Calima Energy Ltd (ASX:CE1) shares were trading about 7% higher intra-day at A$0.22 after commencing its initial 2022 oil and gas drilling campaign in the Brooks area in Alberta, Canada.
The January 2022 program comprises the multi-stage fracture stimulation of two wells at Brooks (Pisces #1 & #2), and the drilling of an additional Glauconitic well at Brooks (Pisces #3).
Current oil prices are ~US$77/barrel WTI, ~US$64/barrel WCS, and gas price is ~C$4/gigajoule which continues to provide excellent returns on existing and future production.
Calima will continue its hedging program to lock in 50% net production at current strip pricing to manage capital exposure and ensure a strong balance sheet into the new year.
This hedging program ensures well program costs are recovered whilst providing shareholders exposure to higher commodity prices.
“Strong start to the year”
Calima CEO and president Jordan Kevol said: “The commencement of the January 2022 drilling campaign reflects a strong start to the year for the company.
“Notwithstanding the extremely cold winter, the company’s production has increased steadily thanks to our Leo 1, 2 and 3 program.
“The additional production from our 3 Pisces wells will provide a significant increase by the end of the first quarter in 2022.
“The company plans an active drilling program for 2022 and is currently reviewing its budget and operating schedule for 2022 ensuring strong capital management and while leveraging from higher energy prices.
“Further details will be shared over the coming month.”
Three-well Pisces oil and gas program
The first two wells of the campaign are within the company’s existing Brooks production area.
Pisces #1 and #2 are development wells targeting oil accumulations in the Glauconitic horizon.
The Glauconitic zone is a shallower (younger) formation compared to Calima’s core Sunburst conventional target.
Pisces #1 and #2 were drilled in December and the two wells are currently undergoing multi-stage frac stimulation and will then be tied-in to existing infrastructure and facilities.
Pisces #3 spudded on January 2, 2022 targeting the Lithic Glauconitic and is planned to have ~32 frac ports in the horizontal section.
Completion style
Once all frac stages are finished pumping on Pisces #1 and #2, the frac interval multicycle sliding sleeves will be closed to allow the newly initiated fractures to “heal” around the frac sand proppant.
This is a mitigating factor to ensure that the frac sand stays in the formation which helps minimize the need for future frac sand cleanouts, as well as increasing the effectiveness of the frac conductivity which is beneficial for production.
Flowback
After the 7-day shut-in period, each of the wells will have their multi-cycle sliding sleeve frac ports opened up, pumping equipment will be installed, and the wells will begin the flow back period.
Since large amounts of frac fluid (~1,400 to 3,300 cubic metres/well) are being used, it takes ~30-45 days to recover sufficient frac fluid before the commencement of reliable oil and gas flow rates from the Glauconitic Formation.
30 and 90 day initial production rates
It is anticipated that initial flowback will occur by the last week of January for the first two Pisces wells.
Once the wells are flowing back frac fluid, it is anticipated that it will take 7-10 days to see any traces of hydrocarbon.
Once meaningful hydrocarbons begin to appear the “IP30” period will commence.
This IP30 period will continue to be a combination of both frac fluid and formation fluid (oil/gas/water).
It will be in the 30-45 day period when each of the wells is anticipated to be producing at their full potential, by late February or early March 2022.