gas markets as they tighten going into the 2020s,” Mr Nicholls added.

“With the West Erregulla-2 well representing one of the largest and most exciting opportunities since the nearby Waitsia discovery, the significance of acquiring Australia’s largest land rig to target in excess of a TCF of gas should not be underestimated,” Mr Casey said.