Calima Energy Ltd (ASX: CE1): Re-iterating production guidance
• Pisces#10, the first well of a 2H23 three well campaign, has reached TD. This is a follow up to the highly successful Pisces #6 and #7.• The company will now drill Pisces#11, the second well of the programme.
• The wells continue to be expected to reach peak production in December (post fracture stimulation).
• Pisces #10 and #11 are on-lease tie-ins. Pisces #12 requires a 2.2 km pipeline and, once sufficient testing and fluid confirmation has occurred, will be shut-in to await pipeline and facility construction.
• On-stream dates continue to be anticipated in 4Q23 with peak production in December 2023
• Production in August was ~3,600 boe/d. While this is below the company’s forecasts due to warmer than seasonal summer weather and maintenance of the water disposal system at the 2-26 battery, we maintain our production forecasts of 3,815 boe/d in 2H23. This could be too conservative given that Calima forecasts an average production rate of ~4,000 boe/d over 2H23.
• We re-iterate our target price of A$0.45 per share, which represents ~5x the current share price.
Valuation
We have incorporated higher WTI-WCS differentials in 4Q23 (US$19/bbl vs our assumption of US$16/bbl) and 1Q24 (US$20/bbl vs US$16/bbl) in our forecasts. The differentials increase is partly due to the recently announced delay to the start date of the Trans Mountain expansion to 2Q24. A sustained higher oil price has a material impact on our cashflow forecasts. At current oil prices (~US$90/bbl for WTI), we now forecast overall FCF of ~A$65-70 mm from 2023 to 2025. This is ~30% above the current market cap. Our Core NAV based on the company’s 2P reserves only is now A$0.30 per share, which represents >3.5x the current share price. Our ReNAV is unchanged at ~A$0.45/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.
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