Strike, CSBP in $5m gas deal

Strike Energy has executed a $5 million sales option with Wesfarmers subsidiary CSBP, for up to 100 petajoules of gas from its half-owned West Erregulla project.

Under the agreement, CSBP will be supplied between 80 and 100 petajoules of gas from commencement of production from West Erregulla, which is located in the Perth Basin.

To secure the supply, CSBP has agreed to pay an option fee to Strike of $5 million.

The option is conditional on a successful result at the West Erregulla-2 well and Strike taking final investment decision on a commercial project.

It will lapse 7.5 years after completion of WE-2 if the opportunity to exercise is not taken and if the WE-2 well is unsuccessful Strike will be required to refund 50 per cent of the option fee in cash or shares.

Strike said the $5 million option fee will be used as operating capital for the delivery of WE-2, designed to delineate the major conventional gas target in the Kingia- High Cliff sandstones.

Strike managing director Stuart Nicholls said the company’s ability to secure a major Western Australian industrial gas user as a potential offtake customer was further evidence of the potential quality of the West Erregulla gas target.

“With the future of WA’s domestic gas markets being unclear and reactionary to future LNG investment, this contingent offtake provides security that Strike will have a positive market to begin gas sales and achieve revenue in the quickest possible timeframe,” he said.

Strike is operator of the 50-50 joint venture with Warrego Energy.

West Erregulla is on track to be the first project drilled for oil in the Perth Basin in over two years.

Last week, Strike announced it will not receive its federal government research and development tax credits for the 2018 financial year.