Calima Energy Ltd (ASX:CE1) has initiated a process to identify, examine and consider potential alternatives to maximize the value of its Montney assets in Northeast British Columbia (NEBC), Canada.
According to the company, these potential alternatives may include but are not limited to, an asset sale, joint venture, asset exchange or other potential transactions.
Calima’s Montney assets include a contiguous land position of more than 60,000 acres in NEBC along with development-ready prospective resources of 1.68 Tcfg and 84 Mmbbl.
Besides this, it also owns infrastructure connected to the sales market, Tommy Lakes facilities, designed for 50Mmcfd and 2,500 barrels of oil/day (BoD), with a replacement cost of more than $85 million.
“Material long-life asset”
Calima CEO and president Jordan Kevol said: “Our Montney acreage is a material long-life asset with significant resources and upside in a proven basin that is currently the centre of activity in gas consolidation in Canada.
"With the commissioning on LNG Canada by SHELL drawing nearer and continued strength in gas prices, we feel that now is the time to either find a strategic partner to fund the development or to monetize the asset.
“Calima continues to undertake its drilling campaign on the Blackspur lands in Alberta and looks forward to updating stakeholders on the progress of its Leo drilling campaign in the Thorsby area.”
Peters & Co to assist
The company has retained Peters & Co Limited to assist in the review of alternatives for the Montney assets.
Kevol said: “Peters & Co brings the necessary experience to identify, evaluate and execute potential alternatives for Calima’s Montney assets.
“They have executed on a majority of transactions in the Montney and know the value opportunity better than most.”
The company’s assets in Canada.
Montney assets
Calima owns and operates more than 60,000 acres of Montney rights in NEBC, Canada, and maintains a 10-year PNG lease over 49 contiguous sections (33,643 acres) resulting from a successful 2019 drilling program.
The remainder of the acreage is held by drilling licences that require validation before their scheduled expiry in 2022.
Calima drilled three wells in 2019, retrieving around 240 metres of Montney core from Calima 1, while Calima 2 and 3 were 2,500 metres horizontal wells with 92 stage completions.
Calima 2 yielded a gas rate of 10.2MMcf/d during testing and long-term reservoir monitoring confirmed the pressure-depth ratio of around 11.5kPa/m (19,382 kPa reservoir pressure).
The Montney has a large resource in place, providing for long-term value with 195.6MMboe (2C) Resources1.
Tommy Lakes Infrastructure
Calima acquired the Tommy Lakes Infrastructure, which has a replacement value of more than A$85 million and provides an immediate sales tie-in to NorthRiver Midstream, in Q1 2020.
Tommy Lakes infrastructure has an egress capacity of more than 50Mmcfd and 2,500 BoD, around 11,000 barrels of oil equivalent (boed) with the existing well-pad sized to accommodate up to 20 wells.
The NorthRiver system provides access to all major gas pipeline networks such as T-South, NGTL, Alliance and Coastal Gas Link.
Rising M&A
Over the past 12 months, merger & acquisition activities in Canada have been growing steadily, with over $6 billion in Montney transactions announced during this period.
A continuous rise in natural gas prices following the renewed focus on the gas market as a substitute for coal has led to increasing investor interests.