Calima Energy’s neighbour in Canada’s prolific “Montney” oil and gas basin has revealed impressive financial returns in a corporate update that helps explain the buzz around the newly-listed ASX company.
Privately held Saguaro Resources was an early mover in the liquids-rich shale boom that has gripped the Montney Basin in British Columbia, Canada. They have significant land holdings just 2kms south of Calima’s acreage.
The Albert-based company has already invested more than C$400 million and drilled 46 wells, with production averaging 10,500 barrels of oil per day from 36 wells in August 2017.
With well costs falling and a reliable estimate of recoveries of between 6 and 8 billion cubic feet per well, Saguaro reported it was achieving an internal rate of return of between 40% and 83% at current condensate and gas prices.
Those types of returns may explain the flood of money into the Montney and the strong debut by their neighbor Calima Energy on the ASX last week.
The company was formerly incarnated as Azonto Petroleum, which came off the boards in July ahead of this months back door listing into Calima.
The deal turned into a bonanza for shareholders old and new as the stock ran from a theoretical re-listing price of 3.3c to a high of 5.9c last week. It held on to most of those gains, closing on Thursday at 5.1 cents.
Calima is led by Alan Stein and Jonathon Taylor who have taken up the roles of Managing Director and Technical Director respectively. They are the core members of a team that carved out a big reputation in the upstream sector with successes at Fusion Oil and Gas and the UK listed £2b Ophir Energy.
In a release to the ASX on Thursday, Stein said data from existing wells in and around Calima’s 51,000 acres had confirmed the company’s view that its land holding was directly analogous to the acreage being successfully developed by Saguaro Resources immediately to the southeast.
Stein said, “It is fortunate that we have been able to acquire a substantial land holding in the core of the liquids-rich play fairway on advantageous terms ahead of the industry. We believe that proving up the play by drilling and completing three horizontal wells will be a key value catalyst,”
Calima is racing ahead with its new Montney project by commissioning a high quality 3D seismic survey over 60 square kilometres. The company has also acquired a regional well log database that includes 60 wells within 35km of Calima’s acreage.
The seismic and well database will be used in the subsurface evaluation and well planning, with a view to commencing a program in 2018 to drill and complete three horizontal wells. That should give Calima’s flood of new shareholders plenty to look forward to.
