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


by Rachael Jones

Calima Energy Limited (ASX:CE1) Managing Director, Alan Stein, talks about the company's strategy, recent capital raising, and results from the drill program at its Montney project.

Rachael Jones: Hello, I'm Rachael Jones for the Finance News Network. Joining me today from Calima Energy (ASX:CE1) is Managing Director Alan Stein. Alan, welcome back to FNN.

Alan Stein: Thank you Rachael.

Rachael Jones: Now Calima Energy has built a substantial land holding in the Montney of British Columbia. Can you tell me about the progress of this?

Alan Stein: We've had a very exciting year. We drilled our first three wells, and we got some fantastic results, compares favourably with all our peers in the area, which no small feat when you consider that the Montney is one of the most prolific oil and gas resource players in North America.

Rachael Jones: Thanks, Alan. Now, the last time we spoke, approval had been granted for a large greenfield LNG export project. How has this been going?

Alan Stein: Shell, PETRONAS and their other partners at LNG Canada have started construction on a $40 billion project at Kitimat, and Chevron and Woodside have just announced that they're going to double the size of their LNG project also at Kitimat, and the demand from just those two projects alone will transform the gas market in Western Canada. So some very exciting times ahead.

Rachael Jones: Now let's talk about the Montney project in more detail. Can you start by telling me more about the drilling?

Alan Stein: Rachael, the drilling went very well. We drilled three wells and we got exciting results. We flowed more than 10 million cubic feet of gas per day. The liquids rate was going at about 40 barrels per million cubic feet, which was on target, still increasing as the well was cleaning up and our independent reserves auditors have now determined that we have contingent and prospective resources in excess of three trillion cubic feet of gas and a 160 million barrels of condensate and natural gas liquids.

Rachael Jones: That's great, and what can you tell me about the leases?

Alan Stein: Now that we've drilled those wells, we've been able to convert about 60 per cent of the leases in our central landholding area into long-term production licenses, which gives us security of tenure and a lot of flexibility about how we go forward.

Rachael Jones: And what about strategy moving forward?

Alan Stein: Now that we've proved the area is as productive as we thought it was going to be, we're now very much focused on putting together all the building blocks of a field development plan so that we can bring this area into production, and we're fortunate in that we have quite a lot of infrastructure all around about us that allows us to do that without having to build new infrastructure, which, of course, is very capital-intensive.

Rachael Jones: Thanks, Alan, and now to financials and your share price. Can you provide a comment on each?

Alan Stein: Earlier this year we did a placing and rights issue to raise 12.7 million. We're in the process of selling an asset in Namibia to Tello for around three million, that's going very well. The share price has been challenging. The Canadian equity market is at 20-year lows because the productivity of the basin has overwhelmed its pipelines, and we find ourselves tracking the Canadian equity market, which is frustrating, but we're on the edge now of a lot of new infrastructure coming in the basin. So sometime next year we expect to see the balance between supply and demand switching as we open up new pipelines, and there's new domestic demand. So we think we're sort of on the edge of quite a strong recovery in the Canadian EMP sector and so hopefully share prices will react accordingly.

Rachael Jones: Let's hope so. And to the last question now, Alan. Where do you see the company in 12 months' time?

Alan Stein: Look, I think we'd like to be obviously on a very strong financial footing. We have the finances in place for the next 12 months and beyond. We will have all the building blocks of our field development plan in place. I think we'll be excited to be part of a very strong recovery in the Canadian energy sector, and particularly as people look to the demand that's going to come from those LNG projects, it's going to open up all sorts of opportunities for us to do strategic partnerships and joint ventures so that we can bring these projects along in a way that delivers value to the shareholders.

Rachael Jones: Alan Stein, thanks for the update.

Alan Stein: Thank you Rachael.