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Calima Energy’s (ASX:CE1) high-octane June quarter marked by strategic Blackspur acquisition

Summary 

  • Calima Energy is a low-cost oil & gas producer with operations focused on the Western Canadian Sedimentary Basin.
  • The Company is developing its oil projects in the Alberta region and holds a material development-ready acreage position in the Montney gas formation in British Columbia.
  • During the June 2021 quarter, Calima completed the acquisition of Blackspur.
  • The company’s gross production for the reported period was 180,500 boe or 2,959 boe/d.
  • Calima realised an average price of US$66.07/bbl during the quarter.

Calima Energy Limited (ASX:CE1) has reported an action-packed June 2021 quarter. The Company became a net producer of oil & gas after the completion of the Blackspur acquisition during the quarter.

Soon after the deal, Calima hit the ground running and embarked on drilling at the newly acquired assets to bolster its production. The Company’s activities were well supported by strong crude oil prices in the international market.

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In the quarterly performance update, Jordan Kevol, CEO and President of Calima Energy, addressed the acquisition of Blackspur as transformational for Calima and its shareholders. He pointed out that the existing reserves, production, drilling inventory and strong management team of Blackspur support Calima with significant cash flow and potential to grow production for a longer period of time.

“The current price for crude oil and natural gas is building a foundation for expanded drilling programs, reserves growth and ultimately shareholder value creation. The Company is preparing for its next drilling program at Thorsby, Alberta, Canada which will commence in August. The Company is encouraged with recent M&A activity in the Montney and continues to focus on strategies to unlock shareholder value from the Montney assets through joint ventures, farm-outs or asset dispositions,” Kevol added.

Read here: Calima Energy (ASX:CE1) lifts guidance on stellar May operational figures

Key highlights for the quarter

Production & Sales

The acquisition of Blackspur was completed on 30 April 2021. As a result, Calima realised the production for two months, May and June, during the quarter. Production came primarily from assets in the Brooks and Thorsby areas in Alberta.

Calima’s average daily production was 2,959 boe during the quarter. For the quarter ended 30 June 2021, the company recognised oil & natural gas sales of AU$10.1 million, while adjusted EBITDA stood at ~AU$4.5 million.

Data source: Company update, 27 July 2021

Operations during the quarter

Followed by the acquisition of Blackspur, Calima Energy launched a development drilling operation to boost production from the Brooks and Thorsby assets.

During the quarter, the Company drilled four development wells in the Brooks area, targeting the Sunburst formation. All the wells were horizontally drilled and did not require hydraulic fracturing for bringing them into production.

Recent update: Calima Energy (ASX:CE1) concludes drilling of Gemini #4 well, what’s next?

Brooks formation target (Image source: Company update, 27 July 2021)

The Brooks production comes from the Sunburst and Glauconitic formations. The current drilling program is solely focused on the Sunburst formation, and Calima is likely to add horizontal wells targeting the Glauconitic formation in its upcoming drilling plans.

Also read: Calima Energy (ASX:CE1) shares soar 12.5% on Brooks Sunburst drilling update

Thorsby to witness some action in August

In the current scenario, Brooks contributes 70% of the total production while the rest 30% is planned to come from Thorsby.

Calima has developed a drilling campaign plan to increase production from the Thorsby asset. The initial plan is to drill three development wells targeting the Sparky Formation oil pools. The drilling campaign is expected to commence in August.

In the Thorsby area, 11 wells were drilled prior to the Blackspur acquisition. It has room for 89 wells on the Sparky Formation and 12 wells on the Nisku Formation.

Thorsby development map (Image source: Company update, 27 July 2021)

The Montney Play: Development pending

The Montney is considered as the third largest gas basin in the world. The basin is a strategic source of oil & gas for Western Canada and is anticipated to become a leading energy supplier of LNG to the North American market.

Calima has a 10-year continuation lease for 33,643 acres of land, which will expire in 2029. The Company also holds approval for the construction and operation of a multi-well production facility. Under the approval granted by the BC Oil and Gas Commission, Calima could construct a pipeline to connect well pads with the regional pipeline and processing infrastructure.

Montney consolidation map (Image source: Company update, 27 July 2021)

Calima is evaluating strategies to develop its holdings in the Montney Play through partnership, farm-out or outright sale.

Hedging Strategy    

To hedge its investment on the wells drilled in the Brooks region, Calima has executed WTI and Western Canada Select (WCS) swap contracts for the next 12 months.

The futures contracts will ensure that any downside in international crude oil prices in the next 12 months will not affect the price of the oil coming out from these three wells.

Outlook

Calima has committed to spend C$15.4 million on development activities in the Brooks and Thorsby assets for the remaining part of 2021. The fund will be spent on bringing online the third and fourth Sunburst wells. A considerable part of the allocated capital will go towards the drilling of three Thorsby wells.

Once the drilling operation is finished and the wells are tied to the production system, Calima estimates 3,700 boe/d of average production for the eight months ending 31 December 2021, while the exit production for 2021 could cross 4,500 boe/d.   

To know more read more: Three Catalysts Enhancing Calima Energy's (ASX:CE1) Upside Potential

Shares of CE1 closed the day’s trade at AU$0.01 on 27 July 2021. The Company has a market cap of AU$102.74 million.

 

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