Recent good news for two energy companies has the analysts at Macquarie interested, with both tipped for strong share price gains.
Let's see who they like.
Image source: Getty Images
Strike Energy Ltd (ASX: STX)
Strike recently struck an agreement with Gina Rinehart's Hancock Energy to process the gas from its West Erregulla project through Hancock's Belisama facility.
The deal also included a $30 million loan from Hancock, which Strike will use to support its share of pre-development activities.
The West Erregulla joint venture is targeting a final investment decision in FY28 with first gas expected in CY29.
Strike said of the deal:
The arrangements derisk West Erregulla's pathway to production and represent a major value inflection point for Strike, providing a clear route to unlock one of Western Australia's largest undeveloped onshore conventional gas resources and to materially increase the scale and diversity of Strike's production and earnings base.
Macquarie said in a research note sent to clients that the deal was a true win-win for both companies.
The broker said:
We expect this agreement has been mutually beneficial and creates deeper alignment in the upstream JV (i.e. Hancock earns a healthy return on the tolling, Strike avoids equity dilution and proceeds to first gas more rapidly than the alternative proposal from Waitsia which is 15-20km away – requiring new environmental approvals and likely with less alignment on plant access).
Macquarie has a target price of 15 cents on Strike shares compared to 10.75 cents currently.
Amplitude Energy Ltd (ASX: AEL)
Earlier this month Amplitude announced that its Juliet-1 well in the Otway Basin offshore Victoria, had intersected a high-quality, gas-bearing reservoir.
The company said the well had found a gas-bearing interval of at least 60m, and two days later Amplitude said the well would be suspended, ready for development as part of the East Coast Supply Project (ECSP).
Macquarie said once Juliet was added to previous discoveries at Annie and Artisan, the ECSP "is now a material program''.
They also expected further drilling in the area.
As they said:
With success at Juliet-1 (pending flow test outcome, but "excellent" reservoir quality is implied from preliminary data collected so far), we therefore expect Nestor looks more likely to be drilled next. Partner O.G. Energy had deferred any decision on drilling Nestor pending the Juliet results.
Macquarie has a price target of $2.50 on Amplitude shares compared to $1.82 currently.
Amplitude Energy is valued at $530.8 million.
