Strike Energy shares have been stripped of one-quarter of their value on news of failed appraisal testing over its key South Erregulla gas field in the Perth Basin. Strike emerged from a trading halt on Tuesday to reveal that South Erregulla-3 had not produced gas from its primary target zone when completed last week. The company said it could yet return to the well, which has been shut in, but admitted the “testing results were not expected”. Strike shares lost as much as 31 per cent in early trading before clawing back some ground to close 25 per cent lower at 31.5¢, wiping $300.5 million from the company’s valuation. South Erregulla-3 was one of three wells drilled to help shape reserve figures for the Strike field, where the company has struck supply agreements with Perth Energy and South32’s Worsley alumina refinery to underwrite development of a gas plant. The project is key to the company’s ambitions to become a major player in the Perth Basin by providing gas into the State’s domestic market. Strike chief executive Stuart Nicholls said on Tuesday the South Erregulla-3 flow test ‘has not matched” expectations, “which is disappointing”. “Further data collection and analysis is ongoing and Strike is reviewing the potential to return to the well,” he said. Strike will now move to production test the South Erregulla-2 well over the next week. Euroz Hartleys said South Erregulla-2 was a lower risk well and should provide greater insight into the gas field, adding that Strike should still emerge with enough gas reserves to support a viable commercial development of the project.