Calima Energy (ASX:CE1) gas play, British Columbia


by Jessica Amir

Calima Energy Limited (ASX:CE1) Senior Geophysicist, Justin Norris talks about the company's Calima Montney Project, British Columbia and its 3 well drill program commencing December.

Jessica Amir: Jessica Amir here, for The Finance News Network. Today I'm with Calima Energy Senior Geophysicist, Justin Norris. Hi, Justin, and welcome to the Network.

Justin Norris: Hi, Jessica. It's a pleasure to be here.

Jessica Amir: So first up, Calima is set to kick off drilling at the Montney formation in British Columbia. Tell us all about it.

Justin Norris: Yeah, sure. Calima Energy, it's an oil and gas exploration company. We're focused on a play in western Canada called the Montney Formation. That spans over British Columbia and Alberta. We've assembled quite a large position in the play, about 72,000 acres, and the play itself is probably the largest oil and gas play in Canada. It actually compares quite favourably up against some of the more well-known U.S. plays, such as the Marcellus and the Bakken.
We entered the play in 2014. We did that with some quite innovative geo science, just building the play, quite low cost. The market today values it at about CAD$700 an acre, Canadian dollars an acre, yet we're seeing transactions in the order of about CAD$4,500, so that's quite exciting for us as well.

We're looking to embark upon our first drilling campaign. Whilst we were building our own position, our neighbours to the south were actually drilling some wells. They drilled probably 60 wells, most of them on production, so they've almost de-risked the play for us, so it's fairly exciting as we head straight into our own play, and we look to almost replicate and maybe even surpass some of the results that our peers are seeing towards the south.

Jessica Amir: So Shell Canada Limited have given the go-ahead for a large greenfield LNG export project in Canada or British Columbia, what does it mean for you guys at Calima Energy?

Justin Norris: This announcement is known as the Kitimat LNG Project, operated by Shell. It's actually the largest infrastructure investment ever in Canada, full stop. The largest that's ever been done. The government's also given approval for a number of other projects down the line. One of those in the same area is actually operated by Chevron (CVX:US), and Woodside to actually joint venture partner, as well, in that particular one.

Why it's exciting to Calima, well, some of the pipelines that actually feed into that LNG are only located probably 20 kilometres from our lands, as well. It also actually means that for the very first time, that the Montney play is actually being opened up to international markets, outside of the U.S.

Jessica Amir: Thanks, Justin. Now to your project. Just give us an update on your maiden resource.

Justin Norris: Yeah, sure. So in March of this year, we took receipt of an independent resource assessment for the 72,000 acres of Calima lands. We have a prospective resource of 475 million barrels of oil equivalents. Just breaking that down a little bit further, that's compiled of 2.1 Tcf of natural gas and 115 barrels of liquids, and the liquids is really the important bit. That's the real big differentiator. The Montney is a huge gas field, but it's actually the liquids that make the difference and we're quite happy that we've compiled a position in quite a liquids-rich portion of the play.

So that report is actually based with 400 wells being drilled over our acreage position. It's also done by exploiting two of the Montney levels. But the reality is, there's actually three wells exploited across the basin, so we actually see the report as actually being quite sensibly conservative, and we think that's quite a good thing. Once we've actually completed this upcoming drilling campaign. This resource assessment will then move from prospective resources over to contingent for a large portion of the play.

Jessica Amir: Now can you give us an update on your drill program?

Justin Norris: We have people on the ground, right now, working in the snow. We're going to drill three wells. The first of those will be a vertical well. That well will be cored and will be used for the stratigraphic correlation, and then on the back of that, we would look to drill two horizontal wells, and they will be taken out to extended production tests, as well. There is talk of AUD$80 billion dollars of investment across western Canada in the near term. So that is our take on that and it's exciting. There's a real appetite for the Montney resource right now.

Jessica Amir: So you just awarded contracts to Precision Drilling (NYSE:PDS). Tell us about what's involved.

Justin Norris: Yeah, so Precision Drilling (NYSE:PDS), they're one of the largest drilling contractors across North America, in Canada and the US. We went through a large search to actually choose a really good choice, and we're very pleased to say that we've chosen a rig, it's known as a hot rig. What that means is it's a rig which is active right now. It's been drilling for a company called Kelt Exploration (TSE:KEL). It then goes to ConocoPhillips (COP:US), and then it will be arriving at Calima Lands, for us to drill out wells, later this year.

Jessica Amir: Now to finances, Justin. Just tell us about your highlights from your quarterly results.

Justin Norris: There's been two significant events over the last quarter for us. The first of those was completion of consolidating the joint venture. There were two other Australian companies, TMK Montney and TSV Montney, and they have now been taken up such that Calima now actually has 100 per cent of the entire project. Beyond that, we then completed a raise in September of this year, and we raised AUD$25 million Australia dollars, so that was taken up largely by institutional investors in the group, very happy to say that it was heavily oversubscribed and we had to close the books early.

Jessica Amir: Just lastly, Justin, before we let you go, where would you like to see the company 12 months from now?

Justin Norris: Sure. Well, in the immediate future we'll be drilling the wells. They talk about drilling as being the vertical lie detector. Maybe in this case it's actually the horizontal well lie detector, but what that actually means is that we would have drilled these wells that would look to validate our prospectivity. We would see that as producing a significant re-rate of our share price, we would like to think. That would then take us down the path of going back to the resource reports. As mentioned earlier, we would actually, some of our reserves would move from prospective to contingent. That then gives us some optionality. If there hasn't been an offer on the table for us to actually acquire our acreage, we would actually look to drill some more wells in the next calendar year. That might involve drilling another three horizontal wells in the Montney play. So that could actually have us in a position, by late next year, actually being a Montney producer with five wells, potentially 3,000 barrels of oil a day.

Jessica Amir: Wonderful. We'll be looking forward to seeing your success. Justin Norris, thank you so much.

Justin Norris: Great. Thank you very much, Jessica.


Jessica Amir

Finance News Network
Jessica joined FNN in January 2017 after having worked in financial advising for seven years and in TV journalism for seven years, specialising in finance, equities and analysis. She has interviewed former Prime Ministers of Australia, Tony Abbott, Julia Gillard and Kevin Rudd and ex Treasurer Jo Hockey. Jessica has worked as a journalist with Sky News Business, ABC 1, ABC's The Business, ABC24 and has also been a regional Channel 7 and 9 TV reporter with Prime7 and Win News.

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