Strike Energy (ASX:STX) hits over-pressured zone at West Erregulla

• Strike Energy (STX) has intersected an unexpectedly over-pressured gas zone in the West Erregulla 3 (WE3) well in the Perth Basin
• The well in the West Erregulla field is being drilled as part of an appraisal campaign by joint venture partners Strike and Warrego Energy (WGO)
• Operations at WE3 will be put on hold until necessary preparations are made to safely recommence drilling and in the meantime, the drill rig will move to on to the next appraisal well
• The delay in completing WE3 will also push back the Final Investment Decision but it is still expected to be reached in the first half of 2021
• Strike CEO and Managing Director Stuart Nicholls said that while the delay is frustrating, the over-pressured zone bodes well for the significance of the Permian gas resource
• STX shares are down 8.77 per cent to 26 cents, while WGO has dropped 6.25 per cent to 22.5 cents

Strike Energy (STX) has intersected an unexpectedly over-pressured gas zone in the West Erregulla 3 (WE3) well in the Perth Basin.

The well in the West Erregulla field is being drilled as part of an appraisal campaign by joint venture partners Strike and Warrego Energy (WGO).

The over-pressured Permian gas column was encountered while drilling through the Carynginia Shale and, according to Strike, the over-pressures are at a magnitude not previously recorded in the Perth Basin.

The WE3 well design limits are close to being reached and, as such, further engineering, materials and equipment will be needed to safely recommence drilling.

While operations are temporarily suspended at WE3, the drill rig will move to WE4, the next well in the appraisal campaign.

The delay in completing WE3 will also push back a final investment decision, but this is still expected to be reached in the first half of 2021.

Strike CEO and Managing Director Stuart Nicholls said that while the delay is frustrating, the over-pressured zone bodes well for the significance of the resource.

“The high-pressured reservoirs of the Permian gas fairway, whilst in this case abnormally high, are one of the key attributes that support the West Erregulla resource as a top quartile, competitive future gas supply,” Stuart noted.

“The high-pressure gas translates into both excellent well productivity and little to no compression being required over the majority of the field’s life. Well costs and compression usually represent the majority of the capital required in any upstream development and we are fortunate to have such high-quality subsurface conditions,” he added.

STX shares are down 8.77 per cent to 26 cents, while WGO has dropped 6.25 per cent to 22.5 cents at 10:49 am AEDT.