Santos and Strike Energy Enter Binding Supply Agreement

Strike Energy [ASX:STX] and oil and gas production company Santos [ASX:STO] have entered into a new gas supply agreement via the Walyering joint venture located in the Perth Basin.

Santos has agreed to purchase a total of 36.5 petajoules of gas from the Walyering field over a five-year term, beginning in the first half of 2023.

Strike Energy’s share price was rising 4% in value by the early afternoon (14/12/2022), buffering its 87.5% rise in the full year and a whopping 35% increase over the last month alone.

In contrast, Santos shareholders were not quite as expressive, the STO share price remaining flat in day trading and remaining up 9% over the year.

Chart of ASX STX Strike Energy stock chart

Source: Tradingview.com

Santos and Strike enter WA gas supply agreement

Santos and Strike have announced a new gas supply agreement in the Walyering joint venture located in the Perth Basin, in which Santos will purchase a total of 36.5 petajoules of gas from the Walyering field over five years from the first half of 2023.

Santos’ customer relationships and pipeline transport positions facilitated the agreement, which will add depth to its WA domestic sales gas portfolio.

Kevin Gallagher, Santos’ Managing Director and Chief Executive Officer, said that the company is continuing to support the Western Australian industry by delivering competitive prices for domestic natural gas.

We are delighted to sign this agreement with the Walyering joint venture and bring this gas to market in a timely manner, reinforcing our position as WA’s biggest supplier of domestic gas,’ Mr Gallagher stated.

Strike serves as both key operator and the holder of 55% of the Walyering JV, over Talon Energy [ASX:TPD], who holds the remaining 45%.

Strike says that the Walyering gas field procurement program is now 95% complete, and construction is on schedule, with 54% of fabrication having been completed.

This means first gas sales are on schedule for Q1 2023 when Santos’ five-year offtake commences.

Santos’ contract covers tranches of the firm take or pay volumes which provide flexibility to the JV as the field ramps up towards maximum production.

The agreement benefits Santos with a new addition to its established domestic sales gas portfolio in WA while assisting Strike to bring gas to market in a ‘timely manner and on attractive terms’.

Strike’s Managing Director and CEO Stuart Nicholls commented:

The agreement with Santos provides a commercially attractive route for the Walyering JV to sell its gas stream in a strong pricing environment. As Strike commissions the field, the flexibility of this agreement is supportive of Strike managing reservoir performance whilst maximising early revenues during the ramp up period.

Walyering’s incredibly short 15-month journey from discovery to planned start-up shows the opportunity and immediacy in returns and value from Strike’s substantial undeveloped acreage position in the Jurassic wet gas play in the Perth Basin.

The sale of this gas to Santos continues to demonstrate Strike’s commitment to supplying the Western Australian domestic gas market with low-cost Perth Basin gas and underscores the importance of Strike’s activities in filling the projected mid-decade gas market shortfalls.

Strike has streamlined its JV activities by decreasing overall fixed and variable operating costs of the field to approximately $0.19 gigajoules. However, this avenue of saving increases capital expenditure by at least $2.4 million.

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