Calima Energy Limited (ASX:CE1) Managing Director, Dr. Alan Stein talks about the company's Montney Project, British Columbia and 3 well drill program.
Rachael Jones: Hello, I'm Rachael Jones for the Finance News Network. Joining me today from Calima Energy Limited (ASX:CE1) is Managing Director, Dr Alan Stein. Alan, welcome to FNN.
Dr Alan Stein: Thanks, Rachael.
Rachael Jones: Now, first up, could you start by giving us an introduction to Calima Energy Limited (ASX:CE1)?
Dr Alan Stein: Calima Energy Limited (ASX:CE1) is an oil and gas exploration company focused on the Montney basin in Canada, which is Canada's biggest oil and gas play and sort of ranks up there besides some of the better-known plays in the U.S., such as the Marcellus mine, southwestern Ontario, Canada and the Eagle Ford mine, south Texas, U.S.A.
Rachael Jones: Thanks, Alan. Now let's talk about your key project. Could you start off by telling us the size of the resource?
Dr Alan Stein: Yeah, we have 72,000 acres of drilling rights, and we have an independent resource report, giving us 475 million barrels of oil equivalent resource, which is made up of 2.1 Trillion Cubic Feet (TCF) of gas and 115 million barrels of liquids. And it's the liquids that are relevant here, because condensate in the Montney mine, southwestern Ontario Canada sells it as a premium to West Texas Intermediate (WTI). It's used as a dilutant in the heavy oil play in Canada.
Rachael Jones: And can you tell me about the drill program there?
Dr Alan Stein: Yeah. When we come up towards Christmas and New Year, we'll be drilling three wells. It'll be the first wells drilled into the Montney mine, North America in our acreage. It'll be a vertical and two horizontals. Although we do have a company next door that has drilled more than 60 successful wells, so the areas has been well-tested.
Rachael Jones: And what can you tell me about the project economics?
Dr Alan Stein: Well, for us, the strategy at Calima Energy Limited (ASX:CE1) is to drill those wells, demonstrate the productivity of the land and then seek a transaction that adds value for shareholders. So the key metric for us is the value of the land. And if we look at transactions involving quite a lot of transactions in the Montney, North America, last year, the average price per acre for undeveloped Montney land was around AUD$2,500.00 dollars. This year, the price has jumped to around AUD$4,500.00 per acre. And of course, we have 72,000 acres.
Rachael Jones: So Alan, where will the first revenues come from?
Dr Alan Stein: Well, after this first drilling campaign, the plan is to go back after having run production tests. We will put in a relatively short pipeline, some 20 kilometers in length, which will link us into infrastructure. And that will see us generating revenue by 2020. Early 2020.
Rachael Jones: And now, to your financials and to the share price. What is your cash position, and how far will that get you?
Dr Alan Stein: Well, we've just completed a placing to raise AUD$25 million, which I'm pleased to say was heavily oversubscribed. We had to close the book early on that one. So now we have around AUD$28 million in cash, which is sufficient to fund that drilling campaign I was talking about, and take us well through winter next year.
Rachael Jones: And can you provide a comment on your stock?
Dr Alan Stein: The share price is hovering around the mid-fives, which is where we did the placing. So I think that that's a pretty fair result. And as we move toward the drilling campaign, I think you're going to see a fairly significant re-rate of the stock, as we go through all that news flow that's going to come out over Christmas and New Year.
Rachael Jones: And last question now, Alan. Why should investors consider adding Calima Energy Limited (ASX:CE1) to their portfolios?
Dr Alan Stein: Well, look. It's a very simple proposition, here. You can think of it a bit like a real estate play, but in the oil and gas space. We have a next door neighbour who has proved up the play with drilling quite close to us. If you look at the valuation of our land position at the moment based on our market capitalisation, taking away the cash, it's between AUD$700.00 to AUD$800.00 per acre. And you remember when I said that the average transactions were around AUD$4,500.00 an acre. So I think you can do the math there, and see quite a substantial uplift for our shareholders. And remember, we are looking to transact in a way that delivers that value to shareholders early. We're not here to develop the whole project.
Rachael Jones: Dr Alan Stein. Thanks for the update, and good luck with the progress.
Dr Alan Stein: Thank you, Rachael.