It certainly has been a tough year for Strike Energy Ltd (ASX: STX) shares.
Since the start of the year, the ASX energy stock has lost 50% of its value.
Is this a buying opportunity for investors? Let's see what analysts at Macquarie Group Ltd (ASX: MQG) are saying about the gas company.
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What is the broker saying?
Macquarie highlights that Strike Energy has completed a capital raising, which has seen Carnarvon Energy Ltd (ASX: CVN) increase its stake in the company. Unfortunately, the accompanying share purchase plan (SPP) wasn't overly successful. It said:
Cash injection: STX has now completed its capital raise (we estimate ~ $84m after costs). CVN raises its stake in Strike to 18-19% and already has one board seat (Will Barker). SPP has closed with light participation (11%), as expected, given it was out of the money.
The broker also notes that Carnarvon Energy is arguably getting the better end of the deal. It adds:
Cash is king (CVN had cash): CVN has established exposure to the endgame at West Erregulla/Erregulla Deep with Hancock for its holders; however, STX shareholders do not gain any exposure to Dorado, Pavo, or the significant upside potential in the Bedout basin.
What else?
Outside this, Macquarie points out that the ASX energy stock has downgraded its reserves/resources estimate at Erregula. This has led to the broker reducing its gross production assumptions. It explains:
STX has been re-basing reserves/resources estimates across the portfolio – Walyering 2P gas reserves -55% (STX now needs to drill Walyering West-1 to support) and Ocean Hill contingent resource -41% (upside to MRE if successful). We have preemptively lowered EP469 gross production to 572PJ (was 700PJ) – includes Erregulla Deep – exercising some caution ahead of reserves review (post the Natta 3D seismic across northern area of block).
Should you buy this ASX energy stock?
In light of the above, it may not come as a surprise to learn that Macquarie doesn't see the 50% decline in the Strike Energy share price as a buying opportunity.
According to the note, the broker has resumed coverage on its shares with a neutral rating and 10 cents price target. This implies potential downside of 9% for investors from current levels.
Commenting on its neutral rating, it said:
We are Neutral-rated on the shares following a period of restriction. CVN has established an effective blocking stake and is now integral in any commercial negotiations if Hancock was seeking to fully consolidate the Perth basin Kingia acreage. Power strategy now key for STX.
