Transcription of Finance News Network Interview with Strike Energy Limited (ASX:STX) Managing Director, David Wrench
Lelde Smits: Hello I’m Lelde Smits for the Finance News Network and joining me from Strike Energy Limited (ASX:STX) is its Managing Director, David Wrench. David, welcome to FNN.
David Wrench: Thank you.
Lelde Smits: Strike Energy is an oil and gas explorer and producer focused on its Southern Cooper gas project. What is the project striving to deliver?
David Wrench: The Southern Cooper gas project is a large gas resource that we are currently developing in the Cooper Basin, just south of Moomba. We are striving to develop the resource to supply gas to our existing customer base, in the domestic market. Plus also, develop a pathway to a much larger export gas opportunity that fits the scale of the resource.
Lelde Smits: At what stage is the project and what’s your development pipeline?
David Wrench: The project’s at an advanced appraisal stage. We’re producing gas from a group of pilot wells and we will be looking to move towards commercial production, over the next few months. And that will underpin a decision to develop a commercial gas project.
Lelde Smits: To enable funding of the commercialisation process, Strike has inked off-take deals. Who are the deals with and on what terms?
David Wrench: We have entered into three gas off-take deals with Orica Limited (ASX:ORI), Aurora Oil & Gas Limited (ASX:AUT) and Brickworks Limited (ASX:BKW). The Orica transaction is the largest; it’s about 250 petajoules of gas. It has a series of prepayments enshrined in the deal. We’ve just met the first milestone and Orica have made their first prepayment, which has been very pleasing. The transactions with Aurora and Brickworks are slightly smaller, but very important in underpinning the off-take for the project, at a commercial development phase.
Lelde Smits: In light of lower oil price environment, what processes has Strike initiated to lower the project’s risk?
David Wrench: We’re very fortunate in that the lower oil price environment has provided us with a great opportunity, to develop the project more quickly. Simply because the lack of activity in the sector generally, as a result of the low oil price environment, has enabled us to secure rigs and other drilling servicesand so on, at much cheaper rates. And more effectively and efficiently than we have been able to in the past. So it’s actually a great opportunity for Strike and the project.
Lelde Smits: Strike Energy also has interests in a number of projects in the US. What is your strategy for unlocking value there?
David Wrench: We have three projects in the US, all in production. And our current strategy is to continue producing from those particular assets. We don’t have any further investment plans in the US and we will be looking to realise those investments, as market circumstances improve.
Lelde Smits: Finally David. When are you targeting production at the Southern Cooper project, and what major hurdles do you need to clear before then?
David Wrench: We’re targeting production in late 2016 or early 2017, in a small scale. And then progressively ramp up over the ensuing years, to meet the full contract quantities that we’ve currently committed to. Before then, we need to demonstrate that we can produce at commercial rates, which is the current short-term focus. And then work through the approval process to ensure and underpin, that we can actually develop the project itself.
Lelde Smits: David Wrench, thank you for the update from Strike Energy.
David Wrench: Thanks very much.