Alrighty, let's kick things off at 8:30 A.M. Good morning, everyone, and welcome to Strike Energy's Q4 FY 2025 quarterly activities and financial webinar. Thanks for joining us this morning. We're going to run this very similar to the way we have in the past. I'm joined by Peter Stokes, our Managing Director and Chief Executive Officer, and our Chief Financial Officer, Tim Cooper. Shortly, I'll hand over to Peter to give a presentation, and then we will follow this up with a Q&A at the end of the session. Thanks to those who have already submitted some questions. If you have any questions that you want to ask and haven't pre-submitted, please use the open chat button. If you use the pre-submission, it'll be difficult for me to find them, so use the chat button in the webinar.
This session will be recorded and posted on our website around this afternoon. Over to you, Peter.
Thanks, Emma, and welcome to the call as well. I really appreciate the opportunity to talk to you all. As Emma said, we're happy to take as many questions as we can at the end. I think the other thing we'll also do is try and address any that we can't get through. We often get quite a few, and we'll go through the ones that have been posted already first and then try and address as many others as we can. The front slide you'll see there, we've had a lot of progress up at South Erregulla on our precinct on the farm that we own. You can see in the background there, that's the engine shed. It's about half built now, so the roof and other parts are on most of the shed now as well.
In the foreground, you'll see the makeover of the key gas well that we're doing the work on at the moment. What you can take away from that is that we're progressing really well with our integrated power solution up at South Erregulla. We're still very focused on ensuring that we get that online by the 1st of October next year, and we've been getting senior management up there regularly to engage with the teams on site and the various contractors, as well as ensuring that we're still driving that progress and in parallel engaging with key authorities in government to ensure that all of the various parts that we're working towards, particularly with Western Power on the line, the connection line, which we'll come to a bit later, is all in place so that we can go live as planned.
If we just go to the next one, please, Emma. In summary, I think a couple of things. The last time we were on the webinar, we talked about the strategic review. We've now, and we're happy to go through some of that. We'll pick up some of the key points from that, and that's a critical part of where we are now and where we're heading. I also wanted to ensure that we've now done the transition. Jill Hoffmann has handed over to me to lead the company. I want to thank Jill for all the work that she did while she was in the seat for the last six months or so.
Last week, we announced the strategic investment by Carnarvon Energy in the business of $88 million via a placement, in addition to the $10 million share purchase plan that we'll have in parallel, with the option to increase that by another $5 million if there's that level of interest. Ocean Hill continues to progress well, and we'll be able to provide an update with the full-year results. The Ocean Hill 3D seismic work has identified a number of really attractive targets that we're looking to do an exploration well on the back end of next year. As I said, the 85 MW peaking plant at South Erregulla continues to progress well. On that note, I'll hand over to Tim to talk through some of the financials, and then I'll pick up the operational part of the business again.
Thanks, Peter, and welcome everyone this morning. Look, it's been a strong quarter for Strike. Sales revenue at $18.3 million. The operations team has done a great job in maintaining production at 25 TJ/day to meet our firm contracts for a total of 2.3 PJ. The realized price there for gas and condensate, the reduction there is just a reflection of the U.S. denominated contracts and foreign exchange. On exploration and appraisal, that's predominantly the Natta 3D seismic work, of which we've communicated previously that that's with independent certifiers at the moment, and expecting those results and share those with the market in December 2025. Development expenditure in line with current forecast on South Erregulla gas peaking power station at $21 million, and the Walyering compression project at $1.7 million. That compression is expected online in January to support ongoing production at Walyering.
Available liquidity is a combination of cash at 30 June and undrawn debt of $76 million, and I can confirm that that tranche one cash $51.6 million has been received from Carnarvon already. I think well placed going forward after a strong quarter, and Peter, I can hand back to you.
Thanks, Tim. I'll run through each of the projects, the status in the last quarter. Starting with West Erregulla and Erregulla Deep, a key part of the strategic placement now enables us to continue to work down towards FID at the back end of next year, which is our target. We're working closely with our joint venture partner on doing that. We'll refine the works that need to be done, at least one well and a couple of makeovers over the next number of months. We're working through, as Tim said, on the Erregulla Deep seismic work from an ADAS survey seismic work, and then we're also looking at working through what the downstream developments look like for both ourselves and our joint venture partner.
