Earnings call transcript: Strike Energy Q1 2025 sees revenue miss

Strike Energy Ltd (ASX:STX) reported its first-quarter earnings for 2025, revealing a revenue shortfall compared to forecasts. The company posted actual revenue of $18.59 million against a forecast of $19.5 million, missing expectations by approximately 4.7%. According to InvestingPro analysis, the company maintains a GREAT overall financial health score of 3.04 out of 5, though current data suggests the stock is trading above its Fair Value. Despite the revenue miss, Strike Energy’s stock saw a modest increase of 3.23%, closing at $0.16, reflecting investor optimism about future prospects and strategic initiatives.

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Key Takeaways

• Revenue fell short of expectations by 4.7%, reaching $18.59 million.
• Stock price rose by 3.23% post-earnings announcement.
• Strategic initiatives in gas-to-power and seismic data acquisition continue.
• CEO recruitment process is ongoing, with an announcement expected by mid-May.

Company Performance

Strike Energy reported a 6% increase in sales revenue, driven by steady production at its Yeringa gas field and the absence of planned maintenance shutdowns. InvestingPro data shows the company operates with a moderate level of debt and maintains a current ratio of 1.23, indicating adequate liquidity. The company also met conditions precedent for the first tranche at its Macquarie facility, highlighting progress in operational and strategic initiatives. Despite the revenue miss, the company’s unique vertically integrated gas-to-power model and operational flexibility position it well in a challenging market.

Financial Highlights

• Revenue: $18.59 million, up 6% year-over-year
• Yeringa gas field production: 25 terajoules per day
• No annual planned maintenance shutdown this quarter

Earnings vs. Forecast

Strike Energy’s revenue of $18.59 million fell short of the $19.5 million forecast, missing expectations by 4.7%. This marks a deviation from the company’s historical performance, where it typically met or exceeded forecasts. The revenue miss is notable given the company’s strategic initiatives and operational achievements this quarter.

Market Reaction

Despite the revenue miss, Strike Energy’s stock price increased by 3.23%, closing at $0.16. This movement suggests investor confidence in the company’s strategic direction and future potential. InvestingPro analysis reveals analyst price targets ranging from $60 to $150, with a consensus recommendation of 2.0, indicating a moderate buy rating. The stock remains within its 52-week range, indicating a stable outlook amidst broader market trends.

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Outlook & Guidance

Strike Energy is focused on several upcoming projects, including the development of the South Yarragalla integrated gas power concept and the construction of a power plant expected to be online by October 2026. InvestingPro analysts anticipate sales growth in the current year, though net income is expected to face some pressure. The company trades at relatively high EBITDA and revenue multiples, reflecting market expectations for future growth. The company anticipates generating $18 million in first-year revenue from capacity credits. Future guidance includes finalizing CEO recruitment and completing a strategic review with Oliver Wyman.

Executive Commentary

Jill, an executive at Strike Energy, emphasized the company’s strategic focus, stating, "We’re entering a period of important execution with near-term milestones that set us up for long-term value creation." She also highlighted the essential role of gas in power and industry, noting, "Gas is essential for power and industry, whether it’s domestic use, mining, or industrial feedstock."

Risks and Challenges

• Declining gas reserves in Western Australia could impact future production.
• The 81% reduction in oil and gas drilling since 2007 poses a long-term supply challenge.
• Energy shortfalls forecasted by AEMO starting in 2027 may affect market dynamics.
• The ongoing CEO recruitment process introduces a degree of uncertainty.
• Market competition and regulatory changes in the energy sector could impact operations.

Q&A

During the earnings call, analysts inquired about Strike Energy’s exploration plans for West Yarragalla and the ongoing CEO recruitment process. The company confirmed its collaborative approach with joint venture partner Hancock Energy and potential drilling of the Ocean Hill well by year-end.

Full transcript - Strike Energy Ltd (STX) Q3 2025:

Jill, Executive/Presenter, Strike Energy: Financial footing as we progress the construction of South Yaragalla. Collectively, this positions us well as we lead into the end of the financial year. Now in relation to the CEO, so in late January, we selected an executive search firm. Can you just change the slide, Emma? And from that progress process, sorry, we’ve received some really high caliber candidates.

