With a massive acreage in Canada’s hottest energy province, significant cash in the bank and a planned drilling program on the horizon, ASX-listed Calima Energy (ASX: CE1) is one energy play that hasn’t been resting on its laurels.
The jewel in the crown as far as Calima and its investors are concerned is its vast 72,000-acre land holding in the Montney Basin, Canada’s most active hydrocarbon basin.
To highlight the scale of production in this region, over 350 horizontal wells were spudded in the Montney in the first quarter of this year alone, almost double the same period in 2016.
According to a 2013 government study, remaining reserves in the Montney were estimated at 449 tcf of gas, 14.5 billion barrels of NGL’s, and 1,125 million barrels of oil.
On the investment front, C$5.2 billion was invested in the Montney in 2017, which is predicted to increase almost 50% to C$7.5 Billion by 2022.
Realising the significance of this region, Calima took the bold step in August this year to acquire its two joint venture partners TMK Montney and TSV Montney giving it 100% interest in the acreage.
Calima holds 72,000 acres of drilling rights in Northeast British Columbia – The Calima Lands.
Its holding lies in a good neighbourhood with one of the leading Montney producers, Saguaro Resources, holding 113,000 acres of drilling and production rights along the same geological trend as Calima Lands.
A recent geological audit and review of offsetting production for the Montney Formation on the Calima lands by McDaniel & Associates Consultants confirmed the Calima Lands should be rich in condensate with adjacent land being developed by Saguaro a valid analogue.
An independent reserve report of Saguaro’s acreage has Proved plus Probable (2P) based on 363 well locations of 401 mmboe.
According to McDaniel’s report, Calima’s prospective resources based on 400 well locations is 475 mmboe.
Cashed-up for drilling and development
Having raised a substantial $25 million in an oversubscribed placement back in August, Calima is cashed-up to fund its initial drilling program over its acreage.
The maiden 3-drill rig program – to get underway in December – will consist of a vertical well designed to calibrate stratigraphy and collect core samples while the second and third wells will have 2,500 m horizontal sections which will be stimulated and placed on extended production tests.
The initial drill program will hit what the company is hoping will be a liquids-rich northern extension of the Montney Formation.
Calima is planning on drilling three additional production wells and a pipeline (C$9m) connecting its wells to nearby infrastructure. Once the pipeline is complete, the company plans on connecting all five horizontal wells.
If all goes to plan, this initial drilling program will show the market the productivity of Calima’s acreage for both gas and liquids.
As investors wait with bated breath for the company to kick off its maiden 3-drill rig program, Calima has been valued in the range of A$0.09-$0.30ps by Morgans in a research note released last week. The stock has been trading around 5c over the past few weeks.
According to Morgans analyst Adrian Prendergast, positive results from this drilling could lead to shorter term production scenarios which would in turn boost Calima’s long term corporate appeal particularly to potential LNG developers looking to boost future gas reserves ahead of staged developments of proposed LNG operations.