On South Erregulla, the integrated power plant continues well on target for construction, and we're now looking at the option of an additional 15 MW expansion, which would come online a year after the current project goes live next year. At Walyering, we're producing online, producing at nearly 98% capacity at the moment. We're producing 25 TJ/day with gas going to both Santos and ATCO. We generated around $70 million of revenue for this last year out of the field, and we're now working on a number of projects, including compression and near-field exploration, to continue to ensure that we can produce at similar rates and ongoing for that project through to the end of the Santos contract. Exploration-wise, the seismic data that we've done around Ocean Hill is in final stages of interpretation. That's being taken through third-party verification, and we'll share that as part of the year-end results.
As we said earlier, that's looking quite prospective from what we're seeing. The strategic placement really enables us to then look at options of how we move that forward at that project, subject to us locking in a couple of other key costs in the meantime. Current intention is to start on the exploration well towards the end of next year. On the next slide, the rationale for the transaction with Carnarvon. We have an $85 million- $88 million strategic placement by Carnarvon in Strike via two-tranche equity investment. Issue price was $0.12, as we had talked through last week, with the tranche two being subject to shareholder approval. I'll run through some of those dates shortly.
There's a non-underwritten SPP for up to $30,000 a shareholder at the issue price to raise an additional $10 million, with the ability to accept oversubscription for another $5 million subject to shareholder approval during next month. Key purpose of the strategic placement, it really enables us to deliver on the strategic plan that we talked about earlier. Four key areas that we'll focus on: taking West Erregulla to FID, finalizing and getting the revenue generated from South Erregulla, working through an expansion of South Erregulla, doing the additional work at Walyering to ensure that it continues to produce at current flows, and then towards the end of next year, as we start to generate funds or revenue out of South Erregulla, the ability to commence our exploration at Ocean Hill and then down the track at Catathina as well.
It really enables us really to deliver on the strategy of the business, ensures that we can then start to deliver our integrated solution, and it also now starts to give us options about how we and our joint venture partner develop the West Erregulla project beyond next year once we've got FID in place. The timetable, which was outlined last week, the placement was announced on the 22nd. Settlement, as Tim said, actually happened last week. On Friday, we received the funds. There will be an extraordinary meeting on the 11th of September, and the record date for eligibility in the SPP was last at 5:00 P.M. on the 21st.
The documents will come out on the 8th of August, and then with an extraordinary meeting on the 11th of September and a close date for the SPP on the 18th of September, with the announcement of the SPP participation and results and issue of shares on the 25th of September. Just to really reiterate what we talked about in the strategic review update, Strike as a business is exceptionally well placed in the WA energy market to be a critical enabler both for power generation and gas. It's very clear from some of the recent announcements from the government and the various authorities that there is a looming gas gap and also a large opportunity for gas-fired, both peaking and mid-merit power over the next number of years. We'll be able to deliver reliable and responsive gas, so our peaking plant is able to start up on short notice.
As we alluded to last year in FID, it'll run around 20% of the time and fill a critical gap with the renewables that are now in the market. In the evenings, as battery power runs out, the peaking power becomes a critical part of that. It's been strongly endorsed by the government, and that's reiterated by the encouragement to put an additional 15 MW, as well as what we've been talking about for West Erregulla, where we're looking to use that gas to provide an additional around 200 MW of mid-merit power. As we work through FID next year, those options will become much clearer on West Erregulla.
It's also very clear in the W A market that there are declining gas reserves, and we're well placed to provide additional gas through a number of our assets, whether that be West Erregulla, Walyering, and Ocean Hill, and down the track, South Erregulla also. Some of the policy shifts that the government is now starting to make are really providing opportunities for us to provide gas into the domestic market, as well as additional power into the market as it's required. In summary, the investment highlights for the business, as we are Western Australia's newest gas provider. We'll become the first fully integrated gas-to-power provider in Australia, and thereby unlocking higher margin opportunities for the business. We have a high-quality asset base.