Progress has been very strong to the point where we expect to make an announcement to the market by mid May. And thereafter, we expect the CEO to start reasonably soon thereafter. On the strategic review, we also started that work in January, and we recruited Oliver Wyman to support us. Our intent is to share the outcomes of the strategic review with the new CEO because it’s incredibly important that they’re comfortable with those findings and that they can support them in the delivery. Thereafter the next steps is we will share that with the market more broadly.

This quarter we also completed the acquisition of the three d seismic data over Irrigala Deep in the northern part of West Irrigala. This data will complement our existing understanding and support the assessment of the commercial development options for West Urrigala. West Urrigala has formed a key part of the strategic review and we’ve assessed multiple development options on how we can best monetize those reserves. And pleasingly, both Strike and Hancock are working to develop West Yiragalla to meet expected market demand. It’s then prudent to talk about the role of gas in the WA energy market and its increasing importance.

On the demand side, we see that gas is essential for power and industry, whether it’s domestic use, mining, or industrial feedstock. We also see gas as very reliable and flexible, providing renewable penetration or supporting the renewable penetration and grid stability. And there’s also very clearly rising demand for gas in WA, whether that’s driven by mining, industrial expansion, and also electrification. What’s also pleasing to see is both the state and the federal government see gas as a cornerstone of the energy transition. On the supply side though, what we’re actually seeing is declining gas reserves.

There’s been a lack of investment which has led to an 81% reduction in oil and gas drilling since 02/2007. Not surprisingly then, we’re seeing AMO forecast an energy shortfall in February starts appearing in 2027, and then exacerbates in 02/1930 when the state government intends to switch off the coal fired power generation. At that time, we see about a 6% increase in supply gas demand. From a strike perspective, we’re very much committed to supporting the state government through this process or the energy transition, and that support will come in the form of gas to power developments and also the development of our assets in a very timely manner. Moving on to South Yarra Galloway, and what we can see in the slide here is the visible progress that happened at site.

And for context for you, the engine room size or the shed that’s going to go over the engines is about 150 by 22 meters. We’re taking a really disciplined approach because what we want to do is manage the execution risk under the construction phase. And in doing that, we’ve completed the internal handover from the strike development team to the strike construction team. We’ve awarded and executed the majority of our major equipment packages such that 50% of the CapEx is locked in through fixed price contracts already. We’ve also undertaken an independent review to confirm our execution readiness, and that came up with some a couple of very minor findings.

And then the last thing that we’ve done in the last quarter is we’ve incorporated or made sure we’ve incorporated the Wahiairean construction lessons learned into the process for South Uragalla. We are on track to deliver the the power station to be online for the 10/01/2026. And in that first year of production, we anticipate $18,000,000 in revenue from the capacity credits, and then that revenue will be supplemented when we turn the gas engines on and generate electrons. Now this slide underscores why Strike has chosen an integrated gas power concept for South Yaragalla. It’s a vertically integrated model, and Strike controls the complete value chain.

It’s a little unusual to see someone control that whole value chain, but it’s certainly beneficial. The power plant itself is going to be located on the precinct, which as you know is strike owned land, and it’s also going to be located on top of the gas reserves at South Eurogalla. Because of this, we’ve negated the need to build gas pipelines, and we’ve also don’t have to build a gas processing plant, which is what you typically see in a traditional model. And the reason we don’t have to build a gas processing plant is there’s only a small amount of work that needs to be done to align the gas spec to feed into this feedstock gas into the power plant. So this avoidance of major capital has made the economics much more attractive, and it’s actually saved us tens of millions of dollars.

The other thing that this model does, it gives us a lot of operational flexibility. So we’ve got no take or pay contracts for pipelines in terms of gas storage. We’ve got no pipe sorry, take or pay obligations under a gas sales contract. What that does, it gives us a lot more flexibility on how we operate the plant because we don’t have to manage the operation within the constraints of those take or pay contracts. So collectively these attributes mean that this power plant is the lowest cost gas producer of electricity in the Swiss, the Southwest interconnected system.

