Why the Strike Energy Share Price is Up today (ASX: STX)

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Strike Energy Ltd [ASX:STX] is an independent oil and gas exploration company. Based in Adelaide, the company has been operating since 1997 and has been listed in the ASX since 2004.

Today the Strike Energy share price is up close to 4% at time of writing

The company has assets in the Perth Basin in Western Australia and the Cooper Basin in South Australia. Strike Energy’s mission is to commercialise these two resources quickly.

What happened for STX?

Today the company provided an update on their West Erregulla-2 flow test.

They reported ‘strong gas flows were observed as the reservoir pressure was used to unload the wellbore fluids.

Strike is the operator and holder of a 50% interest in EP469, and Warrego Energy Ltd [ASX:WGO] holds the other 50%.

Back in September the company finished drilling and competition activities at West Erregulla-2 for flow testing.

As Strike’s Managing Director Stuart Nicholls said back then:

The West Erregulla 2 well has made three individual conventional gas discoveries, has found the deepest hydrocarbons ever seen in Australia and has now set up the company for continued success along the Wagina and Kingia High Cliff geological trends.

What’s next for Oil Prices?

Oil has been trading at lows for a while now, mainly because of increased oil supply coming from the US.

There are concerns that demand could be slowing as worries on the US-China trade war and a global economy slowdown could curb demand.

But there are also some concerns on supply levels. For one there were the recent attacks to Saudi Arabia’s processing facilities and how geopolitical risks could affect it. There are tensions between Iran and the US, and conflict in Venezuela.

And US’s shale oil production is slowing.

From Bloomberg:

The U.S. Energy Information Administration published its latest short-term energy outlook last week and has cut its forecast of oil production by the end of 2020 for the fourth straight month. It now expects American output to rise by just 370,000 barrels a day over the course of next year. That will be the slowest growth in four years and is yet another indicator that the latest period of rapid shale expansion is faltering.[…]

With a WTI oil price of about $50 a barrel, some in the shale patch are struggling. Shale companies are being forced to produce more to service their high debts, but they aren’t making any surplus profit to cut their borrowing or pay shareholders. Now those investors are starting to demand more of a return.

Any further turmoil affecting supply could drive oil prices higher.

Interested in oil stocks? We make a case for an oil company as a dividend play in this free report. You can get it here.

Best,

Selva Freigedo

About Selva Freigedo

Selva Freigedo is an analyst at Money Morning. She has a background in financial economics, but what makes Selva´s experiences different to many are the places she has lived and worked. Born in Argentina, she has also lived in Brazil, the US, Spain, and now Australia. She has seen up…

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