Shares in Strike Energy Ltd (ASX: STX) are claiming territory today. The Strike Energy share price is currently trading up around 13% at 17.5 cents a pop.
Stike's share price has been on the move today. Investors are responding positively to an update on the Walyering-5 well and the miner's exploration and appraisal activities in its central Perth Basin.
What did Strike announce?
Strike advised it has successfully run in and cemented the 5.5 inch casing for the Walyering-5 well. Moreover, the company has successfully pressure tested the casing string in the well.
The company says the cost of the Walyering-5 well has come in under budget with the drilling performance exceeding expectations.
The total cost estimate for drilling and evaluation of W5 is currently a gross $8.5 million. However, overhead and owners' costs are not part of this estimate, per the release.
Walyering now presents a low capital expenditure (capex) and fast development opportunity for Strike to monetise the asset on a successful production test scheduled for Q1 2022.
According to Strike Energy, the Walyering project is fast to market. Furthermore, it represents a low capital development opportunity for several reasons.
The first reason is that gas specification is better than pipeline. Further, testing has identified nearly zero impurities in measured gas samples (H2S, nitrogen, CO2). Among other factors, the reservoir pressure measured at 5x the operating pressure of Parmelia Gas Pipeline.
Furthermore, what Strike Energy labels as the "simple profile" of the Walyering gas accumulation means "nominal infrastructure downstream of the wellhead is expected to be required before the gas enters the Parmelia Gas Pipeline, and in turn minimal non-well capital expenditure pre-production."
Strike will now run a cement bond log and vertical seismic profile before suspending the well. The rig will then be demobilised to the South Erregulla-1 well site. Flow testing of the W5 well is set to occur in Q1 2022 as part of a broader testing campaign.
As such, the company is investigating a concept design of a production system that could support additional resource from 2 wells from the main lobes of the Walyering gas field.
It has already commenced work to identify the location and design of the Walyering-6 well, according to the announcement.
Management commentary
Speaking on the announcement, Strike Energy managing director and CEO Stuart Nicholls said:
The successful application of 3D seismic and corresponding conventional gas accumulation at Walyering has provided the company with a new suite of opportunities for very near term and future gas production in order to both capture the current favourable gas market conditions and to materialise its longer-term vertically integrated downstream strategy.
Nicholls continued:
The Company is currently incorporating the results of Walyering into its development plans and, post a successful flow test in early 2022, will engage with an independent certifier to book reserves and resources at Walyering.
Strike Energy share price snapshot
It's been a difficult year for Strike Energy shareholders, as its share price has collapsed more than 35% in the past 12 months.
This year to date it is also down nearly 39%. However, it has regained strength in the last month to trade over 9% in the green.
