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Strike Energy (ASX:STX) has confirmed the rumours that were circulating Monday: another Western Australian-based energy smallcap, Carnarvon Energy (ASX:CVN), is snapping up just shy of a 20% stake in the former.
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There is one thing that Strike shareholders haven’t liked – Carnarvon is effectively buying into Strike at 12cps.
In turn, STX shares fell in early Tuesday trades by more than -15% to 13.5cps at 10.30am. Perhaps surprisingly, Carnarvon was in the red at the same time, too.
While it’s early intraday, it’s looking like nobody likes this deal from either camp. Despite the fact Strike expects the funds from Carnarvon to materialise its South Erregulla project into next year, and allow the company to reach FID on the West Erregulla gas project.
With that potential in the chamber, it’s likely a case of shareholders wondering why, then, Strike has allowed Carnarvon to buy nearly a fifth of the company – just short enough to avoid triggering corporation act rules – at the discount price of 12cps.
For Carnarvon, however, the deal appears somewhat sweeter.
“Following the Bedout JV Operator’s recent decision to delay the Dorado Development, the Carnarvon Board has been assessing value accretive opportunities for shareholders,” CVN chair Rob Black said.
To remind, Dorado is Carnarvon’s flagship project in which it only holds a 10% stake. The other 80% is held by Santos (ASX:STO).
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“The Carnarvon Board believes the Strike Investment represents an attractive opportunity for the Company to help Strike unlock the value in its high-quality portfolio of Perth Basin assets on attractive terms, whilst retaining full exposure to its own assets in the Bedout Sub-basin,” Black added.
In between the lines, it could be the case that both companies are feeling the pressure. But the early market reaction suggests shareholders from either camp aren’t necessarily ebullient on the news.
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