Strike Energy advises that it is set to embark on an extensive exploration campaign across its highly prospective Australian and US acreage after realising USD 21.7 million from the sale of two of its US assets, the Mesquite and Rayburn properties.

Strike's US joint venture partners in Mesquite and Rayburn, located onshore in the Gulf Coast of Texas, also sold their stakes.

When Strike's share of net cash flow after capital and operating costs from past production is combined with its share of the sale proceeds, Rayburn and Mesquite have delivered AUD 35.7 million to the Company.

The result is strong evidence that the Company's US activities are capable of delivering exceptional returns on investment.

The sale of Rayburn and Mesquite considerably strengthens the Company's financial position and reflects the confidence the Board and Management has in the prospectivity of its retained Australian and US portfolio.

The sale price achieved equates to USD 2.63 per Mcfe for 1P reserves. This is an attractive price compared to recent similar asset sales.

Strike's debt of USD 5.8 million is to be repaid and its hedging positions closed, at the completion of which the Company will have cash reserves of AUD 20.4 million and ongoing positive cash flow from Louise gas/condensate production.

The sale acreage represents approximately 50% of the total gross acreage in which Strike holds interests in the onshore US Gulf Coast.

The acreage retained by Strike includes its 30% interest in the producing Louise gas/condensate field as well as its 30% interest in the properties secured under the Eaglewood Joint Venture (current total area approximately 15,000 gross acres) including the Steindorf well to be tested in February and the Muegge well which has been suspended.

The Eaglewood Joint Venture provides Strike with a pipeline of excellent drilling opportunities. Through experience gained, over several years, by the Eaglewood Joint Venture in the 'Wilcox' play type, the joint venture is developing low risk prospects which are returning high rates of commercial success. Strike expects this success rate to continue.

Immediate activities will involve testing (fraccing) of the Steindorf well in early February. Steindorf was drilled to test the Deerslayer play, a prospect with a target potential of more than 200 Bcf of gas.

A six well US drilling program with possible commencement date in February 2011 is currently proposed. The program will test targets with a similar risk profile to those that have returned the high rate of discovery experienced to date.

Strike's Managing Director, Simon Ashton said 'the Company is now in a strong financial position and has ongoing cash flow to fund an aggressive drilling program which has the potential to generate substantial returns for investors'.

Tags: Strike Oil