Calima Energy Ltd (ASX: CE1): Replacing over 100% of produced reserves
• YE22 net 2P reserves have been estimated at 20.5 mmboe (net of royalty), up 1% compared to YE21. This suggests that Calima has added ~1.3 mmboe net reserves in 2022 (~+6% versus YE21).• The overall development plan associated with the 2P reserves is based on only 54 wells, including 30 wells at Brooks and the balance at Thorsby.
• Net 2P reserves at Brooks have increased from ~10 mmboe at YE21 to 10.2 mmboe at YE22 given the very good results in the shallow Glauconitic and Sunburst reservoir. Compared to YE21, 8 new net drilling locations have been identified at Brooks (total of 138 at YE22 versus 130 at YE21). Only 19% of these locations have been booked at YE22. The reserves report assumes four new Glauconitic and four Sunburst wells to be drilled in 2023. 108 locations have not been booked as 2P reserves yet.
• Net 2P reserves at Thorsby were estimated at 10.2 mmboe at YE22, down from 10.4 mmboe which reflects FY22 production. The total number of locations has been reduced from 98 to 82 with some land expiries. Two Thorsby wells could be drilled in 2023.
• Production in 1Q23 to date continues to be high at ~4,500 boe/d including 3,500 boe/d at Brooks that continues to perform very well.
• The positive impact of the increase in reserves is offset by our more conservative gas price assumptions and we re-iterate our target price of A$0.50/sh.
Reserves upside
The reserves report re-iterates a number of sources of reserves upside. The large number (108) of unbooked drilling locations at Brooks combined with the strong performance of the wells recently drilled on the field is, in our view, the most important. We carry an unrisked NAV of A$0.27 per share for the associated potential resources. Additional reserves are also expected to be realized in 2023 through the implementation of the full water-flood development of the Countless J2J Sunburst pool. The ultimate recovery factor in the Sunburst without waterflood is only 14%. The waterflood programme could take the recovery factor to 25% (+11%). Accounting for a 9% increase (2% already included in the 2P reserves estimate) in the recovery factor at the J2J pool only could add almost 1 mmbbl of reserves. This could also probably be applied to the wider Brooks area.
Valuation
We now assume ~US$3/mcf for HH in 2023, US$4.4/mcf in 2024 and US$5.5/mcf thereafter (US$6.5/mcf previously). Under our oil price scenario, we forecast overall FCF of >A$40 mm over 2023 and 2024. Our ReNAV is A$0.46/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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