Strike Energy Limited has agreed with Australian fertiliser and chemical company, CSBP Limited, to convert its gas supply option to a firm 100 Petajoule (PJ) gas offtake agreement at 25 Terajoules (TJ) per day for approximately 11 years.
The foundation supply agreement supports Strike’s proposed development of Phase 1 of West Erregulla in the North Perth Basin and, in turn, the company’s strategy of rapid cash flow generation from the project to assist in financing and reducing the cost of capital of a larger expected Phase 2 development.
The agreement has a narrowing window delivery mechanism for first supply that will allow Strike to deliver all of its volume from day one, post-commissioning.
The option-agreement pricing model has been amended to a fixed price with annual escalation, which simplifies the agreements and supports both the delivery of material free cashflow from West Erregulla’s projected Phase 1 gas production and Strike’s return expectations.
CSBP is a provider of agricultural, chemical and mining solutions to the agriculture and resources sectors. CSBP is a wholly-owned subsidiary of Wesfarmers Chemicals, Energy and Fertilisers.
With a firm offtake agreement with CSBP, a Tier-One customer in Western Australia’s domestic gas market, Strike outlines that it now has a solid platform to secure a high-quality financing solution for the construction phase of the project.
The offtake agreement is subject to a Final Investment Decision (FID) on the West Erregulla project being taken which will enable the delivery of 25 TJ/day to CSBP expected to commence in 1H/2022.
Strike Energy Managing Director and CEO Stuart Nicholls said the conversion of the CSBP offtake option to a firm gas supply agreement is another important milestone for Strike as part of its Perth Basin development strategy.
“Delivery of gas into this contract will see Strike generating strong free cash flow from 2022 to support organic growth via development and exploration activities throughout our Perth Basin portfolio,” Mr Nicholls said.
“CSBP is a high-quality foundation customer, which has supported Strike since the discovery of this resource. The supply agreement meets Strike’s primary objectives of producing affordable and competitive energy for Western Australian businesses, with a key focus on WA domestic products.”
