Calima Energy Annual Report Update: Well Positioned Amid COVID-19

On 1 April 2020, Subiaco-based, ASX-listed international oil & gas company, Calima Energy Limited (ASX: CE1) updated the market with its annual report for the 12-month period ended 31 December 2019. CE1, which owns and operates 63,103 acres of drilling and production rights in British Columbia's Montney Formation (Calima Lands), drilled three successful wells in the year 2019 that resulted in a maiden gross contingent resource of 196.1 Mmboe.

The other major milestones achieved during the year were: -

  • Ten-year Continuation Lease granted over Calima Lands: On 28 October 2019, the Company revealed that the British Columbia Department of Energy, Mines and Petroleum Resources granted CE1 with a 10-year continuation lease over 49 sections (33,643 acres) of land, owing to the 2019 drilling campaign on Calima Lands. This represents that over 56% of the Company’s core lands do not require further well drilling programs on land converted to leases until 2029.

It is also notable to mention that the remaining acreage of the Company is held under five-year drilling licences that require drilling for further conversion into lease grants, mostly maturing in 2022.

  • Wellsite Production Facility Approval: On 18 November 2019, CE1 secured approval for a production facility construction project, encompassing electrical generation metering, tankage and a control centre. The off-site construction in a controlled environment and installing the same on pre-set foundations at the site would result in a cost-effective and efficient infrastructure establishment in the winter.

It is expected that extra modular design would be necessary at the site in order to have capacity for a 20 well pad.

  • Pipeline Connection to Regional Sales Networks Approved: On 11 December 2019, Calima Energy announced to have received permit for a pipeline construction project, which will connect the Company’s well pad to the processing infrastructure and regional pipeline.

The pipeline capacity is expected to be up to 50 Mmcf/d and 1,500 bbls/d of wet gas and well-head condensate, respectively.

Good Read: Coronavirus Effect on O&G Company and CE1.

Come 2020; CE1 strategies have continued to place well in line with the commercialisation of Calima Lands. Despite the recent tumbling oil prices and volatility in the global market with the advent of COVID-19 outbreak, the Company seems well positioned to endure the existing challenges and composed to take advantage from any market improvement.

Tommy Lakes Infrastructure Acquisition: On 19 February 2020, CE1, in continuation with pipeline approvals, announced Tommy Lakes Infrastructure acquisition, offering profitable access to the pipeline (NorthRiver Midstream) and Jedney processing facility.

The facilities of Tommy Lakes Infrastructure such as compression facilities, associated pipelines and other infrastructure are strategically situated 20 km north of the Calima Lands, aiding the Company with the advantage of export routes to T-North/Station 2, NGTL/AECO and Alliance. Further, it provides access to gas transportation to the proposed Shell/Petronas' LNG Canada Facility and Kitimat Woodside/Chevron LNG Facility and post the increased pipeline capacity.

It is also notable that Tommy Lakes Infrastructure Facilities are in excellent condition and are estimated to involve A$85 million of replacement cost and A$825,000 of purchase cost.

Field Development Plan (FDP) & Final Investment Decision (FID): The acquisition of Tommy Lake Infrastructure is an essential step toward FDP, making Calima Lands a ready-for-development project, allowing production to commence as early as 6 months from FID. The Company does not intend to carry out FDP until FID is completed, subject to securing fund via either a JV and/or project financing.

Calima Energy Strategic Forward Plan: During end-March 2020, the Company also update the market with management shift to Canada. The Tommy Lakes acquisition, along with management shift, is anticipated to maximise the shareholder value. For the same, CE1 plans to maintain healthy balance sheets and overhead cost reduction.

The changes occurred in the announcement are: -

  • Mr Micheal Dobovich will assume the role of President (currently Country Manager);
  • Dr Alan Stein, present MD of CE1, will move to a Non-Executive role;
  • Mr Mark Freeman, CFO, will handle extra responsibility of Company Secretary in Perth, Western Australia;
  • Directors have agreed for the conversion of their fees (director and executive) to shares and overheads slashed, effective from 1 March 2020.

Interesting Read: Regulatory Agency Governing O&G Activities Know-How & CE1’s Montney Formation Asset

Stock Information

Calima Energy has more than A$4.15 million net working capital as of 29th February 2020 (excluding Tommy Lakes’ acquisition worth ~ A$1.0 million). The Company has a market cap of A$6.47 million and its stock closed the day’s trade at A$0.003 on 01 April 2020.

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