Here’s why the Strike Energy share price is zipping 10% higher today

Strike’s latest update extends its rally over this past week.

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Key points

  • Strike Energy shares are driving higher in afternoon trade on Thursday following a company announcement 
  • The release concerns an update at its South Erregulla-1 well, building on previous updates at the company's West Erregulla site just days earlier 
  • The Strike Energy share price has clipped a 7% loss in the past 12 months 

Shares of Strike Energy Ltd (ASX: STX) have surged more than 10% into the green on Thursday and now trade at 32 cents apiece.

Investors appear to be bidding up the Strike Energy share price in response to a company announcement concerning its South Erregulla gas discovery.

In broad market moves, the S&P/ASX 200 Energy Index (ASX: XEJ) has also spiked 280 basis points today.

Returns this year to date for both instruments are plotted on the chart below.

TradingView Chart

What did Strike Energy announce?

The company advised that the multi-rate test it has conducted at its South Erregulla-1 well has delivered positive results “that are reflective of the high-quality gas charged reservoir” observed in the core analysis.

“Testing to date has produced a choke coefficient peak rate of 80 [million standard cubic feet per day] mmscfd and a sustained rate of more than 78 mmscfd on a 78/64” choke with flowing tubing head pressure (FTHP) of 2,590 psi over a 5-hour period,” the company said.

The results indicate that the well could potentially produce “unrestricted rates in excess of 100 mmscfd,” it added.

Strike will now commence preparation for the production test of the South Erregulla-1 over-pressured Wagina gas discovery which will require the mobilisation of a workover rig to isolate and reset the tubing at the Wagina Sandstone interval.

Management commentary

Speaking on the announcement, Strike Energy CEO, Stuart Nicholls said:

This excellent flow testing provides additional confidence that the Kingia gas discovery at South Erregulla is a large, productive source of low-cost, low impurity natural gas, and that it can form the foundation of Project Haber’s globally competitive nitrogen-based urea fertiliser.

In a time where undeveloped sources of gas are nationally and globally short, the significance
of Strike’s Perth Basin success continues to rise.

This year to date, the Strike Energy share price has jumped more than 56% into the green, despite clipping a 7% loss in the past 12 months.

Motley Fool contributor Zach Bristow has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. 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 Scott Phillips.

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