Calima Energy Ltd (ASX: CE1): Better than expected performance. A$3 mm dividend distribution. High free cashflow expected in 2Q23.
• 1Q23 production was 4,532 boe/d slightly higher than previous indications (~4,500 boe/d) and our initial expectations (4,378 boe/d) given the strong performance of recent wells.• The 1Q23 financials were in line with the latest guidance.
• 2Q23 production is expected to be ~4,200 boe/d. This is higher than we anticipated (3,935 boe/d) given the better-than-expected performance of the recently completed Pisces #8 and #9 wells. These wells were tied-in late in 1Q23 and were ~22% longer and had 15 additional fracs each, compared to the 12-23 well, resulting in anticipated higher production and reserves. The production from these two wells will primarily contribute to production levels in 2Q23.
• With minimum capex during the break-up period in 2Q23 (A$3 mm), and much lower WCS/WTI price differentials (below US$20/bbl so far in 2Q23 vs US$24.77/bbl in 1Q23), we forecast free cash flow >A$6 mm in 2Q23.
• We re-iterate our target price of A$0.50/sh.
Second dividend distribution
Calima has announced a second dividend of A$3 mm payable in July. This is higher than the first dividend (A$2.5 mm). A third dividend could be announced in January 2024. The A$3 mm dividend represents a yield of ~4.4%. The company expects to provide an annual return of A$5 mm. This would equate to a dividend yield of 7.4%.
Valuation
We now forecast overall FCF of >A$45 mm over 2023 and 2024. This represents >70% of the current market cap. Our Core Nav is A$0.26 per share (2.3x the current share price) while our ReNAV is A$0.49/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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