Market Update

General - Strike Energy

Sorry I have been writing my butt off today, and now this thing got deleted...I had previously saved some of it, but cannot be bothered to write the missing stuff again....


Mbeki negated the existence of AIDS - Trump negates the existence of man-made climate-change...what an irresponsible moron! Honestly, do you regard the US as an ally, still? At least their politics are hostile. What Bush initiated with the war in Iraq, Trump is now fullfilling: The end of the Western Alliance!?

We need another 20$ in the gold price for a very clear break out...probably only 10$ stocks are not moving because of all this crazy index stuff in the States...This will be over and done with in 2 the meantime, use the weakness to buy affected stocks....Gold is trading at 1278 US$ as I am writing this, and at a new recent high in A$ terms of 1718 A$/oz!!!! Buy PRU/DCN/WAF and EVN as a core holding....

Strike Energy - the market is you can see in the market. Very weak, erratic share price following the new strategy presentation by the new MD, Stuart Nicholls. 

Please have a look at the webpage for the presentation itself.

STX is one of my major positions, and has been for some time - and I am obviously under water here. So let´s spend some time on it!

The market is scared off because:

1. Potential litigation with Orica. Orica had advanced STX 7.5 mill$ to Strike, as a pre-payment for future gas deliveries. Without going into legal details of teh agreement, STX is pretty sure of having had the right to cancel this agreement, without having to give the 7.5 mill back. That at least is the legal advice they have. As part of that agreement, Orica had the right to receive delivery of 250 PJ of gas over a certain time frame, at a certain price ( which has always been confidential ). If I assume, that this price was 6$ ( and I have reason to believe, that it was lower, given the gas price at the time it was negotiated ), and look at the current gas price, which is 10$ - and will probably go higher - the revenue difference is 1.5 bill A$! Yes- 1.5 bill.....STX´s managements view is, that even IF they have to pay back the 7.5 mill A$, the opportunity arising from the cancellation of the transaction, in terms of profits, as well as in terms of giving STX much more freedom to get strategic investors / Jv-partners / off-takers is dramatically worth more than 7.5 mill$......I fully agree with this view. Also, STX are pretty sure, that IF they should loose a potentail court case here, they would be able to negotiate a medium term time table to pay it back in gas or even in cash, if wanted.

2. I think we all agree, that a fresh approach to recovering this massive resource commercially, is essential. STX have struggled now for 2 years at least, to prove commercial gas flows....STX new management is adament, that a lot of capital will be needed to fully develope this asset, and that a large JV-partner will therefore be needed. I also agree. The MD claims ( and he is ex-Shell ), that for a big company coming in, the project has to be de-risked further. The main question to tick is the actual gas-content of thecoal resource. The currentyl existing wells will be able to answer this question up to a degree, but not to the full extent needed. The MD believes, though, that a major could be interested to amke an initial invstment, based on results from existing wells - these results should be available within the next 4-latest 5 month. To get answers to the open questions to a full extent, STX will ahve to drill Jaws 1 - at a probable cost of around 12 mill A$. At this stage, STX does not have the cash or the financing to do this. Initial discussions with the South Australian Government are creating some hope, that additional liquidity for STX might be gathered from this source.

Some investors are scared of Orica - others from the time table - some of teh risk of additional equity being needed. 

I think the company has adressed these risks. If anything, the shre price should have been up substantially because of the cancellation of the Orica-deal. The new management is bringing a large-company approach to teh story - I think, that this is neded for a project, which has some work left to be done, but which could bring to an end the looming gas shortage of Easternm Australia.

Risks remain - no doubt at all - but I am more bullish than ever....

I have a very positive impression of the new MD. Tim Goyder is back on the board, protecting "normal" investors interests - and with John Poynton running  it now, the big end of town is now involved - all good...just for one thing, which is the most important: The share price is f....ed!!! You make your own decision, as my advice on STX has been wrong in the past....

Sorry - the above is not very structured, and written down as I think about the issues. But I believe to have covered the main areas of concern here.

Have a nioce week - I will be in Greece for a week