Published On: November 1st, 2023
Figure 1: Calima Energy Limited
Calima Energy Limited (ASX: CE1 / OTCQB: CLMEF) (“Calima” or the “Company”) announces its September quarterly activities and cash flow report focusing on drilling and production updates.
Production Overview and Financial Stability
Calima Energy Limited reported a total production of 338,786 boe (60% oil and liquid products), a slight decrease from the forecast.
Despite this, Calima Energy Limited reports strong financial stability. As of September 30th, 2023, Calima Energy had net working capital of AUD 5.9 million and AUD 17.3 million cash. Notably, the Company did not use its CAD 20 million debt facility. Importantly, ~28% reduction was seen in the capital expenditure of the Company; Capex for 2023 forecasted AUD 36 million compared to the previous year 2022 AUD 49.7 million.
Mr Karl DeMong, President & CEO of Calima Energy Limited, said,
“We are pleased to report a quarter of strong production and successful drilling at our Brooks core area through the third quarter and early 4th of 2023. The wells drilled in late Q4/22 and early Q1/23 have enabled us to maintain average YTD Production rates in the 4,100 boe/d range, keeping ahead of corporate decline rates while minimising new spending. The further drilling underway at Brooks for late Q3 or early Q4, together with cost and expense management, will allow Calima to continue to produce at these rates into Q1-2024, helping to maximise free cash flow. We will start to see some production from the 3 Pisces wells in Q4-2023. Drilling plans for the first quarter 2024 will be finalised in the coming weeks.
WTI Oil prices remain strong in the ~USD 85/bbl range, which results in excellent cash flow from our production, which remains weighted towards oil at >60%.”
As far as production is concerned, Calima Energy Limited has maintained an average daily production of 4,000 barrels of oil equivalent per day throughout the first nine months of 2023. Though the third quarter saw a 3.8% decrease in production due to maintenance activities, it has been restored to its forecast levels.
In the third quarter, Calima’s drilling program was designed to maintain corporate production levels and grow PDP reserves.
Current production is ~4,100 boe/d, following production at Pisces 10 and 11. Pisces 11 continues to clean up, with Pisces 12 recently fracture-stimulated and due to commence production over the coming weeks.
Figure 2: Calima Energy Limited’s Key Financial And Operating Highlights
Calima Energy reported AUD 23.7 million as revenue for the quarter ended on September 2023, which is AUD 1.6 million higher than the forecast, mainly due to higher WTI prices. During the period, the Company experienced some reduction in operating costs, primarily due to the Company’s fixed price power contracts. During the September 2023 quarter, operating costs slipped by AUD 0.9 million. Eventually, the abovementioned factor impacted earnings positively, which stood at AUD 9.8 million, AUD 2.3 million greater than the forecast.
Recent Developments
Calima Energy Limited completed its drilling program at three wells under budget by 12.5% before the end of the quarter. Drilling operations on Pisces #10 and #11 have been completed. The drilling activities are in the final stages for Pisces #12.
Figure 3: Table Of H2 2022 Drilling Program
The recent drilling program at three wells was performed to maintain their daily production target of 4,000 boe/d for 2023. These wells, completed in Q3 and ongoing into Q4, utilised cost-efficient techniques.
- Pisces #10 and Pisces #6 and #7 exceeded production rates
- Production is underway at Pisces #11, targeting a new oil pool
- Pisces #12, which completed multi-stage fractures, is set to begin production, targeting oil in the Glauconitic horizon and extending the success of Pisces #8 and #9
- A pipeline is under construction to tie Pisces #12 into Calima’s oil battery
Commodity Prices Update
The September 2023 quarter witnessed a spike in the WTI crude prices. During the quarter, WTI prices were USD 69 per barrel and surged to a peak of USD 95 per barrel. This increase was attributed to nearing 5-year lows in US crude oil stock levels, driven by robust seasonal demand and record-breaking US crude exports. Presently, WTI stands at approximately USD 85 per barrel. To stabilise the market, OPEC+ countries have extended production cuts to counterbalance any weaknesses in demand.
