Calima Energy Ltd (ASX: CE1): Selling the Montney assets. Increasing dividend distribution
• Calima has sold its Montney acreage and its Tommy Lakes facilities to Advantage Energy for A$11.4 mm. Calima will also be returned an operating bond of A$0.4 mm. The proceeds represent ~A$0.02 per share.• While this is less than what we carried for the asset (A$0.04 per share), the transaction reflects (1) the continued low gas price in North-East British Columbia, (2) very weak equity markets and (3) the required minimum capital programme spend (C$50-100 mm) to develop the Montney assets is significant.
• The disposal of the Montney Assets will also result in operating and holding savings of approximately A$1 mm per year.
• With the September dividend increased from A$2.5 mm to A$7.5 mm, the total dividend yield for 2023 is >14%. By the end of September, the total dividend distribution over the previous 12 months will amount to A$10 mm, which represents ~20% of the company’s current market cap. The company will also distribute a further A$2 mm in January.
• As we incorporate the proceeds for the disposition of the Montney assets in our valuation, we have trimmed our target price from A$0.50 per share to A$0.45 per share, which still represents >5x the current share price.
More details on the 2H23 drilling programme
Calima has confirmed its plans to drill 3 new Brooks wells in 2H23. A programme of 3 Pisces wells will commence in mid-September. The wells are expected to reach peak production in December post fracture stimulation. The Pisces wells have the best economics and will be the initial focus of the company. Calima anticipates producing ~4,000 boe/d in 2023 (in line with our forecasts).
Valuation
At current oil prices, we now forecast overall FCF of ~A$50 mm from 2023 to 2025. This is similar to the current market cap. Our Core Nav based on the company’s 2P reserves only is now A$0.31 per share, up from A$0.28 per share previously, which represents >3.5x the current share price. Our new ReNAV is ~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.
Auctus provides Corporate Broking, Equity Research and Investment Banking services.
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