Strike Energy Limited (ASX:STX) has made an important discovery as part of its Strike-Warrego joint venture that could define its future for many years to come. The company has made a discovery of exceptional quality conventional gas in the Kingia sandstone, paving the way for a robust mining operation.
Kingia Sandstone Gas Discovery
As part of the West-Erregulla-2 drilling campaign, the company has discovered a gross gas column of at least 97 meters at 4,753 meters. Below the 4,790 meters mark, the company says there is a presence of high quality larger units with high levels of blocky porosity development. The company is planning to continue drilling to reach a final depth of 5,200 meters.
In addition, the well-drilled so far is yet to encounter any gas-water contact and is consistent with the seismic amplitude model. Initial results indicate that Strike might as well have incurred a new conventional gas fairway conversely validating the current geological model.
“The Kingia results at West Erregulla have exceeded Strike’s highest expectations and indicate a significant discovery that appears to have higher reservoir quality than the Waitsia gas field. With West Erregulla-2 now being one of the deepest wells ever drilled onshore Australia and finding such excellent quality sandstone reservoirs, the subsurface paradigms of the Perth Basin are shifting,” said Managing Director, Stuart Nicholls.
The new gas discovery follows the announcement that the company was not planning to deploy hydraulic stimulation technology at the West Erregulla exploration well. The company came to a decision after working with landholders as well as state government regulatory bodies to ensure high levels of environmental standards at the mine.
The gas discovery in Kingia marks an important milestone for Strike as it comes hot on the heels of the company making a similar discovery in the Wagina. The chances of adding further material discovery at the Wagina points to a bright future for the company. A rapid appraisal of these projects should allow the company to meet growing domestic demand.
Addressing LNG Domestic Shortage
The gas discovery comes at a time when Australia is one of the leading suppliers for LNG gas in the international market. Increased exportation has led to shortages in the domestic market, which presents a gateway for the likes of Strike Energy to address with the discoveries. The discovery should also help avert the possibility of chocking of the LNG exports as a result of growing domestic demand.
Strike Energy stock has since taken a flight in the market thanks to renewed investor interest in the wake of the gas discoveries. After coming under immense pressure resulting in a plunge to one-year lows, the stock has rallied by more than 200% and in the process turned bullish.
A spike to the $0.29 level leaves the stock flirting with record highs, waiting to see if the stock will continue edge higher. The fact that the break out came at the back of high turnover in traded shares underscores strengthening investor confidence on long term prospects and growth metrics turning bullish.