Published On: February 5th, 2024
Calima Energy Limited (ASX: CE1) (the Company or Calima Energy) announced its December 2023 quarterly results highlighting the sale of Blackspur Oil Corp. for the cash consideration of C$75 million. During the quarter, Calima Energy ran its operations smoothly, maintained production of 352,234 boe and generated revenue of A$21.1 million.
Figure 1: Calima Energy Plant In Alberta
Divestiture of Blackspur Oil Corp
On January 5th, 2024, the Company announced a definitive agreement with Astara Energy Corp to sell its 100% stake in its wholly-owned Canadian subsidiary, Blackspur Oil Corp, the owner of the Company’s Brooks and Thorsby production assets (‘Alberta Assets’) for a cash consideration of C$75 million.
The completion of sales will be subject to the adjustments of net debt (anticipated to be C$2.5-3 million at closing). Highlights from the Blackspur Oil Corp sale include a post-sale net cash backing of approximately 12-13 cents (A$) per share after completion adjustments and forex movements.
Astara Energy Corp is fully funded for the acquisition, backed by a C$5 million deposit held in escrow. Calima Energy intends to distribute at least 85% of its sale proceeds to shareholders. The remainder of the proceeds will fund the Company’s future plans and new ventures.
During the past 12 months, Calima Energy had returned A$10 million in distributions to shareholders.
Figure 2: Calima Energy’s assets in Brooks and Thorsby
Karl DeMong, President & CEO, Commented:
“The Calima team has concluded yet another active quarter, marked by the successful sale of Blackspur Oil Corp and the completion of the three-well Pisces campaign (Pisces 10, 11, and 12).
The sale is a substantial gain for our shareholders, projecting approximately A$80 million in net proceeds. The Company is committed to returning at least 85% of these proceeds to shareholders. Combined with the recent capital return of $7.5 million in October 2023, this translates to a noteworthy 12-13 cents return per share. This is especially significant
compared to our recent share price of approximately 6-7 cents per share before the announcement of the Blackspur sale. Our corporate team is actively working on the most tax-efficient manner to distribute these funds to shareholders, and we will promptly update shareholders.
All conditions precedent, except for Shareholder Approval, have been met, and we anticipate the closing of the transaction around 26th February 2024, with a final deadline of no later than 30 March 2024.
Following the sale and distribution, the Company will focus on maintaining production from the Paradise Well in British Columbia and acquiring additional oil and gas assets.
I extend my gratitude to all shareholders for their patience. I commend the entire Calima team for their exemplary efforts in ensuring the growth and maintenance of the Blackspur assets, ultimately leading to a successful sale.”
Post Deal Closing Strategy
After completing the Blackspur Sale and the subsequent distribution to shareholders, the Company will remain listed on the ASX. Its key priorities will include continuing production from the Paradise well (operated by Calima Energy Inc. in British Columbia) and actively pursuing the acquisition of additional oil and gas assets. The Paradise Well generates an annual free cash flow of around A$350,000, secured by a performance bond of A$400,000.
Key Performance Metrics
Calima Energy Limited maintained an average daily production of 4,046 boe/d for 2023. The average production for the fourth quarter stood at 3,829 boe/d, marking a 5% decrease compared to the initial forecast. Denoted decline is mainly due to the delays in new production during Q4 due to mechanical issues and the fall of production below the anticipated levels from wells drilled in late Q3 and early Q4.
Figure 3: Key Performance Indicators and Financials of Calima Energy Limited
Calima Energy Limited reported revenue of A$21.1 million with adjusted EBITDA of A$7.9 million. Cash Flow from Operation (CFO) for the quarter ended on December 2023 is A$8 million with Free Cash Flow (FCF) of A$2.4 million. During the quarter, the Company spent A$5.6 million on capital expenditure. The lower production was offset by efficient field drilling operations that resulted in A$0.9 million lower capital expenditures than had been forecasted.
Oil Prices Update
WTI prices averaged US$78.32/bbl in the 4th quarter, 4% less than the previous quarter’s US$81.43/bbl. Currently, WTI is being traded at approximately US$77 per barrel. This is backed by the OPEC+ production cuts declared in November 2023, which have started influencing physical markets. Concurrently, persistent geopolitical risks are counteracting the reduced demand for crude oil resulting from a weakened global economic outlook.
During the fourth quarter, the WCS markets experienced a decline. Anticipations of increased imports of Venezuelan heavy crude into North America and ongoing speculation regarding the commencement date of the Trans Mountain expansion (TMX) seasonally influence the weakness of the WTI.
Despite the short-term dip in WCS differentials in Q4, the medium-term demand for heavy oil remains relatively robust. This is attributed to the sustained demand for the heavy barrel and the anticipated rise in egress resulting from the TMX expansion, facilitating an additional 500,000 barrels per day of exports from Western Canada.
Calima Energy’s Hedging Positions
During the December 2023 quarter, Calima Energy Limited realised gains of A$0.05 million. The Company hold multiple hedging contacts during the quarter:
Figure 4: Commodity Hedging Contracts
Some currency hedging contacts:
Figure 5: Currency Hedging Contracts
About Calima Energy Limited
Calima Energy Limited (ASX: CE1) is a leading Canadian production-focused energy Company. It specialises in developing oil plays in Brooks and Thorsby in Southern and Central Alberta. With a genuine commitment to Environmental, Social, and Governance (ESG) principles, Calima Energy generates stable production from its assets in Brooks and Thorsby.
The recent C$75 million Blackspur Oil Corp sale shows the company’s strategic acumen, securing its position for transformative growth and improving shareholder value. Beyond its operational prowess, Calima Energy holds rights over 34,000 acres of the “liquids-rich” fairway in Montney. This shows scope for significant growth in domestic gas and global LNG markets.
Meet Executive Chairman Mr Glenn Whiddon
Glenn Whiddon is an experienced professional with a diverse background in investment management and executive leadership roles. He is the Principal and Founder of Lagral, a family Company focused on investment management activities in the mining, energy, and property sectors.
Glenn is the Chairman of Calima Energy Limited (ASX: CE1), where the Company invests in oil and gas exploration and production projects, primarily focusing on Canada and potential international opportunities. Under Glenn’s leadership, the energy company aims to maximise value for its shareholders through successful exploration, development, and production activities in the energy sector.
Previously, Glenn held executive positions such as Executive Chairman of Rialto Energy Limited and CEO and Chairman of Grove Energy Limited; which Stratic Energy acquired later in 2007. He was 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.
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.
He holds a Bachelor of Economics in Accounting from Macquarie University.
Investor Outlook
- Calima Energy’s clear strategy to monetise assets on time has positioned the Company as a key player in wealth creation for shareholders
- The Company’s commitment to distributing no less than 85% of the proceeds from the Blackspur sale shows its dedication to delivering substantial returns to its shareholders
- Allocation of the balance proceeds from the Blackspur sale to fund future exploration programs shows the Company’s dedication to consistent growth
- Calima Energy’s focus on optimising expenses and prioritising responsible corporate practices aligns perfectly with investor expectations.
- The possibility of a share buy-back program presents an exciting opportunity for investors in search of companies with flexible strategies
- The stock price of Calima Energy Limited stood at A$0.094 per share as of February 1st, 2024, with an average 52-week range of A$0.082 to A$0.150
- As of February 1st, 2024, the Company’s market capitalisation is A$68.8 million
- The Company has 625.7 million shares on issue as of February 1st, 2024
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