The Strike Energy Ltd (ASX: STX) share price has returned from its trading halt and crashed deep into the red.
In early trade, the ASX 200 energy stock dropped over 30% to 29 cents.
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Why is this ASX 200 energy stock crashing?
Investors have been rushing to the exits today after the company released an update on well testing activities at South Erregulla.
According to the release, South Erregulla-3 (SE-3) was completed with production tubing and the primary zones in the Kingia Sandstone were perforated on Monday 5 February 2024.
Upon opening the choke, the well failed to flow but was also observed to be substantially overbalanced.
Management advised that in response, it proceeded to plug off the zones and mobilise nitrogen to displace the well fluid and move the well into an under-balanced state.
Early in the evening of 8 February, the plug was removed with no initial flow. The release reveals that the well was then shut-in and a steady increase in tubing head pressure and associated temperature drop was subsequently observed, where bleed offs of gas were detected as hydrocarbons.
Strike advised that it then ran slickline where it observed a fluid level at ~250m from the surface, which indicates that reservoir fluid had been produced.
Unfortunately, Strike interprets this as having encountered a possible gas-water contact in the SE-3 well. Several samples of this fluid and gas have been collected for further analysis.
'Disappointing'
The ASX 200 energy stock's Managing Director & Chief Executive Officer, Stuart Nicholls, revealed his disappointment with the news. He said:
The SE-3 flow test has not matched its petrophysical interpretation, which is disappointing. Further analysis and data collection is ongoing and Strike is reviewing the potential to return to the well.
Though, Nicholls remains upbeat on the future, adding:
Looking forward, Strike will be drilling the Walyering-7 and Erregulla Deep-1 wells in this half, which have the potential to add material 2P developed and undeveloped volumes on success. Also, of note Strike has commenced its Ocean Hill 3D seismic acquisition which may provide the well location for the contingent appraisal well Ocean Hill-2 later in the year.
