A $136 MILLION windfall courtesy of Gina Rinehart's Hancock Energy Pty Ltd is expected to accelerate Project Haber plans to produce urea fertiliser at a proposed Mid West Low Carbon Manufacturing Precinct.
Strike Energy Ltd, which plans to use gas from its South Erregulla discovery at Arrowsmith East as feedstock to make granulated urea and also proposes to convert the surrounding farm it has bought into a gas, solar and wind-powered manufacturing hub, has said it will sell its shares in a joint-venture partner, Warrego Energy Ltd, to Hancock Energy.
Last week Strike told the Australian Securities Exchange (ASX) it had closed its own off-market offer to Warrego shareholders of one fully-paid Strike share in return for each Warrego share they held and intends to accept Hancock's cash offer of 36 cents a share for the Warrego shares it holds.
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Hancock's 36c a Warrego share offer closes tomorrow, Friday, February 24.
Strike told the ASX that as of last Thursday it owned or controlled 377,040,765 Warrego shares, about 30.4 per cent of Warrego's issued script, so accepting the offer "will realise $136m in proceeds to Strike".
"(This) is the equivalent of Strike conducting an equity capital raise at 40c per Strike share, or a 16pc premium to Strike's last closing price of $0.345," it noted in its memorandum to the ASX.
"In conjunction with the $67m of available cash and undrawn facilities as at (the end of last year), Strike will have a total of $203m of available funding, (plus) a further $80m in an uncommitted domestic gas development facility, to support its next investment decision," it said.
"Strike will now proceed to accelerate its Perth Basin-focused strategy across its portfolio of highly attractive domestic gas, fertiliser and renewable energy assets.
"Strike is currently conducting a capital allocation review and will provide further information on the additional activities that will be funded under this acceleration strategy in due course."
Withdrawal of Strike's own offer and acceptance of Hancock Energy's cash offer ends a complex, multi-faceted contest for ownership of Warrego which started last September.
Early on, the bidding contest for Warrego also involved Beach Energy - until it was trumped by a Hancock Energy bid in December - as Beach has gas interests in the Waitsia project to the north west and the Beharra Springs field to the west of Strike's wholly-owned South Erregulla well and proposed Mid West Low Carbon Manufacturing Precinct.
Until this week Strike and Warrego were 50/50 partners - with Strike the operating partner - in the West Erregulla gas project immediately to the north of Strike's South Erregulla well and proposed Mid West Low Carbon Manufacturing Precinct.
Strike has previously indicated it could consider using gas from its more advanced West Erregulla joint venture to supplement gas from South Erregulla for Project Haber's 1.4 million tonnes a year for at least 15 years anticipated urea production and also to help energise the manufacturing precinct.
It may now have to renegotiate that with its new West Erregulla partner Hancock Energy.
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As previously reported in Farm Weekly, verification of sufficient volumes of high quality gas at South Erregulla prompted Strike to relocate Project Haber from Geraldton to beside the gas well to save significant costs of building a gas pipeline.
The concept then quickly morphed into Project Haber being located in the north-west corner of a wider 3500 hectare Mid West Low Carbon Manufacturing Precinct that Strike wants to co-develop with like-minded manufacturing business partners on the farm it bought fronting Tomkins Road.
The former sheep and cropping property was farmed by Russell Morgan and wife Mary after the Morgan family had begun cleared the land 57 years ago.
It has been destocked and the plant and equipment was sold off last Thursday at a clearing sale conducted by Elders Mingenew.
Solar and wind farms along ridge lines are proposed to be established on the property to generate electricity for Project Haber and the low carbon manufacturing precinct, with any excess being exported to the State electricity grid.
Strike has previously flagged a possibility the area beneath the wind generator towers could be used for dry land grains research and development.
The southern half of the property is proposed to be revegetated to generate carbon credits, to help offset any greenhouse gas emissions from manufacturing processes on the northern half - the property abuts a similar revegetation carbon abatement project of Woodside Energy on its western boundary.
Strike has said it has "aspirations of becoming Australia's lowest cost domestic gas and fertiliser producer" and claims it has developed "an integrated downstream strategy ... supporting its future customers' carbon abatement".
Last week, after announcing it would accept Hancock Energy's cash for its Warrego shares, Strike managing director and chief executive officer Stuart Nicholls said the company "has never been in a better position than it is today".