We've got tier-one resources in a location that's very well located, both between the two key power pipelines in Western Australia, but also importantly close to the electrical infrastructure, so we can connect into that and provide additional power. We do have options of how the downstream optionality of what we do at West Erregulla, and there are a few options that will become clearer as we work through towards FID next year. Our intention is to get to FID with our joint venture partner by the end of next year, and then be able to, in parallel with that, lay out the options of where we will go with that gas from West Erregulla. Our Walyering project was successfully delivered and continues to produce gas at very high availability, and it was delivered in a very short timeframe.
The funding that we now have ensures that we are fully funded to develop our core projects as outlined in the strategic review. On that note, Emma, I'll hand back to you, and we can start to go through some of the questions that have started to come through.
Perfect. Thank you, Peter. Yeah, we might kick off with probably the most asked question that we've had come through, and that is to help everyone understand in detail the cost increase behind the Western Power costs. What assumptions have changed since FID? If you could help us go through that.
Sure. I think as we talked to last week in our announcement, there has been an increase in the South Erregulla overall cost. The core cost of what we've done there, there's about a 10% increase in the directly controllable costs by Strike. I think that the area that we're working through at the moment, and we've taken a conservative view of what we need to do to link our power plant into the network, we're working closely with Western Power to really get to the bottom of exactly what the costing will be. What we've got is a total cost to integrate our power plant into the power grid near Three Springs, about 15 kilometers from our property. A number of parts of that are now locked in and clear.
A number of other parts, as we work through with Western Power, it's clear that both the line capacity, the lines are near, or the infrastructure is near capacity, and we also need to agree with Western Power what is actually shared infrastructure and what will be ours. That's an ongoing discussion with the Western Power team and our technical team. As that becomes clearer, we'll be able to make some announcements of where that gets to. The second part of that is that we'll work with Western Power on different ways to fund that, so that we'll look at options of whether there's some joint funding of the capital that's required, potential to recover some of that then from Western Power through tariffs and/or us through the energy that we provide, so that there's not a full upfront.
To be conservative, we've taken a view in our planning that we have the full $30 million in there at the moment. There are some rebates that will come through that as well, but we haven't finalized that yet. We've taken, as I said, a pretty conservative view to ensure that there's no additional costs that come through for South Erregulla. We're also pushing that project forward as quickly as we can, including the testing that needs to be done, so the planning around that testing to ensure that we're online by or before the 1st of October next year.
Yeah, great. That leads into the next part of the question, which was, have there been any delays to the project? Are you still confident in the 1st of October 2026 deadline to get the capacity credits? When do the engines arrive in country?
Yep. Maybe take the last one first. The first of our engines, they're coming in in twos and threes each month. The first arrive late next month, early September, so they're already being shipped. We have 20 engines altogether, so they'll start arriving, twos and threes each month. We can then start to install those into the shed. All of the infrastructure for the shed will be completed by the end of the month. Key other components, mufflers and other things, have started to arrive. The installation team will start on site over the next couple of months and start putting those in. The infrastructure around those is being built in parallel. On the timing, we're confident that we can still hit the 1st of October next year. The back end several months is in place for coal testing with Western Power.
Our joint intention is to try and reduce that testing time for the GenSets and the integrated power solution. That's what we're working to, but at the moment, our timelines line up with delivery before October 1 next year.
What options are available to defer the payment for that Western Power portion of scope? If deferment is possible, will this make additional cash available for exploration at Walyering and Ocean Hill?
Yep. I think, just to be clear on that one too, at the moment, in the way we've done our planning, we've assumed that we have to fund all of that $30 million from capital. Our discussions with Western Power, though, they are very open to different concepts around how they would contribute capital and recover some. Also, the other part we're working on with them is what is shared infrastructure, so that we would actually share the cost of whether that's substations or connections or other things as well. The options for payment could be through tariffs that we get charged or through us providing energy, and we don't get that full revenue, but we effectively OpEx that cost as opposed to capital. Our intention is still subject to where that lands.
The funding enables us, with both tranches in place and the SPP, to be funded to do the first Ocean Hill exploration hole back end of next year, by which time we'll have revenue coming in from both Walyering and South Erregulla power plant.
Great. There is a question around that, which hopefully this is answered, but maybe just to make it clear, why is the drilling for Ocean Hill 2 only planned for the latter part of next year? I know there's a lot of people who are excited to get Ocean Hill drilling and see what that has. As Peter said, we want to make sure our development projects are fully funded first.