We’ve removed and that’s because we removed significant OpEx and CapEx in this model. It’s also enabled us a shorter time to start up, so not having to build the gas processing plant or the pipelines is condensed that period. We also have a lower carbon intensity relative to a traditional gas processing oh, sorry, relative to a traditional gas generation, and we also deliver the greatest value per molecule of gas. And at a hundred and $40 a megawatt hour megawatt, sorry, the look through gas price is $28 a gigajoule, and that does include the capacity presence. Now touching on the financials for the quarter, while Yering remains a reliable gas generator.

Production’s been steady at 25 TJs a day, which has meant that we’ve been able to fulfill all of our guests nominations. Sales was up sales revenue was up around 6%, and the reason for that is we had a advantageous foreign exchange. And in this quarter, we didn’t have the annual planned maintenance shutdown. Subsequent to the quarter, we’ve met our conditions precedence for the first tranche of the Macquarie facility, which enables us to progress the South Hererigala. Looking ahead, we remain very focused on finalizing the CEO recruitment process and the strategic review outcomes, and that does include the capital allocation framework to provide guidance on the development pathways for all our assets.

We’re going to continue to be very focused on the South Yarra Gallagh gas peaking plant and some of the key activities that we’ll be undertaking this quarter is the concrete works for the gas engines, the factory acceptance testing again for the gas engines. Those engines are currently located in so they have their fat testing prior to shipping to Fremantle. We’ll also award the transmission line and switch out erection works. We will interpret the net of three d seismic and the next steps for West Yarugala, and we will also maintain our operational liability at Wawar Yeri. And in summary, we’re entering a period of important execution with near term milestones that set us up for long term value creation.

And on that note, I’m going to hand over to Emma to host the Q and A. Thanks Emma.

Emma, Host/Moderator, Strike Energy: Great, thank you. Apologies everyone if the slides stopped there. My computer had a little bit of a freeze up. Took a while to catch up. Now we’ve got Dale Kerners who if you’d like to unmute Dale and ask a question.

Dale Kerners, Analyst: Yes, morning. I just wanted to confirm the writing on Page three, you’ve said strikes assessing a range of development pathways for its share of West Era Gullah and Era Gullah Deep. Are you looking at a sole risk option as well as another development case with your JP partner?

Jill, Executive/Presenter, Strike Energy: Sorry, I couldn’t hear that question properly. Would you mind repeating it? I only heard part of it.

Dale Kerners, Analyst: On page three of the release, you’ve stated that Strike is exploring developing its share of West Aragala and Aragala Deep Resources. I just wanted to confirm that you’re looking at a sole risk development or are you only looking at development cases with your joint venture partner?

Jill, Executive/Presenter, Strike Energy: Okay. Thank you. We’re looking at a range of development options for West Yiragalla. So what we’re focused on is the highest value accretive pathway for Strike. So we’ve looked at all options and how we would monetize that.

So that clearly does include working with Hancock, and we’ve looked at what we can do at Strike. But, yeah, everything’s on the table, and we’ve looked at all options.

Dale Kerners, Analyst: Can you give any color as to what a sole risk development would look like if Strike was to develop only its own reserves?

Jill, Executive/Presenter, Strike Energy: No. That’s not something that I can give any color on.

Dale Kerners, Analyst: Okay. And then maybe a second other question then. Just in terms of the high caliber CEO candidates, what is the board looking for in the new CEO? What are the key characteristics that they’d like to bring?

Jill, Executive/Presenter, Strike Energy: Sure. So we’ve been really impressed with the high caliber candidates that have been presented to us. Some of the attributes that we have been looking at is clearly having an understanding and working in the energy sector, oil and gas. Ideally, previous CEO experience will also be helpful. The other thing is around the style of the the CEO candidate, you know, working with our stakeholders.

We’ve got multiple stakeholders, so having a personality that builds those relationships and can execute strikes strategic review are really important to us.

Dale Kerners, Analyst: Thank you.

Emma, Host/Moderator, Strike Energy: Thanks, Dale. I might hand over to Declan Bonnet from Euroz.

Declan Bonnet, Analyst, Euroz: Yeah. Thanks, Emma. Jill. Just on slide five of the presentation, the blobbing between the West Aragala Field and the Aragala Deep field used to be pink, so classified as a gas field, but now it’s yellow, classified as a prospect. Is it reading too much into it that, you know, the 278 petajoules that you speak to regarding the prospective resource for Aragalla Deep is too high now?

