Strike Energy (ASX:STX) goes into trading halt for $80m cap raise

The Strike Energy Ltd (ASX: STX) share price has gone into a trading halt as the company undertakes an $80 million capital raising.

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The Strike Energy Ltd (ASX: STX) share price has gone into a trading halt as the company undertakes an $80 million capital raising.

Management is capitalising on the high Strike Energy share price to get the cash injection to fund what it considers to be “transformational” outcomes in Western Australia.

The Strike Energy share price surged nearly 189% over the past year and last traded at 38 cents.

Strike Energy cap raise at big discount

But the new share sale is being priced at a relatively big 26.7% discount to the last traded price to tempt institutional investors to tip in $75 million into the capital raise via a placement.

The emerging gas producer is aiming to secure the balance via a share purchase plan that is also priced at 30 cents a pop.

Cap raise to draw first gas from West Erregulla

A chunk of the proceeds will be used to develop and deliver “first gas” from its West Erregulla project.

Phase 1 of the project is expected to produce 80 Terajoules a day. Final investment decision (FID) for West Erregulla, which is 50% owned by Strike Energy, is expected by middle of this calendar year.

If things go to plan, first gas from the project could come as soon as end of 2022, if not the first half of 2023.

Other uses for the funds

Management also plans to use the new cash to prove up the South Erregulla gas resource and to appraise the Perth Basin wet-gas Jurassic play at Walyering.

Those participating in the cap raise will also be helping Strike Energy reach its pre-FID milestones for Project Haber and to develop its geothermal projects.

Coincidentally, the federal government is looking to use gas to fire up Australian manufacturing, although the plan has attracted controversy.

More ASX shares raising capital

Strike Energy isn’t alone is tapping shareholders on the shoulder for cash. The Zip Co Ltd (ASX: Z1P) share price fell 2.7% this morning to $9.35 after it raised $400 million via a “zero coupon” senior convertible note offering.

Zero coupon means Zip Co doesn’t pay any interest on the note. Investors who participated in the raise are banking on a further sharp rise in the Zip share price when they convert the notes to shares at a fixed price of $12.39 before the note matures in 2028.

Strike Energy and Zip Co won’t be the last to raise capital in this market. Investor appetite is strong and ASX shares remain very well supported despite worries about overstretched valuations.

As mentioned in a previous article, I am also expecting more miners to be passing the cup around, including Galaxy Resources Limited (ASX: GXY).

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Brendon Lau owns shares of Galaxy Resources Limited. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of ZIPCOLTD FPO. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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