Quarterly Activities & Cash Flow Report 30 September 2021

Source: www.gulfoilandgas.com 10/29/2021, Location: North America

Calima Energy Limited is pleased to provide the following summary of activities for the three months ended 30 September 2021.

Calima is a production-focused energy company pursuing the exploration and development of oil and natural gas assets in the Western Canadian Sedimentary Basin. The Company is currently developing its oil plays at Brooks and Thorsby in southern and central Alberta. Additionally, Calima owns a significant undeveloped Montney acreage position at Tommy Lakes in north-eastern British Columbia.

Calima (the “Calima Group” or “the Company”) is dedicated to responsible corporate practices, and places high value on adhering to strong Environmental, Social and Governance ("ESG") principles. The Company is committed to establishing and executing an ESG strategy that will both serve its stakeholders and seek to enhance long-term value creation.

- Production – For the quarter ended 30 September 2021, the Company produced 302,653 boe (gross) of oil and natural gas, averaging 3,290 boe/d. YTD the Company has produced 485,009 boe (gross) of oil and natural gas, averaging 3,156 boe/d.
- Quarterly sales and earnings – For the quarter ended 30 September 2021 oil and natural gas sales were A$17.8 million and the Company delivered Adjusted EBITDA1 of approximately A$8.4 million. YTD oil and natural gas sales were A$28.1 million and Adjusted EBITDA1 was approximately A$12.3 million.
- Energy Prices – The benchmark price for oil averaged US$70.56/bbl WTI, C$71.79/bbl WCS and C$3.41/GJ AECO, reflective of improved demand fundamentals for both oil and natural gas in North America in response to ongoing recoveries from the COVID-19 pandemic.
- Capital investments – For the quarter ended 30 September 2021, the Company drilled three Sparky Formation wells in the Thorsby area. Completion activities commenced in early October and the wells are targeted to be on stream in mid-November 2021. Since the Blackspur Acquisition, the Company has also drilled and brought on stream four Gemini Brooks Sunburst wells.
- 2022 forecast – Calima is planning a 2022 capital investment program of C$35 million for continued development of the Brooks and Thorsby oil assets. The Company plans to drill 3 Glauconitic and 4 Sunburst wells at Brooks and 5.5 net Sparky wells at Thorsby, targeting average production of 5,500 boe/d in 2022.
- Montney strategic review – The Company initiated a process with Peters & Co. in respect of a development, partnership, farm-out, or outright sale of the 60,000 acres of Montney rights held in the Tommy Lakes area of British Columbia.
- Share consolidation – On 10 September 2021, the Company completed a 20:1 share consolidation. The consolidation has successfully reduced arbitrage trading and the Company is very pleased with the results to date.

In August, the Company commenced a 3 well drilling program in the Thorsby area targeting the Sparky Formation. Drilling activities were substantially complete by the end of the third quarter. These development wells are expected to be completed and brought on stream in mid-November 2021 with first revenue received in December 2021 which will lower net debt by year end.

Calima anticipates 31 December 2021 exit production will be ~4,500 boe/d. The Company expects average 2021 production of 3,400 boe/d which reflects a moderate timing deferral of the 3 Thorsby wells on stream in the fourth quarter primarily due to delays stemming from service rig availability.

The Company’s development plans for the remainder of 2021 consists of C$7 million to be invested in the Brooks and Thorsby areas. The fourth quarter budget includes the completion and equipping costs for the three Thorsby wells in addition to the Brooks Sunburst J2J pool waterflood, workovers and maintenance capital on existing assets. Compared to previous guidance, the Company’s capital investment program reflects a 10% increase primarily due to cost overages experienced during the drilling of Leo #1 well as a result of downhole directional geometry adjustments.

The Company expects to exit 2021 with net debt of C$18 million, a reduction of approximately C$2 million compared to the third quarter of 2021. Compared to the Company’s previous exit guidance of C$11 million, the higher net debt primarily reflects the impact of the Company’s additional capital expenditures, moderate deferral of the Thorsby wells coming on stream, higher royalty rates, operating cost escalation experienced during the year and hedging losses as a result of higher realized commodity prices.

For 2022, the drilling and development program is expected to be approximately C$35 million. The Company plans to drill 3 Glauconitic and 4 Sunburst wells at Brooks and 6 (5.5 net) Sparky wells at Thorsby, targeting an average production of 5,500 boe/d in 2022. The Company plans to finalise the 2022 capital budget in the fourth quarter of 2021.

Adjusted EBITDA for the year ended 31 December 2021 is forecasted at C$26 million and C$66 million for 2022.

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