I think it's pretty simple, Emma. We want to ensure we've got revenue, the South Erregulla revenue-generating project up and running and delivery. That program's clear to them as well and have that locked in to deliver the three wells that we will drill.
Great. I might move to Walyering. There's quite a few questions coming through on Walyering. If you could clarify if the proposed Walyering West well is to support 1P reserves or migrate contingent resource into reserve category, I might take this one. Walyering West is a new field, so that's a separate field that sits out to the west of Walyering. We don't currently have any prospective or contingent reserve or resource in that area. Any success at Walyering West will add reserves or resources to the Walyering West field. It's not to support Walyering field itself that way, and it's not a development well. Hopefully that clarifies that.
The other thing, Emma, maybe just to add on that one is we have done 3D seismic across that now too. I think one of the things that we are ensuring that we do on all, as we move from exploration into production, we do it, we as a group are generally happy with 2D to do exploration wells. Although that said, at Ocean Hill, we've now run 3D. We've done 3D seismic or a combination of 3D and 2D for the West Erregulla well. The other thing that we're doing on all of these is, one, independently verifying our proposed targets. Also, as we've previously always done independently, we verify all of our reserves and updates that we're doing. That'll flow into our August numbers when we do, and our year-end numbers when we do an update of all of the reserves across the group.
As Tim said, we'll have that for West Erregulla a bit later in the year. We're using another party to do that, and that's in progress, but that'll be provided by the end of this calendar year.
Yeah. Tim, maybe one for you on Walyering. We've got $1.7 million against the cost of Walyering compression in the quarterly. Is that the total cost or is there more to come? Can you provide some guidance around the cost for compression?
There are some further costs to come. We're leasing those units, so we'll see them in the operating cost as we move forward.
Great. Peter, what is Strike's current estimate of the amount of recoverable gas in Walyering East, and is there any chance that that will be tied into the facility in the future?
Walyering East, currently, it's around 8.5 BCF, but it's still subject to well testing. We did that well. Our intention is when we do Walyering West and do the production testing there, that we would swing that unit across to do Walyering East. We haven't given, and we talked a little bit about this in the strategic review update, given where it's located, unless there is significantly more gas for some reason than where we currently think. Our expectation is that we'll tie that into the facility a bit later in its life. Get Walyering West up and producing; it's about two or three kilometers to the west of the plant, and we can connect that one in fairly simply. The connection to East is a little bit more challenging. We need to run under the highway.
It's a little bit further distance, and there's some native vegetation that we'll need to get approvals for as well. We do see it connecting in, albeit later into the life of the field.
Yeah, great. What is the expected field decline profile looking like for Walyering, and what is the contingency if Walyering West doesn't find additional gas? Tim, maybe that's one for you.
If we don't find additional gas to backfill, I think that's potentially some extension in the field there. We have to work with the party, Santos in particular, around how we manage that gas supply. We are able to buy gas on market to backfill those contracts and supply at an alternate delivery point. We have engaged with Santos early on potential risks around compression, and we're quite supportive with Santos in engaging on that flexibility. In a worst-case scenario, there are LDs applicable to not delivering on that contract, and then we'll manage that risk as we move forward if it crystallises.
Yeah, great. Back to Ocean Hill briefly, there's a question that's come through from the Ocean Hill appraisal. Is there any obvious location for the exploration well, and will the risk resource update be provided to the market prior to the September 11 EGM?
Yep. Yes, there is. We have a target there, which we're just working through. That independent verification will confirm that, but the team will have a preferred location for the well. That will be provided as part of our, or the update will be provided as part of our August reserves update at the year-end. I think that'll be clear. I'm not sure there's anything else to add, Emma, to that one, but that's when we'll have an update of the reserves based on the 3D seismic that we've run. One of the other things that I'm not sure is quite clear is we haven't been sitting around waiting to do the seismic work at Ocean Hill. We've had approvals in there for several years. It took a long time to get those approved, given the native vegetation that we needed to run the 3D seismic over.
3D seismic requires a much closer spacing, running in, you know, obviously at 90 degrees to each other. That took a while, and we've run that as soon as we're able to. That interpretation is running to schedule, but as I said, looking really positive from what we're seeing of something, you know, and we'll be able to provide a lot more detail around that as we get the final results over the next month or so, and then we'll release that with the result, you know, with our August update.
