Calima Energy Ltd (ASX: CE1): High condensate yield in the Montney and lower costs

• The Calima #2’s peak 24 hour condensate rate in the Middle Montney was 396 bbl/d at a rate of 3.4 mmcf/d gas. This is higher than the average yield reported previously (102 bbl/mmcf on 3.65 mmcf/d production over the duration of the test).
• Calima #3’s peak 24 hour condensate rate in the Upper Montney was 21.7 bbl/d at a rate of 4.9 mmcf/d gas. This is also much higher than what had been reported previously (3 bbl/mmcf on 4.2 mmcf/d production over the duration of the test). Only 7.7% of the load fluid has been recovered (17.2% at Calima #2).
• The 24 hour peak rates and condensate yields are also representative of what could be achieved once the wells are in production.
• NGLs continue to be expected to be recovered through gas processing and could add 15-25 bbl/mmcf of liquids.
• The high condensate yield addresses a key area of uncertainty. This will probably increase the likelihood of Calima finding an industry partner for the Montney asset. In any case, the Calima#2 and #3 wells could be put in production next year with light capex.
• We re-iterate our target price of A$0.50/sh.

Lower costs
The total costs of the testing are estimated at A$2.0 mm; the net costs after the offset of the sale of ~5,900 bbl of condensate are expected to be ~A$1.4–A$1.5 mm. This compares with an initial budget of A$2.8 mm. Clean condensate was sold on average at WTI plus US$4/bbl.

Valuation
Calima is looking for an industry partner for the Montney. We are currently only carrying US$23 mm/C$0.12/sh for the asset, which might prove to be too conservative. We continue to forecast overall FCF of >A$55 mm across 2023-2024. Our “2P NAV” continues to be A$0.30/sh and our ReNAV C$0.52/sh.