By David Press on
1/19/2011 10:07 PM
Strike Energy (
STX-ASX) announced early this week, the sale of a number of their onshore gas producing assets in the USA for $21.7 USD. This strategic move comes as little surprise to those who paid particular attention to the company's AGM presentation, at which the management team hinted at a change in the company's strategy. Managing director, Simon Ashton, believes the sale now gives Strike Energy a 'war chest' of cash to explore it's high impact US and Australian targets and is a clear indication that STX's management prefer to unlock value than dilute share holders holdings with capital raising into low share prices.
According to Strike's public announcement, the sale of their Rayburn and Mesquite interests has netted the company $21.7m USD and equates to $2.63 USD per Mcfe of 1P reserves. The cash will be used to pay down existing debt ($5.8m USD) and close the remaining open hedging positions. The net result will leave STX with cash of just over $20m on the balance sheet, and exposure to their remaining interests, the recent Louise discovery, Steindorf (to be tested early February) and the suspended Muegge well. Additional to the existing and developing US assets, Strike Energy have large prospective CSG acreage in the Southern Cooper Basin and the FutureGas project, as well as their offshore Baniyas project in the north of WA. At a market capitalisation of around $60m at current share prices, it would appear STX offers investors large potential upside with limited downside risk.
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