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Friday, 4 May 2012 LOGIN

THE BIG PICTURE:

Striking the right chord

Wednesday, 4 April 201 2

James McGrath

THERES a remarkably simple way to get the

market interested in your junior exploration

company: just mention Cooper Basin, joint

venture with Beach Energy and

unconventional in the same sentence.

Those three key phrases have certainly been ofbenefit to Strike Energy, which has seen its shareprice on an impress ive run in 2012.

After an annus horribilis last year in which it shed

more than 38% of its value, its more than doubled its10c low at the turn of 2011 to its current position ofmore than 22c.

While juniors are certainly prone to swings androundabouts, a 120% jump is proof that investors arebuying into the Strike story.

Perhaps more importantly, it shows that investors arehooked on the Cooper Basin unconventionalnarrative.

That narrative was given a kick along last year whenBeach Energy booked a 2 trillion cubic feet contingentresource at PEL 218 after the drilling and fraccing ofthe Holdfast-1 vertical well plus testing at Encounter-1.

Suffice to say, the fact that a multi-Tcf contingentresource was booked from two vertical test wells hadinvestors licking their lips at the prospect of horizontal

wells in the Cooper.

The buzz has Beach Energy shares up by more than61% from August last year until the time of writing,and the positive sentiment can be tracked at similarlevels when observing other explorers in Beachspatch.

Drillsearch shares have been on a golden run overthe same period, up almost 192% to $1.53, althoughthis has no doubt been helped by the exc itementsurrounding QGC s $130 million farm-in to ATP 940P.

Senex Energy has also benefited, up by a similar166% over the period.

By way of comparison, the All Ordinaries index

recorded a modera tely small gain of over 4% sincethe Holdfast-1 contingent booking while the ASX/S&PEnergy 200 index has recorded a 5.4% gain over thesame period.

Before its Cooper-led revival Strike had been largelyunloved by Australian oil and gas investors, wholumped it in the risky basket labelled US explorer.

While Strike isnt shying away from its current USacreage who would when a fair chunk of its in theprolific Eagle Ford shale its pitching squarely on itsCoope r Basin acreage a nd its that angle which hasattracted the a ttention of the market.

However, one of the interesting facts which has gonelargely unnoticed by shareholders is that StrikeEnergy has been in the Cooper for almost a decade.In fact, Strike holds more than 16,000sq.km ofpermits and applications in the Cooper, whereprospective resources have been estimated at 6.1trillion cubic feet.

Its not as if weve just appeared in the C ooperBasin, Strike managing director David Wrench toldEnergyNewsPremium.

I think whats happened is that all of a sudden theCooper Basin has become much more attractive inthe last 12 to 18 months really as a result of thedevelopment of technology around theunconventionals.

Theres also been a change in dynamic in theEastern States gas market. For 30 years the gas pricein eastern Australia has been $2, and it really made

STORY IMAGE SLIDESHOW

RELATED STORIES

Marsden-1 shows promise(17 Apri l 2012 )

PARTNERS Strike Energy and Beach Energy havehad encouraging signs from the Marsden-1 well inthe southern Cooper Basin, with preliminary resultsindicating a very large and potentially liquids-richprospective gas resource. - more

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no sense or ere o e a o o wor one n eCooper Basin which was gas-focused because of thelow prices.

Thats all changed.

Strike is drilling Marsden-1 at PEL 95 as part of a 50-50 joint venture with Beach Energy and will startdrilling Davenport-1 at PEL96 in joint venture withBeach and Senex, wells Wrench describes as datawells.

Were really trying to get some basic data, he said.

We dont really know too much about the maturitiesof the shale, we need to see how much hydrocarbonshave been genera ted all that basic stuff we dont

know. We have clues and indications from offset wellsand other work, but we havent tested the centre ofthese basins.

Marsden-1 will be first up at PEL 95 and is targeting700m to 800m of Pe rmian sediments including theToolachee formation and the Roseneath, Epsilon andMurteree (REM) formations.

The well will be drilled to a total depth of 2640m, withthe REM formations expected to hit 200m furtherdown than Senex Energys nearby Vintage Crop-1well.

Strike is hoping for the same kind of liquids-rich gasshows that Senex expe rienced, with Marsden-1 toundergo extensive coring and logging and a drill timepencilled in at 20 to 30 days.

Davenport-1 at PEL 94 will follow immediately afterMarsden-1, and will target the Milpera trough.

It will be drilled to a total depth of 2458m and isexpected to hit about 700m of Permian sedimentsincluding the Toolachee, REM, and Patchawarraformations. The well will also be cored and loggedwith drilling time also put at 20 to 30 days.

Both the wells are fully funded after Strike closed a$A20 million equity raising recently.

Strike is targeting the wet gas fairway across thesouthern flank of the Cooper Basin, and its analysishas shown that such a zone is at depth consistent witha substantial portion of the resource in Strikes permitareas.

Wrench said it would take 12 months to two years tofigure out whether hydrocarbons from the formationscould be commercially produced.

Perhaps in no other address in Australia would cores

and logs from two wells, and with commercialisationof the resource two years away, genera te so muchmarket buzz something which Strike has been busytrying to capture over the past four months.

It has commissioned coverage from BreakawayResearch, which labelled Strike as a speculative buy,doing the sums on the value of its acreage.

The rationale is clear as S trike is by any measure farand away the cheapest of all ASX-listed Cooper Basinfocused unconventional energy plays, the reportread.

This is despite the fact that the companys acreageposition is as large and as vast as any of its peers.

So there is undoubtedly a real opportunity he re for asubstantial share market re-rating.

It added that if Strikes acreage was valued on the

basis on recent deals in the area, Strikes value wouldbe several times more than its current marketenterprise value of $60 million.

Its part of a push from Strike to get the market tonotice that it has Cooper Basin acreage.

Weve had the permits for a long time, the C ooperBasins been there for a long time but the marketssuddenly realised that the Cooper Basin is actually areally attractive place to be right now for an oil andgas explorer, Wrench said.

It just so ha ppens that we have a good position andin the past we havent done as good a job as weshould have in the past in communicating that to themarket.

Weve tried hard to rectify that over the past three tofour months.

While it still has an exposure to the Eagle Ford shalein the US, Wrench said trying to expand in the sectorwithout breaking the bank was starting to getproblematic.

In the US its v ery hard to put together largeacreage positions. Weve worked for two years to puttogether a 34,000 acre play, which is tiny comparedto what we have in the Cooper, he said.

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good plays in the US, whereas in Australia you canget very large positions in these huge resource plays,

albeit at a very early stage. The attraction for Strikeand its shareholders is that if we can mov e the playthrough the development phases, the upside to that ishuge.

Its that huge upside which has S trike Energyshareholders looking forward to the rest of the year.

After all, all its had to do so far to get a 122% gainon the market is remind it of where its acreage is.

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