Or, you know, is that still part of the discovery or has that been excluded now?

Emma, Host/Moderator, Strike Energy: Yeah. I’ll take that one, Deck. That is probably reading a bit too much into it. There’s just several iterations of maps, some of which JB endorsed in places. So we’re we still we haven’t the note on that map is that their STX interpreted leads and prospects, I wouldn’t read anything into the volumes there.

We we haven’t interpreted anything from the NADA three day that’s come through yet.

Declan Bonnet, Analyst, Euroz: Okay. Thank you. And maybe just a quick follow-up question. On Ocean Hill, I note that a couple of the rigs have left the basin. What do you think the potentially quickest timeline for getting that drilled done over the next twelve months could be?

Jill, Executive/Presenter, Strike Energy: Yes. Sorry. I’m struggling to hear a little bit. For Ocean Hill, what we’ve done is we’ve confirmed what our first drilling target would be, and we’ve had that independently verified. I understand that there is one or two at least one rig that’s still available in the Perth Basin, but at best, we’d be able to drill that well at year end, but that would assume an immediate securing of that rig.

But your sentiment is right, Declan. If the rigs leave the region, then that does make it more challenging because you’re going to have to mobilize the rig back to the Perth Basin.

Declan Bonnet, Analyst, Euroz: Excellent. Thanks for your time.

Emma, Host/Moderator, Strike Energy: Thanks, Declan. I hand over to Henry Meyer from Goldman Sachs.

Henry Meyer, Analyst, Goldman Sachs: Thanks. Good morning, all. It seems that the optimal development plan for West Orogela will also depend on your JV partners’ drilling results completed over the last few months as well and how they’ll be looking to optimize their portfolio. Could you share what key milestones you’re looking to within the JV as you work towards the development plan there?

Jill, Executive/Presenter, Strike Energy: Yeah. So, clearly, with Hancock Energy procuring MinRays, they’ve been looking at their development options, and so it comes as no surprise that Strike has also been looking at our development options. I can’t share detail in terms of a lot of things commercial and confidence, but what I can say is the relationship is from Strike’s perspective is much more productive, and examples of that is the team worked really well together in relation to three d data survey. We’re both working towards commercializing West Uragalla for the expected market demand, and you can look at the AIMO forecast around when that market demand becomes available. But, you know, our objective is to work with Hancock Energy to commercialize West Yorugala.

Henry Meyer, Analyst, Goldman Sachs: Okay. Thanks, Jill. And at South Yorugala, could you just add some color onto what components of the CapEx are fixed beyond the gas compressors and how you’re planning to manage any risks related to the remaining variable CapEx through the development?

Jill, Executive/Presenter, Strike Energy: Sure. So when any project moves into construction, managing execution risk is critical. So we’ve got the leasing component of the Macquarie, which is for the Genbacker gas reciprocating engines, and we’ve awarded a number of the major equipment packages. In fact, I think we’ve only got one or two left to do. So that’s why we’ve locked in 50% of the the capital for South Eurogala.

The variable component really becomes when we’re on-site and we’re talking about labor. And at this stage, as I say, most of the equipment packages the water is not locked in is pretty much equipment that you can get off the shelf. So we don’t expect significant price variation for the residual equipment. I hope that answers your question.

Henry Meyer, Analyst, Goldman Sachs: It does. Thanks, Joel. Maybe just to expand a little bit. If labor is one of the bigger risks, could you just share any views on how you’ll be managing that through the project? Have we got a contractor locked in already or still work to do there?

Jill, Executive/Presenter, Strike Energy: Sorry, I didn’t catch the first bit of your question. Sorry, the sound is not great. So can you repeat the first part of the question? Sorry, I just didn’t hear it.

Henry Meyer, Analyst, Goldman Sachs: Sure. Sorry. If labor is the biggest risk to variable costs, could you just share any detail on whether contractors have been locked in yet, so how you’d be managing that over the next twelve months?

