Calima Energy Ltd (ASX:CE1) has begun a three-well horizontal drilling campaign targeting the Sunburst Formation at its core Brooks area in Alberta, C anada, with Gemini 1 well spudded on Monday, May 31, 2021.
Each well will take between 7-10 days to drill and then a further 20-35 days to complete and tie-in to existing infrastructure and facilities.
The new wells will flow into existing Blackspur oil facilities and the company is targeting IP30 production rates on the three wells in August 2021.
Notably, the Brooks 2P (Proved & Probable) reserves total 11.62 million barrels of oil equivalent with year-round access and 147 new well locations and 48 wells drilled to date.
“Confident wells will be on budget”
Calima CEO and president Jordan Kevol said: “I am pleased to advise that a multi-well drilling campaign targeting the Sunburst Formation in the Brooks area has commenced.
“Calima has committed to drilling three conventional horizontal wells with the program beginning today.
“Based upon our extensive drilling experience in the area, we are confident these three development wells will come in on budget and produce at or above the well type curves.
“With low geological risk and short (typically on-lease) tie-ins, our drill to on-stream time is extremely fast at 30-45 days.
“If we like what we see on the first three wells, and oil prices continue to be strong, we have two more top-tier Sunburst drill locations ready to go.”
The company expects to make a decision on the additional Sunburst wells in early June.
Sunburst Well economics.
C$2.7 million capital program
The capital program is funded from operational cashflows and National Bank debt facility, totalling C$2.7 million net for the three Sunburst wells.
Notably, the wells are conventional horizontal wells requiring no stimulation such as hydraulic fracturing.
True vertical depth (TVD) of the target Sunburst zone is around 1,000 metres and the average lateral length of the horizontal section is 775 metres.
The combination of the shallow target depth, relatively short horizontal length, lack of need for stimulation, and short tie-in, results in an all-in cost estimate for each well to be C$1 million.
Short term hedging
At US$60 West Texas Intermediate (WTI), the wells are extremely economic with short paybacks of around six months.
The company will mitigate downside commodity price exposure for this three well drill program by executing WTI and Western Canada Select (WCS) swap contracts for the next 12 months.
This strategy will ensure the cost recovery of the capital program is secure and will allow for net cash flow to be recycled into future drilling programs over the coming 24 months.