Published On: August 23rd, 2023
Calima Energy Limited (ASX: CE1 / OTCQB: CLMEF) (“Calima” or the “Company”) has announced its drilling plans for the rest of the year 2023. The program for new 3-well Pisces drilling will begin in mid-September this year. The drilling is planned around the key mineral leasing contract finalised in 2022 and concentrates on the property around core Brooks activities. This program will allow effective cost management along with profitable production. Two of the three wells follow up on the highly successful Pisces #6 through #9 wells. These wells will connect to Calima’s current oil batteries and infrastructure, with planned Q4-2023 on-stream dates. The peak production is projected to occur after fracture stimulation in December 2023. Furthermore, the newly drilled wells will give investors leverage to the recent increase in commodity prices.
With additional production from these three wells and higher WTI prices at US$80 per barrel and lower WCS differentials, Calima is well placed to increase revenue and earnings over the coming 6 months.
Calima has announced a distribution to shareholders of $3 million in September 2023 and has undertaken to make regular distributions to shareholders going forward.
The Objective:
The drilling program aims to keep production levels on average at 4,000 boe/d range. The strategy focuses on increasing energy efficiency, maintaining a strong balance sheet, and maximising free cash flow. This will also provide optimum funding for capital returns and dividends through successful production and exploration.
Figure 1: 3 Well Pisces Oil Drilling Program
Key Highlights
- The Q3/Q4 2023 program consists of three multi-stage fractured wells in Brooks from Pisces #10 to #12
- Among other successful drills, two wells are following up on the Pisces #6 through #9 wells
- The third is investigating the horizontal multi-stage productivity of an oil pool delineated and tested via vertical wells. The drilling and testing process is likely to take ten days on average, which will begin in mid-Q4-2023
- The capital and funding will be obtained from the Company’s credit facility and current cash flow
- Glauconitic wells are expected to have the following:
- EUR’s of 170 to 270 Mboe’s
- IP90’s of 200 to 400 boe/d
Mr Karl DeMong, CEO and President, commented, “The commencement of the September 2023 drilling program is integral to the Company’s strategy to maintain production levels to support the return of capital to shareholders while leveraging existing infrastructure and lands. The balance sheet is very healthy, and Calima is poised to benefit from any potential upward move in commodity prices“.
The 3-Well Drilling Program Update
According to the 3D seismic, the three prospect wells are a potential resource on the safe surface pad of the Glauconitic horizon. These will be completed with multiple-stage fractures and tie up with the existing reserves of Calima Energy.
#Pisces 10: The horizontal well is a follow-up of recently drilled Pisces #6 and #7 wells. These newly drilled horizontal segments of the Pisces have shown exceptional performance within the group. The production for both wells began in the latter part of December 2022, and in just the initial 7-month period, each well has collectively produced 53,000 bbl and 41,000 bbl of oil, respectively. The well will be finished with multi-stage fractures and tied into Calima’s 2-29 oil battery. This area will be drilled from the same surface pad as Pisces #6 and #7, resulting in an on-lease tie-in that will lower overall costs.
#Pisces 11: The well is focused on developing a new oil pool and is about 10 meters downdip and a mile north of a 0.28 BCF gas well. The well will be completed using multi-stage fractures and feed into Calima’s 50% owned 15-23 oil battery at the Brooks field’s southern end.
#Pisces 12: This horizontal well targets oil in the Glauconitic horizon and is a northern extension to the successful wells Pisces #8 and #9. The Company possesses 3D seismic coverage in the region that confirms the existence of the Glauconitic channel, and there are still ample reserves in terms of volume. This well will continue to be designed with a horizontal length that is about 20% longer. The fracture intensity will be about 45% greater than the original 12-23 well, based on the success at Pisces #8 and #9. The well will discharge into the South end of the Brooks field’s 15-23 oil battery, which is 50% owned by Calima.
Figure 2: Typical Glauconitic Drilling and Production Timeframes
Chairman of Calima Energy Limited, Mr Glenn Whiddon
Mr Glenn Whiddon is a seasoned professional with a broad career in executive leadership and investment management positions. He is the Principal and Founder of Lagral, a family Company focused on investment management activities in the mining, energy, and property sectors.
Mr Glenn is the chairman of Calima Energy Limited, which invests in oil and gas exploration and production projects, primarily focusing on Canada and possible global prospects. Under Mr Glenn’s leadership, Calima aims to maximise shareholder value through successful exploration, development, and production activities in the energy sector.
Previously, Mr Glenn held executive positions such as Executive Chairman of Rialto Energy Limited (now Azonto Petroleum Limited) and CEO and Chairman of Grove Energy Limited, which Stratic Energy acquired later. He also co-founded Pinnacle Associates, which undertook direct investments in the Russian natural resource sector and provided advisory services for foreign companies investing in Russia and the CIS region.
Mr Glenn’s extensive experience also includes establishing the Moscow operations of Bank of New York – Inter Maritime Bank, focusing on correspondent and corporate banking, resource investments in the oil industry, and consulting.
Dividend Payback to the Shareholders
Calima has approved a total capital return of AUD 5 million for FY2023, approximately a 10% yield. The distribution will be completed in two instalments, first in September 2023 and next in January 2024. The objective is to increase the frequency of shareholder distributions, subject to prevailing market conditions and commodity prices.
Previously, Calima Energy (CE1) launched a half-year dividend program beginning in the second half of 2022 following the ongoing strong performance of its production assets. The dividend payout totalled $2.5 million, reflecting a half-yearly yield of 2.4 per cent at the current share price.
Investor’s Outlook
- Calima’s share price stood at AUD 0.097 per share as of August 21st, 2023, with an average 52-week range of AUD 0.083 to AUD 0.150 per share
- The Company’s market capitalisation stood at AUD 59.43 million as of August 21st, 2023
- Q2 2023 quarterly production was 377,826 boe, with daily production averaging 4,152 boe/d (Approximately 62% oil and liquids)
- For the second quarter of 2023, oil and natural gas sales grossed AUD 22.7 million with an adjusted EBITDA of AUD 7 million
- The new well is directly north of one of the best-performing vertical Lithic Glauconitic wells, which has produced ~47,000 barrels of oil and 825 mmcf of gas
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