Great. Apologies for jumping around a bit, but back to Walyering, there's a question that says in the quarterly it mentions the fabrication of compressor packages. Are these compressor packages for export gas compression or wellhead booster compression? I just wanted to clear that up and make sure that everyone knows that's for field extension wellhead compression, not export, as we'd be unable to export gas from Walyering at this stage.
There are a couple of other things, you know, the cooling and some of the other things that we're doing there as well. It's a structure, there's a program of managing the reserves there, and as part of that is doing the additional well at West Erregulla. As I said earlier, looking down the track at potentially tying in the East hole, you know, once we've got West up and running.
Yeah. I might touch on West Erregulla for a few questions. Noted in the report, the dedicated processing through third-party gas processing infrastructure, does this mean that the AGIG-operated processing facility for West Erregulla has been abandoned in favor of third-party tolling? Is there any cost to the company moving away from this owed to AGIG?
Tim, do you want to do that one?
Yeah, happy to. Look, Strike's strategic plan, as we've laid out, is about gas-to-power. Our plan is to work along the lines of that power plant development. Part of that is to consider maintaining access to gas market and some rural gas being provided through a tolling arrangement. We're still considering all those options and how to best optimize that downstream project. In terms of the AGIG, that is not the current priority, and I don't believe we've incurred material costs. Obviously, there's corporate costs involved in progressing that and discussing the opportunity. I couldn't give you the value on that, but there is no trailing cost on that opportunity. To be clear, we're progressing that downstream option in gas-to-power generation.
Yeah, great. There's been a question around the current status of the West Erregulla JV and why there's been another delay to the FID, and whether you can provide any color or certainty around what's required to take FID in the second half of next year.
Yeah. I'll jump in and then maybe you can add, Tim. At the moment, we're working with our joint venture partner through a couple of things. One, each year we agree works to be done. That's in process at the moment. One of the things we are jointly focused on is getting to FID. Strike as the operator has put a plan to our joint venture partner shortly that outlines what we think needs to be done with FID. The joint venture partner will then review that. At the moment, our current thinking is an additional well, well six, and then two workovers during the year that will enable us to have surety around how we head to FID. As we work with them, we will start to look at how the lifting arrangement works.
There's still some things to work through there if we were to process gas separately or jointly, but that hasn't been agreed yet. We need to work through that process.
I think from my perspective, the joint venture is working together to define exactly what steps are required to reach upstream FID. We're aligned in progressing that as quickly and as effectively as possible, and we'll communicate with the market as soon as we've reached that formal agreement on those activities and a timeframe. Clearly, Strike's timeframe that we're working towards is that second half, 2026, and we expect to do everything in conjunction with the joint venture to achieve that outcome.
Yeah, there's also a comment on here that I just wanted to address, saying that the explanation was that Hancock needed to assess their options at the two most recent wells on their permits, which have been completed for some time now. If you go to Mineral Resources Quarterly that they released this morning, they've actually outlined that Lockyer 6 is still under assessment and that that will feed into their contingent payments. They're still clearly assessing their fields. Not that it's an excuse, but that is still happening concurrently. All right, we might move on to the strategic placement that we have a few questions coming in on. Peter, was the placement to Carnarvon or another party recommended as a result of the strategic review? If it wasn't, when did the company determine it was required?
I think, having come in on the end of it, I do, through that process, funding options were, through the strategic review process, various funding options for the business became clearer as we wanted to develop these key assets. I think one of the things that became clear, and it's for Tim and I coming in, looking at the project, really challenging the team of where we've got to, particularly at South Erregulla, made it clearer that we needed additional funding in the business going forward. Also, enabling us to move the West Erregulla project to FID requires additional funding, which we just didn't have in the business. I think that became clear as we locked in the strategic review plans and actions. We have a very strong asset base, as we talked about.
We had the discussions with Carnarvon had started before Tim and I joined and evolved over time to a point where we landed on the placement, which was something that worked for both organizations. There'd been various things considered, but this was the one that ultimately landed, that was able to be executed by both companies.
