Calima Energy Ltd (ASX:CE1) recently found further exploration success at the Brooks oil and gas property in Alberta, Canada.
Equity capital markets and advisory firm Auctus Advisors has re-iterated its target price of 75 cents per share (current share price: 26 cents) for Calima following the latest exploration update.
The following is an extract from Auctus Advisors’ research update:
Looking at the reserves growth story following exploration success
- The Gemini #5 stratigraphic well, the 1st Sunburst well of 2022, encountered a Sunburst interval with reservoir properties sufficient for potential production (unlikely to require fracture stimulation).
- This is a good result as the purpose of the well was to prove the presence of the Sunburst formation. The well will now be flow tested and, if the test is successful, this could lead to the addition of 1-6 new horizontal Sunburst locations (currently unbooked) which are within ~2.5 km of Calima’s main 2-29 oil facility.
- While investors’ attention has so far been focused on production growth, the result of this well illustrates the reserves upside story. At the end of June, the company held 21.4 mmboe net 2P reserves based on 64 development wells only. An additional 211 drilling locations have been identified and have not yet been booked. ~50% of these additional locations are in Brooks.
- Considering only Brooks and assuming ~0.2 mmboe EUR for each Brooks well suggests ~20 mmboe (0.2 mmboe x 100 unbooked Brooks drilling locations) potential reserves upside on the field. In addition, only five Sunburst pools are in production so far. Some further pools have been identified on 3D seismic at Brooks.
- We re-iterate our target price of A$0.75 per share.
An even larger reserve upside at Thorsby
A Thorsby well recovers 0.35-0.46 mmboe. With ~100 unbooked drilling location, the potential reserves upside could be >35 mmboe.
Valuation
1-6 new drilling locations at Brooks would add only 0.2-1.2 mmboe gross reserves. Pending further details on future drilling, we have left our ReNAV of ~A$0.75 per share unchanged.