Jill, Executive/Presenter, Strike Energy: Yeah. I’m not sure that labor is the biggest risk to the to construction. It’s clearly the variable part of the cost profile for the project. So a lot of that contracts are already logged in for the labor component. And I think more importantly is we do have some contingency in the schedule.

We do plan to down man a little bit around the Christmas period because that’s a time when it’s harder to get people to come to site. So at this stage of the project, we’re not worried around having sufficient labor to execute the project. And a lot of the project is actually gonna be constructed off-site, and then we move it to site. You know, we’d start the erection of the engine shed very shortly, and what we will do is move through the project in a stage post process. So it’s not like all the engines arrive on-site at the same time.

They arrive progressively, and they’re assembled on-site as they arrive. So the whole thing is a sequence in terms of how those engines go into the engine shed.

Emma, Host/Moderator, Strike Energy: Sorry. We might hand over to Stuart Howe now from Bell Potter.

Stuart Howe, Analyst, Bell Potter: Yeah. Hi, Jill. Hi, Emma. Just to go back to West Erogala. I I think previously, we thought that we’d see a field development plan update and AGIG tariff for the processing plant, and then the joint venture would take FID.

But it looks like now you’re you know, there’s a bit of uncertainty around that, and you’ve addressed that. Just looking at the, at the AIMO data, the supply demand forecast, you know, you you made a comment earlier that that you wouldn’t bring that online until you saw, I guess, a sufficient supply gap emerging. And I guess if you’re looking at the chart that you provided in your presentation, is that the gap we sort of see in 2028, or is it the one later in the decade? And to what extent do you think Aimo has West Yarugala supply in its forecasts?

Jill, Executive/Presenter, Strike Energy: Okay. If I take the last part of your question first, I’m not sure whether West Yarugala has oh, sorry. Aimo has West Yurugala in in their forecast. What they do do is they talk to all these stakeholders, and they build their forecast from a bottom up basis. But where West Yurugala specifically sits in the Aimo forecast, I’m not sure.

What we do plan to do though is is strike as we recognize that there is an energy gap in WA. We plan to help fill that through the gas to power as well as further gas processing. So AMO updates its forecast regularly, and we are looking at towards around that gap around ’27, ’20 ’8 in terms of when we can next fill it with our next gas processing.

Stuart Howe, Analyst, Bell Potter: And perhaps just to follow-up, it feels like there’s a lot of commentary in the a lot of language in the presentation and release around vertical integration. And I know you’ve sort of said all options are on the table for West Era Gala. Can you perhaps just speak through some of the options you’ve got at the top of that list?

Jill, Executive/Presenter, Strike Energy: Sorry. I didn’t catch the big order of that question. I’m sorry. I’d have to ask you again.

Stuart Howe, Analyst, Bell Potter: So just relating to the the commentary in the in your releases today relating to vertical integration, obviously, taking part in electricity generation in in the context of West Irrigala. Just wondering if you could talk to some of the options you’ve got on the top of your list when say you’ve looked at all options, just perhaps the top couple of development scenarios that you’re considering?

Jill, Executive/Presenter, Strike Energy: Yeah. So it’s similar to what we’ve done for all our assets as part of the strategic review. We’ve looked at around how we can optimize the value of each of the assets. And so for West Eurogala, you know, clearly, we’ve got the precinct. We’ve been looking at how do we optimize the value of the precinct.

Could you build a gas processing plant there? You can also build it on the existing in the existing acreage. We’ve also looked at power, and what we’re trying to do is be creative in terms of how do we optimize the value of that resource. So the actual outcomes of that would be shared as part of the announcement of the strategic review.

Stuart Howe, Analyst, Bell Potter: Great. Thank you. That’s all for me.

Emma, Host/Moderator, Strike Energy: Cool. Unless any of the analysts have any further follow-up questions, I think we’ll leave it there for today. I’ll reiterate that we would like to see your questions on the hub if you feel they haven’t been addressed, and we’ll answer as many of them as we can.

Jill, Executive/Presenter, Strike Energy: Thank you. Great.

Emma, Host/Moderator, Strike Energy: Alright. Thank you very much, everybody.

Jill, Executive/Presenter, Strike Energy: Thank you.

Emma, Host/Moderator, Strike Energy: Thanks, Jill.

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