- Calima’s successful merger with Blackspur has transformed the Company into a high margin oil & gas producer.
- The Company now owns a cash-flowing asset base that holds long-term upside, comprising high quality, producing assets – Brooks and Thorsby.
- Calima is well-placed to benefit from a bolstering commodity price environment.
Calima Energy Limited (ASX:CE1) seems to be ticking all the right boxes so far as it becomes a free cash flow and growth focussed Canadian oil and gas producer and explorer following Blackspur Oil Corp.’s acquisition.
Calima’s merger with Blackspur has created a mid-tier, ASX-listed firm, with robust cash flow from high return conventional oil assets that have been undercapitalised for several years, and strong growth potential from Calima’s legacy significant undeveloped resource portfolio in the Montney.
Besides, the successful merger with Blackspur has transformed the Company into a high margin oil & gas producer leveraged to WTI pricing and exposure to surging natural gas prices through its strategic holdings in the Montney Formation.
With the completion of the transformative merger, there are many good reasons to believe that Calima is ideally positioned for growth over the coming years:
Cash-Flowing Asset Base with Long-Term Upside
The merger with Blackspur has provided the Company with a cash-flowing asset base that holds long-term upside, comprising high quality, producing assets – Brooks and Thorsby – in Alberta, Canada. In Q4 2020, Brooks produced ~1,860 barrels of oil equivalent per day, while Thorsby produced ~740 barrels of oil equivalent per day.
Blackspur has established a significant position of land (~83 net sections) in Brooks and significant infrastructure that creates a base for growth and expansion with year-round access. Brooks’ production comes from the Glauconitic & Sunburst formations. Interestingly, open hole Sunburst wells have top tier economics at current pricing.
On the other hand, Thorsby is a large, consolidated land base containing a delineated resource play with a large inventory that is development ready providing long-term development potential. The Thorsby asset offers a consolidated land base of ~108 net sections and has year-round access.
At Thorsby, Sparky play is more conventional in nature with little historical drilling. Besides, the scoping economics on the Nisku play appear strong at current prices, and the Duvernay play has seen positive offset results by other companies nearby.
Large Resource in World-Class Montney Play
The Montney play is one of the most competitive unconventional plays in North America given the low cost, high productivity and liquids-rich wells combined with attractive fiscal terms.
Calima holds 100 per cent interest in over 60,000 acres of Montney drilling rights in British Columbia, with a 10-year continuation lease over 49 sections (33,643 acres) owing to a successful 2019 drilling campaign. The Company’s Montney asset holds a 2C Contingent Resource of 248.9 billion cubic feet of gas and 12.4 million barrels of crude oil and natural gas liquids as Development Pending.
In Montney, the Company also owns Tommy Lakes facilities and pipeline infrastructure with a replacement cost estimated at AU$85 million. Besides, the Company holds approval to construct a service pipeline connecting the Calima well-pad with regional pipeline and processing infrastructure.
The pipeline, which is planned to run through the core of the Calima Lands, will connect existing and future Calima wells to the Tommy Lakes infrastructure with the capacity to transfer up to 50 mmcf/d of wet gas and 1,500 bbl/d of wellhead condensate through to the North River Midstream sales line. This will be providing the Company with access to the Canadian and US gas markets at AECO, Alliance and T-North/Station 2.
Once Calima secures funding to build the tie-in pipeline from its existing well pad into its owned infrastructure, the 2C resource elevated to the Development Pending category will be recategorised as 2P Reserves.
Leveraged to Oil & Gas Price Recovery
Calima is well-placed to benefit from a bolstering commodity price environment. As per Calima, it can quickly respond to rising energy prices by accelerating its drilling programs, given the Company’s ability to convert wells from spud to on-stream in 30-60 days.
Moreover, Blackspur’s oil-producing assets will provide the larger entity a recurring cash flow stream as well as an exposure to improving oil prices. Furthermore, the substantial resource base of the Calima Lands in the Montney gives upside to both improving oil and gas prices and LNG development in Canada.
Calima shares traded at AU$ 0.008 on 27 May 2021.