Calima Energy (ASX:CE1) keeps eyes on the prize as oil remains on the boil

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  • Crude oil prices are estimated to rise further as US inventories are running low, and the EU is contemplating to reduce/stop Russian energy imports.
  • China has reopened Shanghai after two months of lockdown, which is expected to revive the energy and resources demand.
  • Calima Energy recorded a peak production of 4,300 boe/d in the March 2022 quarter.
  • The Company plans to drill four horizontal wells on its assets in the Brooks area.
  • Calima continues to evaluate options with respect to value maximisation for its Montney gas asset.

Last week, oil prices rose further as China’s financial hub Shanghai reopened after two months of strict lockdown. Market analysts expect a rebound in China’s energy and resources demand as financial activities are expected to start picking up pace again.

YTD WTI price movement (Image source: Refinitiv; Analysis: Kalkine Media)

Another factor stoking oil bulls is that fuel inventories in the US are at a multi-year low, unable to catch up with the increased demand.

Also read: Calima Energy (ASX:CE1) on high-growth path amid robust crude oil market

Furthermore, the EU and the UK are considering to implement a coordinated ban on insurance for the tankers carrying Russian oil. Given that the UK is home to the International Group of P&I Clubs, which insures 95% of liability on tankers worldwide, the move could be a serious blow to Russian oil exports.

Factors like limited new supply options, growing risks to traditional supply and increasing worldwide demand are expected to drive oil prices further north.

Calima leverages opportunities offered by hot O&G market

In the current buoyant setting, ASX-listed oil & gas producer Calima Energy Limited (ASX:CE1|OTCQB:CLMEF) is making a significant space in the booming oil & gas market.

Backed by a series of development activities, the Company is now producing nearly 4,100-4,400 boe/d of hydrocarbons from its oil fields at Brooks and Thorsby in Alberta, Canada.

During the March 2022 quarter, Calima registered a 56% increase in revenue and a 93% surge in profit compared to the December 2021 quarter.

The Company expects similar revenue and profit boost in the June 2022 quarter. Also, as there are no major capital expenditure plans, the company anticipates cash flow to be significantly higher in the coming quarter.

Image source: Company update, 24 May 2022

Montney – A development-ready project

As part of its asset portfolio, Calima also holds 100% interest in over 34,000 acres of Montney drilling rights in British Columbia. The Montney asset, which is referred to as a natural gas sleeping giant, holds substantial inherent value.

The Montney Formation is a world-class and the most active oil & gas field in Canada, with estimate reserves of about 449 Tcf of gas, 14.4 billion barrels of condensate and 1.1 billion barrels of oil.

The Company continues to execute its strategy to realise Montney's inherent value, but the process is taking longer than expected due to the size of the opportunity, significant merger and acquisition activities undertaken in 2021, and the time it takes to absorb new deals.

The area under the control of Calima is ready for development activities with an existing facility capacity greater than 11,000 boe/d of gas and related liquids (50,000 mcfg/d and 2,500 boe/d) via the Tommy Lakes facilities.

With global economies recalibrating to increasing demand for gas and LNG, Montney presents a significant opportunity for the company.

What’s next?

For the June 2022 quarter, Calima has planned to drill four new horizontal wells on its Brooks asset area. Also, the company will carry out the completion and tie-in of the Leo#4 well, drilled in the first quarter of 2022.

To boost the production further and maintain the average daily production levels in the range of 4,100-4,400 boe/d, Calima plans a further drilling program for the fourth quarter of the current calendar year.

CE1 shares were trading at AU$0.195 in the early hours of 6 June 2022.



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