Strike Energy (ASX:STX) share price leaps again, up 21% this week. Here’s why

The gas exploration company’s share price has had a great week.
The post Strike Energy (ASX:STX) share price leaps again, up 21% this week. Here’s why appeared first on The Motley Fool Australia. –

Shares in Strike Energy Ltd (ASX: STX) are set to close the week more than 21% in the green and are currently trading at 21.25 cents apiece.

Whilst there’s been no market-sensitive information released by the company today, Strike’s share price popped on Wednesday after it advised that its Project Harber received major recognition from state and federal authorities.

Why’s Strike Energy charging higher this week?

Given the recent market turbulence caused by the AdBlue crisis, Strike’s Project Harber has received Lead Agency Status from the Western Australian Government as a potential domestic urea manufacturer.

Adding to this, the federal government has also thrown a $2 million grant Strike’s way as a part of its supply chain resilience initiative.

The Adblue saga has been bought about as Australia is about to run out of the mixture in a number of weeks. Urea is a major ingredient in AdBlue, and Strike is poised to benefit as a domestic producer of the chemical should its Project Harber successfully commercialise.

Moreover, Intec Pivot Ltd (ASX: IPL), owner of Australia’s sole urea production facility, will be closing its urea operations as of next year, adding to the scarcity of the product.

This poses a risk to both Australian vendors and users of urea as prices are susceptible to volatility in foreign markets and to exchange rate risks.

And with many agricultural commodities in the midst of a cyclical upswing, one might be right to correctly fear those risks. Wheat prices are up 21% this year to date for instance, whereas palm oil, canola, cotton, corn and even rice are all ranging 20-60% higher since January 1 also.

Project Harber is set to be a 1.4mpta urea fertiliser production facility built near Geraldton in WA’s Mid Wes Region. Strike says the venture would replace Australia’s reliance on more than $1 billion of fertiliser imports each year, by providing a “local producer, top quality fertiliser that would improve Australian agriculture’s competitiveness and reduce the carbon intensity of Australian farming”.

It is in the Pre-FEED stage, with design work being carried out by Technip Energies. Earlier in May 2021, Strike closed expressions of interest for fertiliser offtake from Project Haber, which was oversubscribed 2.5x the proposed plant’s capacity.

Strike has plans to undertake a competitive process in Q4 2021 to seek interest from equity partners to fund the capital requirement of the project, with Strike expecting to retain a 30% interest.

Aside from this, Project Haber will be a large hydrogen-consuming facility and is, therefore, a key player in the value chain for hydrogen production and usage.

Investors piled into the company following the news, sending its share price north on the day. The buying has continued until today, on tremendous volume that’s surmounted to 183% of its 4-week average.

Strike Energy share price summary

In the last 12 months Strike Energy has posted a loss of 24%, spurred on by a 25% drop this year to date.

Over the past single month, it has reversed course and is 25% in the green after reclaiming some territory this week.

The post Strike Energy (ASX:STX) share price leaps again, up 21% this week. Here’s why appeared first on The Motley Fool Australia.

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More reading

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The author has no positions in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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