Persistent economic uncertainty and a subdued global economic forecast continue to pose challenges for the global oil markets. Nonetheless, these obstacles have been mitigated by increased geopolitical risks from the conflict in Ukraine and recent tensions in Israel. Consequently, the WTI markets are anticipated to remain highly volatile.
Figure 4: US Crude Oil Stock
Fracturing Strategy
Figure 5: Completion Design
- Fracturing Process: The three Pisces wells were completed using a multi-stage fracturing approach with frac ports 30-40 metres apart. Each stage used 15 tons of sand to enhance conductivity.
- Healing: After each stage, the frac ports were temporarily closed to allow fractures to heal around the sand, minimising cleanout needs and improving production efficiency.
- Transition to Production: Once all stages were completed, the wells were brought into production, initiating the clean-up phase.
Calima Energy Chairman Mr Glenn Whiddon
Mr Glenn Whiddon, the Chairman of Calima Energy Limited, brings a wealth of experience in equity capital markets, banking, and corporate advisory, primarily focusing on the natural resources sector. With an academic background in Economics, Mr Glenn Whiddon has held various leadership and management roles in the corporate world.
Currently, Mr Glenn Whiddon is a Director for multiple publicly traded Australian and international companies operating in the resources sector.
In the past, Mr Glenn Whiddon held key positions, including Executive Chairman, Chief Executive Officer, and President, at Grove Energy Limited. This company was engaged in oil and gas exploration and development in various European and Mediterranean regions, such as Italy, Romania, Slovenia, Tunisia, and the UK and Dutch North Seas. During his tenure, Grove Energy underwent a remarkable transformation under his leadership.
Calima Energy’s Commitment to Health, Safety, and Environment (HSE) and Emission Reduction
Calima Energy Limited has prioritised Health, Safety, and Environmental (HSE) concerns, maintaining a remarkable record of zero employee downtime due to injuries or incidents for multiple quarters. Key HSE indicators consistently exceeded corporate targets.
Calima Energy manages its closure spending effectively, aiming to meet the 2023 target set by the Alberta Energy Regulator. They have also completed a successful oilfield waste audit and are committed to reducing carbon emissions, notably replacing methane-operated pumps with emission-free solar-powered systems.
Investor’s Outlook and Financials
- Calima Energy’s future looks promising as it continues to optimise its projects in Alberta’s southern and central regions
- The Company’s adaptability and commitment to staying responsive to changing market dynamics, especially to cleaner energy sources, position them well to meet demand while also contributing to a greener energy future
- Management succeeded in maintaining ~4,000 boe average annual production despite a ~28% reduction in capital expenditure year on year basis
- As of now, the Company has maintained a zero-leverage policy (no debt)
- For the quarter ended on September 2023, the Company reported AUD 23.7 million, higher by AUD 1.6 million than the forecast figures that eventually positively impacted the earnings of the Company
- Management effectively signed the fixed power contract that resulted in the reduction of AUD 0.9 million in operating costs during the quarter
- Calima Energy’s share price stands at AUD 0.088 per share as of October 31st, 2023, with a 52-week range movement of AUD 0.080 – 0.150 per share
- The Company’s market capitalisation is AUD 55.06 million as of October 31st, 2023
- Calima Energy Limited has 625.72 million shares on issue as of date. Also, the Company has 15.8 million @ AUD 0.20 (Expiry 2024-2026) and 2.5 million @ AUD 0.16 (Expiry 2024-2025) options outstanding
About Calima Energy
Calima Energy Limited is a Canadian Company primarily involved in the production and exploration of oil and gas. The Company is headquartered in Perth, Australia, while operations are centred in the southern and central regions of Alberta, specifically in the areas of Brooks and Thorsby.
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