Carnarvon Energy Limited said it has entered into a subscription agreement under which it may invest up to $58.9 million (AUD 89 million) to acquire up to 19.9 percent interest in Strike Energy Limited at AUD 0.12 per share.
Carnarvon will execute the investment in two tranches, the company said in a news release. The first tranche consists of $34.4 million (AUD 52 million) for an initial 13 percent stake, while the second tranche will involve up to $24.5 million (AUD 37 million) for the final stake of 19.9 percent and is conditional on the approval of Strike shareholders at the company’s September general meeting.
Upon the completion of the first tranche, Carnarvon will have the right to nominate one representative to Strike’s board, according to the release. The right ceases if Carnarvon’s voting power in Strike falls below 10 percent for a continuous period of two months.
Carnarvon said the investment gives it a stake in Strike’s “extensive and high-quality gas portfolio of production, development and exploration assets which requires access to capital to drive growth”. The investment will also give Carnarvon exposure to Western Australia’s domestic gas and electricity markets “at a time when gas and energy demand is increasing,” the company said.
The investment will allow Strike to complete the South Erregulla 85-megawatt (MW) gas-fired peaking power station by October 2026 and move it closer to a final investment decision on the West Erregulla gas project, according to the release.
The funding will also be used for the planned life extension of the Walyering domestic gas project and the maturation of an attractive portfolio of Perth Basin development and exploration opportunities such as Ocean Hill, according to the release.
Subject to shareholder approval, Strike will also undertake a non-underwritten Share Purchase Plan to raise up to $6.6 million (AUD 10 million), with the ability to accept oversubscriptions for up to an additional $3.3 million (AUD 5 million) at the board’s discretion, the company said in a separate statement.
Carnarvon Chair Rob Black said, “Carnarvon is excited to become the largest shareholder of Strike Energy. Following the Bedout JV Operator’s recent decision to delay the Dorado Development, the Carnarvon board has been assessing value accretive opportunities for shareholders. The Carnarvon board believes the Strike investment represents an attractive opportunity for the company to help Strike unlock the value in its high-quality portfolio of Perth Basin assets on attractive terms, whilst retaining full exposure to its own assets in the Bedout Sub-basin”.
Strike Chair John Poynton said, “We welcome Carnarvon as a strategic partner and Strike’s largest shareholder. Strike has a unique asset base with significant potential and Carnarvon’s investment provides the financial capacity and flexibility to realize this potential. Strike remains focused on executing [its] revised strategy and remains well placed to support Western Australia’s energy transition through the development of its high-quality Perth Basin assets”.
Carnarvon said its ability to fund the development of its own portfolio, including the Dorado liquids project and exploration drilling planned for the Bedout Sub-basin over the next four years, remains intact with the combination of cash and expected debt funding.
To contact the author, email rocky.teodoro@rigzone.com
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