Published On: January 25th, 2023
Calima Energy (ASX: CE1) unveils the initiation of an effective testing program on the two long-reach horizontal Montney wells drilled and partially tested in 2019 on the Calima Lands. With this, Calima Energy and CEO Jordan Kevol intend to de-risk the project and are expected to generate a higher value for the asset, aiming to complete a joint venture, partnership, or trade sale.
The operation of one of the top-tier mining companies in Australia will gauge the gas and condensate flow rates of the Middle Montney Formation in Calima #2. In addition, it will allow for a longer-term test on the Upper Montney in the Calima #3 well. The abundance of condensate and NGLs will further upscale the project economics for prospective Calima Energy projects. Currently, the project is funded by cash flow derived from the production activities in the Brooks and Thorsby assets, with current production of around 4,500 boe/d. The latest Calima Energy share price is AUD0.145.
A Glimpse at the Background
Due to the early spring breakup, Calima #2 and #3 wells’ production testing was cut short after the fracture stimulation of the two Montney horizontal wells in 2019. The spring breakup further necessitated the demobilisation of the heavy machinery, which led to ambiguous and inconclusive test results. However, such concerns will be duly eliminated in the forthcoming Calima Energy projects as a specific strategy for a permanent access road to the main highway shall be in place.
The testing of the Middle Montney in Calima #2 allowed only a 16% recovery of the frac load, which was considered the peak potential gas rate. Before the end of the testing program, the well flow was tested at 10.2 mmcf/d and 103 bbl/d condensate (approximately). However, re-testing the well will uncover the ultimate potential of this zone in addition to the associated condensate rates, which the original test may still need to look into.
The Upper Montney well (Calima #3) was tested for a relatively short period, resulting in a minimal frac load fluid recovery of 5% before the final termination of the testing. While the 2019 production testing rates of the Calima #3 well barely revealed its potential, the additional testing program planned for Q1-2023 is estimated to uplift the energy Company’s detailed reservoir work that points towards a significant condensate resource within the Upper Montney at Tommy Lakes.
Condensate is a light and high API value oil that attracts premium pricing in the Canadian market, usually in the range of WTI pricing.
Calima Energy and CEO Jordan Kevol’s Mission Retest
Calima Energy CEO Jordan Kevol
Calima Energy senior management and the board have sanctioned a work program consisting of an in-depth re-testing of the flow rates from each horizontal Montney wells. It is anticipated to commence in late January 2023, well before the onset of spring thaw conditions. These testing programs will be carried out with sufficient volumes being produced to bring an accurate evaluation of each of the zones. The wells are forecasted to secure valuable gas flow rates. Besides, the work program will validate the expected condensate production rates from the two Montney zones.
Calima Energy and CEO Jordan Kevol also project a striking presence of a condensate-rich resource in the Upper Montney owing to the condensate saturation noted in the core from the vertical Calima #1 well.
Given that the load fluid has had considerable time to leak into the formation, testing the Middle Montney may bring more substantial outcomes in the form of higher gas and condensate rates.
The Potential Advantages of the Testing Program
One of the notable benefits of this testing is that the Upper Montney zone on the Calima lands is perceived as a condensate-bearing zone and can provide the energy Company with incremental reserves that still need to be acknowledged. Moreover, the higher condensate test rates and related reserves can add further value to the Calima Montney project, allowing the energy Company to benefit from both high natural gas and condensate prices, thus creating a win-win situation for Calima.
From the Lens of Calima Energy Investors
- In recent months, Calima has engaged many parties interested in joint ventures, collaborations, and other potential investments into the large-scale Montney resource wholly owned by the Company.
- A partnership agreement with Calima Energy company funding would also uplift the current contingent reserves in the development pending category to 2P Reserves of 6 MMboe.
- Calima’s >34,000-acre position is also ready to drill.
- Calima Energy, led by CEO Jordan Kevol, is a thriving and ROI-focused producer and explorer of natural resources in Australia and rare earth metals with top-tier assets, positive cash flow, and a strong emphasis on ESG.
- The strategic re-testing of the Calima wells and the anticipated success will further propel the Company’s potential to unfold the unexplored value in the Montney, thus setting it up for more groundbreaking projects shortly.
For more information, visit their official website.