I'd add to that, Emma, just in terms of timing, I think it's important to understand. The discussion around long-term funding has been there for some time. The board was considering how best to approach and timing for that funding. What became apparent as we've released, you know, recently with South Erregulla, as well as Walyering, etc., the timeframe for that funding had shortened somewhat in the very recent past. As those discussions with Carnarvon had evolved over time, the consideration for this particular outcome did have to take into account some of the more recent developments within the business and the demand for that cash flow, particularly on the South Erregulla side, where this increase that we're referring to at the moment is to be realized between now and December.
Yeah. Tim, maybe this is a good follow-on for you. In the announcement last week, there were comments around the strategic partner having oversight on permitted expenditure. Is this a condition precedent reinvestment, and is everything that's being proposed broadly aligned reprioritizing cash flow versus discretionary?
Look, I think the easiest way to look at it is through these discussions with Carnarvon. We've obviously been sharing the strategic direction as we have with the market. Our view is to prioritize those cash-generating projects as quickly as possible, and as soon as we have that certainty, is to get into exploration and create that pipeline for further cash generation down the track. There is reference to your prioritization of cash flows in this transaction. There is, I wouldn't say there's oversight, but we've agreed, you know, Strike is committed to deliver on the prioritization of this expenditure as we're outlining at the moment. I don't think there's any sort of obligations beyond what we're committing to market at the moment. That's no different to what we've committed to Carnarvon, is to prioritize that expenditure as we've outlined already.
Peter, maybe this is one for you. What options will be explored if shareholders vote against the second tranche of funding, and perhaps you can provide some color on the need for that second tranche of funding?
Yeah. Maybe just step back. First, the first tranche of funding enables us to do a couple of key things: ensure that we finish South Erregulla as planned, progress with our FID on West Erregulla, and also enables us to get and do the Walyering West hole. We start to get pretty tight after that. I think the challenge for us without the second tranche is it really constrains what we can do at Ocean Hill. I think, you know, and many of our shareholders have been engaged in this business for a long time as an explorer. We're moving the business to be both an explorer, but also having strong revenue streams in the business. For me, I think it's an important part to have that second tranche.
Should it not happen, I guess we would be looking during the first half of next year, looking at different options about how we would refinance the business, whether that's with some of our current providers and look at other options about what that might look like. I think it's certainly, for me, I think having a business fully funded makes a lot of sense if, you know, as a shareholder in the business. I think it enables us to have the opportunity to deliver the key assets we want to, as well as ensuring that we can bring on Ocean Hill, get that into a production status as soon as possible.
Great. Maybe this leads in, there's been a couple of questions around this, and maybe we'll finish on this one, given the time. Perhaps you can just provide a bit of an overview, how successful were the recent institutional roadshow that we were on last week? Provide a bit of color around.
Yeah. Last week, we did an investor roadshow on the East Coast, and we had quite a number of meetings. I think a lot of interest in Strike Energy as a business. I think there is definitely a recognition that we have a great asset base. I think there's an understanding that without the right funding, we can't bring that to market. That was a clear takeaway from last week. Clearly, we have work to do, being really frank with both our shareholders and potential new shareholders around our credibility. Delivering these projects is critical. Having a long-term production profile at Walyering is really important. Delivering South Erregulla on plan, as we said we would, these were the questions that we got asked, very similar to today.
I think also, importantly, working with our joint venture partner on how we bring West Erregulla to market and having a clear plan on that was one of the big areas that we got asked. Overall, positive feedback on the company, positive feedback on a reset. I'm in a unique position coming in as a new CEO to be able to go look at where we are in the business and say, "Here's how we go forward with the insights from the strategic review." I'm very strongly supportive of the four focus areas that we're focused on. I think that'll give market confidence as we deliver against each one of those. The other thing that we probably took away was regular communication to our shareholder base. It's really critical. I think we've not always, we haven't done that regularly enough, particularly the last number of months.
Without the permanent CEO in place, that was difficult. We need to, we will ensure that we keep engaging the market regularly to bring updates as we're able to.
Great. All right. We might wrap up there, given time. Thank you everyone for joining. As I mentioned, this will be recorded and posted on our website in case anybody popped in late. Thank you and talk to you soon.
Thank you.
Thanks, everyone.