Calima Energy Ltd (ASX: CE1): Another strong production update
Another strong production update• The Pisces #8 and #9 wells have now been tied in.
• The aggregate initial flow rate of >500 boe/d is in line with expectations. The IP30 production for a Pisces type well is 230 boe/d.
• Production in 1Q23 to date is ~4,500 boe/d. With the contribution of the two new Pisces wells, our forecast of 4,325 boe/d in 1Q23 could prove to be too conservative.
• We continue to forecast that Calima will produce 4,450 boe/d in 2023.
• The WCS discount to WTI has also reduced to ~US$15/bbl compared with US$28/bbl in January. This is much lower than what we assume (US$23/bbl in 2Q23 and US$21/bbl in 3Q23), which could have positive impact on our cashflow forecasts.
• Pending further details on the drilling programme over the rest of 2023, we re-iterate our target price of A$0.50/sh.
Valuation
We continue to carry US$23 mm (A$32 mm)/A$0.12 per share for the Montney asset. Our 2P NAV for the business assuming US$67/bbl LT for WTI is A$0.29 per share; which represents ~140% upside. Assuming US$67/bbl for WTI and the current WCS/WTI discount over 2023 and 2024 would imply ~US$5-10 mm (A$7-14 mm) free cashflow over the period. This also assumes a capex programme to grow production to ~5 mboe/d and to maintain it as this level. This level of free cashflow also allows the company to continue paying its dividends at current levels. Under our oil price scenario, we forecast overall FCF of ~A$55 mm over 2023 and 2024. Our ReNAV is A$0.52/sh.
Calima Energy and its subsidiaries are engaged in investing in oil and gas exploration and production projects internationally and more specifically in West Africa.
Auctus Advisors is a specialist Equity Capital Markets and Advisory business with a focus in the Energy Sector.
The partners have complementary skill sets, with decades of experience across Equity Capital Markets, Investment Banking and the Energy industry. We have worked at Société Générale, Canaccord Capital, BMO Capital Markets and Schlumberger. Most recently we have worked together for many years at GMP FirstEnergy.
Auctus has been set up at the beginning of a new decade in which we see significant opportunities in the Energy space. Globally, demand for energy is at record levels and continues to grow. Conversely, investment in traditional energy sources has been severely constrained. We believe this imbalance creates opportunities for both companies and investors.
Auctus provides Corporate Broking, Equity Research and Investment Banking services.
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