Calima Energy (ASX:CE1) eyes production boost as new wells set to contribute

Highlights

• Calima has wrapped up the drilling of Gemini #8 and Gemini #9, which are expected to join the production stream shortly.
• Drilling has been completed on Pisces #4, while Pisces #5 was recently spudded.
• Calima’s production is on track to bounce back to ~4,100boe per day.

Calima Energy Limited (ASX:CE1|OTCQB:CLMEF) is making giant strides to strengthen its position in the oil & gas market at a time when crude oil prices are running hot.

The Canada-focused oil & gas producer has issued an update, highlighting a number of activities across its project portfolio. The company undertook an extensive drilling campaign over its Brooks and Thorsby assets. It was aimed at boosting production to reap substantial benefits from strong crude oil prices.

On the back of the latest operational updates, shares of CE1 edged nearly 3% higher and closed the day’s trade at AU$0.175 apiece on 4 July 2022. The shares were trading at AU$0.175 midday on 5 July 2022.

Operational update

Brooks: Calima drilled Gemini #8 and Gemini #9 in June 2022. Drilling on the Gemini#9 well was finished on 21 June 2022, and the well is currently undergoing completion and tie-in. The company expects the well to start contributing to production by next week.

Drilling on Gemini #8 was finished on 11 June and the well will commence production within the next few days.

Image source: Company update, 4 July 2022

In June 2022, Calima also drilled and completed the Pisces #4 well. Pisces wells are drilled on the most productive Glauconitic formation. Pisces #4 is a follow-up of 15-36 well, which has produced over 133,000 bbls of crude oil since mid-2018. The well is expected to undergo fracture simulation in the coming weeks, while production is scheduled to begin by mid-August 2022.

Pisces #5 was spudded on 2 July, and drilling continues to move forward. Pisces #5 is a follow-up of the 04-05 well, which has produced 86,000 bbls of oil since mid-2014. The company anticipates Pisces #5 to outperform the 04-05 well in production.

Thorsby: The fracturing program on Leo #4 is complete. The well was drilled in January this year at North Thorsby, targeting the Sparky formation. The company plans to shut in the well for two weeks whilst a temporary oil battery is set up, and the gas sales pipeline is tied-in.

Data source: Company update, 4 July 2022

Revision of hedging policy

As Calima’s swap hedge book is due to expire on 31 December 2022, the company has implemented a revised hedge policy. The new policy will provide exposure to upside prices and, at the same time, will protect from the downside risk of oil prices. This will be done in the form of a put-call collar topping up its coverage for Q4 2022.

The collars implemented for the period are 250bo/d @ US$2.8/bbl and include the below coverage:

The new Thorsby and Brooks wells will start contributing to the Company’s net production in the coming days and will boost the revenues further.