This morning Strike Energy Ltd (ASX: STX) reported an operating cash loss of $6.47 million on no sales, but for now investors are not too worried about its cash flows.
The stock went gangbusters over the September quarter after the gas drilling business reported blockbuster gas discoveries at its West Erregulla-2 well near Perth, Western Australia.
In total it made three 'major' gas discoveries across the Wagina, Kingia and High Cliff sandstones located at the West Erregulla-2 field, with most of the cash outflow over the period related to staff costs and the drilling.
Strike owns 50% of the tenement in a joint venture with Warrego Energy Ltd (ASX: WGO), with the two businesses now boasting market values around $420 million and $220 million respectively.
Strike is debt free and has cash on hand close to $6 million as at quarter end. It is estimating $4.9 million in net cash outflows over the current quarter.
This suggests it might need to raise capital in the future unless it takes on more debt by issuing convertible share options for example. This is not uncommon in the resources industry where companies boast some hard assets unlike the speculative biotech sector for example.
Strike shares closed at 24.5 cents on September 30 and have edged higher to 26 cents this morning.
