Calima Energy Ltd (ASX: CE1): Selling Blackspur
• Calima is selling Blackspur for ~A$83.3 mm (C$75 mm) in cash to Astara Energy. The final sale proceeds received by Calima will be adjusted on a dollar-for-dollar basis to the extent Blackspur’s net debt exceeds C$0. Blackspur's net debt is anticipated at closing to be approximately ~C$2-2.5 mm, resulting in a net cash payment on closing of ~A$80-81 mm.• Calima Energy has ~A$4.1 mm in cash which remains with Calima together with a A$0.4 mm bond with BCOGC.
• The company will also retain the Paradise well asset in British Columbia that generates ~A$0.4 mm of free cash flow per year.
• At least 85% of the net cash received from the Blackspur sale will be distributed to shareholders.
• Overall, assuming only A$69 mm (equivalent to A$0.11 per share) will be distributed to shareholders (representing the minimum of 85% of the final sale proceeds) would leave Calima with ~A$15-16 mm in net cash on closing (equivalent to ~A$0.025 per share). The distribution to shareholders could be much higher as the company might not require as much net cash on closingCalima retuned A$10 mm to shareholders during 2022/23
• With the residual free cashflow funding an important proportion of the company’s residual A$1 mm per year expenditure (post sale of Blackspur), most of the remaining cash can be redeployed to make new acquisitions.
• We have changed our target price to A$0.13 per share to reflect the transaction.
Mechanics of the transaction
The divestment of Blackspur is expected to complete ~10 days after shareholder approval on 15 February and no later than 30 March. The only other condition to completion of the divestment is the approval under the Canadian Competition Act. This is expected to take place ahead of the shareholder meeting. Astara has provided a C$5 mm escrow deposit. There is a C$1.75 mm break fee in favour of Astara payable by Calima in the event that Calima’s shareholders do not approve the Blackspur sale or a superior acquisition proposal is announced or recommended in relation to Blackspur.
Valuation
Our new Core NAV of ~A$0.13 per share for the company reflects the proceeds for the divestment of Blackspur plus our estimate of the residual net cash retained by Calima on closing.
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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