Strike Energy’s share price rallied 7 per cent on Monday as the company reinforced the value of its business in a quest to show the market that Gina Rinehart’s Mineral Resources asset deal was not bad news for its own operations.
On Thursday, Mrs Rinehart announced in a statement she was buying the energy assets of the Mineral Resources business for $1.1bn, saying she welcomed the opportunity to work alongside her “friend” Chris Ellison and his Mineral Resources team.
Strike jointly owns the West Erregulla project with Warrego Energy, which is owned by Mrs Rinehart’s company Hancock.
It includes the processing of gas from upstream wells and transport of the gas to the Dampier to Bunbury Natural Gas Pipeline.
Up for proposal is to develop a gas processing facility and pipeline, but West Erregulla is awaiting Final Investment Decision, which requires Hancock’s approval to proceed on current time frames.
While there may be concerns that Mrs Rinehart’s latest Mineral Resources deal could mean she delays that approval, Strike would no doubt be keen to point out to investors that gas does not have to be processed through West Erregulla and could be sold to alternative owners.
The obvious being Beach Energy and Mitsui, which own the Waitsia gas plant in Western Australia, which is understood to be short of gas.
Shares in Strike on Monday closed up 1.5c to 23c.
The Mineral Resources assets that Hancock has purchased are to the north of West Erregulla.
In a statement last week on the Mineral Resources deal, Hancock said it would “undertake a review of its interests across the Perth Basin to identify opportunities and synergies, including the location and size of gas processing infrastructure”.
This may have sparked fears from Strike investors that Hancock opts to process gas through a plant to be developed as part of the Mineral Resources acquisition.
It comes after about $4bn of Perth Basin company asset acquisitions have occurred in the past six years.
Strike said in a statement on Monday that it is “trading on a resource multiple of just under $1 per gigajoule on its aggregate independently certified 2P and 2C resource numbers, which does not account for any new Reserves and Resources that will be defined by the recent Erregulla Deep discovery.
“This is more than a 50 per cent discount to the price Hancock has paid for the non-independently certified Lockyer and North Erregulla 2C Resources.”
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