Calima sets 9-month EBITDA target of A$68m

Calima Energy is set to drill at least four horizontal wells next quarter to keep its Canadian cash flowing as it seeks to maintain a run rate of between 4100 and 4400 barrels of oil equivalent per day at its onshore Canadian oil operations. The company has issued adjusted EBITDA guidance for the nine months to September 30 of between A$63m and A$68m based on WTI oil prices of US$105 a barrel – marginally below today’s pricing.

In a price sensitivity analysis the company said its adjusted EBITDA expectation for the nine month period would lower to between A$57m and A$62m if the oil price dropped as low as US$95.

Notably management also flagged the possibility of a shareholder dividend later in the year.

The ASX-listed, Alberta-focussed producer is actively working two main project areas in Canada, Thorsby and Brooks, while it keeps a watching brief on the increasingly prospective condensate and gas prospects of its more northerly-located Montney gas field.

A flurry of vertical and horizontal wells into a range of productive formations at the Brooks and Thorsby projects last year lifted production to over 4000bopd.

In January last year Calima was averaging less than 50 bopd at the project that it picked up via a takeover of Blackspur Oil Corp in the first quarter of 2021.

The company is now set to kick off two horizontal wells next month into the Gemini play and two more horizontal wells into the Pisces play. It also flagged the June completion and tie-in of the Leo 4 well drilled in early 2021.

Gemini 5 was a highly successful, conventional vertical well drilled earlier this year into the Sunburst Formation and Calima is planning two horizontal wells from the same drill pad at a total cost of around C$2.7 million. It has tipped a six-month payback time and a 10 year reserve life.

Gemini 5 cost C$924,000 and has generated a net C$3.5 million to date that, according to the company, makes it one of the best performing Sunburst wells in the core Brooks area.

The Pisces play, also part of the wider Brooks project, is targeting the Glauconitic Formation where Blackspur had significant success prior to the Calima transaction. The planned wells, Pisces 4 and 5, will follow up Blackspur wells that have produced 130,000 and 85,000bbls respectively.

The company said it expected Pisces 5, where it has a 50 per cent interest, to outperform the earlier 04-05 well due to technology advancements in horizontal multi-stage fracturing and a higher number of planned frac stages.

With a drilling budget of C$4.4 million the new wells are expected to pay out in around 8-9 months according to Calima and are expected to have a well life exceeding 10 years, based on calculations at current oil and gas prices.

Calima is planning to multi-stage fracture stimulate and test the Leo 4 discovery into the Sparky Fm in an area of undeveloped acreage at Holborn north of Thorsby. The company says the oil and gas shows were excellent while drilling this well and it is ready for a 53-stage fracture program and production testing once spring conditions permit.

It is hoped that with production success at Leo 4, Calima will be able to book new reserves in this area and plan future follow-up drilling. It said production from Leo 4 is expected later in the year.

The current drilling program is designed to grow and maintain the Company’s base production and maximise cash flow giving financial flexibility to provide returns to shareholders later this year. With continued commodity price strength, and a successful Brooks drilling program, Calima will have the flexibility to plan additional drilling in Q4 2022, following a return to shareholders.

Three of the wells will utilise the recent expansion to the infrastructure in the Brooks area and the company has been able to book a preferred drilling rig that has previous experience in the region.

Due to the on-lease tie-in nature of the wells, the company said it anticipates a fast-tracked timeframe for all four wells to get into production. Additionally, the upcoming completion and testing of the Leo 4 well at Holborn has the potential to be impactful with respect to additional reserves bookings and follow-up drilling locations according to management.

Notably, Calima’s wells appear to have serious margins, providing a significant buffer against any retreating oil price.

With an upper end revenue estimate of A$111m for the nine month period to September 30th against a US$105 oil price and an upper end estimated adjusted EBITDA for the period of A$68m, there seems to be plenty of fat in it – good business if you can get it.

Is your ASX-listed company doing something interesting? Contact: matt.birney@wanews.com.au