Calima Energy Ltd’s (ASX:CE1) core assets are the Calima lands that lie within the liquids-rich gas sweet-spot of the Montney Formation in British Columbia, Canada and the nearby Tommy Lakes facilities.
The company continued to make significant advancements during the June quarter, completing a resource reclassification of 248.9 billion cubic feet gas (BCFG) and 12.4 million barrels of oil (MMBO) from Development on Hold to Development Pending at Montney.
Calima now regards a significant portion of its Montney acreage as being development-ready subject only to securing the necessary funding to construct a tie-in pipeline.
Once the company secures funding then according to the reporting standards these Development Pending resources could be classified as 2P reserves.
Potential to unlock value
The Inga Assets are about 130 kilometres south of Calima’s acreage.
A valuation based on industry averages of $30,000 per flowing barrel of oil or 3 x Net Operating Income (NOI) would place a value on the undeveloped acreage of C$200-C$280 million or C$1,400-$C2,000 per acre.
This is the latest major transaction in the Montney together with the three acquisitions Tourmaline Oil Corp (TSE:TOU) announced in first quarter 2020 for C$82 million and indicates that consolidation is underway in the Montney.
Calima recently noted that “The significance of these acquisitions may indicate the first steps towards a consolidation of acreage positions across the Montney, which would seem to be a logical step ahead of the projected increase in demand for LNG feedstock in Canada and growing pipeline capacity.”
Tommy Lakes acquisition
In April 2020, Calima closed the acquisition of compression facilities, associated pipelines and infrastructure in the Tommy Lakes Field which lies north of the Calima Lands.
The highlights of the facilities are:
- Cost-efficient access to North River Midstream pipeline and Jedney processing facility;
- Access to regional markets via the major pipeline networks including NGTL, Alliance and T-North;
- Gathering pipelines, compression facilities and associated facilities capable of transporting up to 50 MMCF/D of gas and 2,500 BBL/D of condensate;
- Field office with a control centre and flexible camp facilities suitable for drilling operations;
- Year-round condensate storage and off-loading facilities;
- Located 20 kilometres from Calima Lands –approval to build connecting pipeline already secured;
- The facilities are fully permitted and have been preserved for future recommissioning.
Tommy Lakes infrastructure plan
Calima CFO Mark Freeman recently described Tommy Lakes as a "game-changer" and said it gave the company and any potential joint-venture partner the ability to sell oil and gas in the east while drilling wells and simultaneously allowed for the development to the west if Calima wished to produce more than 50 million standard cubic feet (Mmscf) per day.
The Tommy Lakes facilities are fully permitted and strategic to the company as they connect to regional, national and international pipeline networks, including major oil and gas markets such as the US Pacific Northwest, US Midwest and Western Canada.
The facility has been set aside for future recommissioning and has an estimated replacement value of A$85 million.
Canadian energy market
Calima noted that the Canadian LNG was expected to have GHG emissions average well below the industry’s global emissions output – with projects designed at 0.06 to 0.15 tonnes of carbon dioxide equivalent per tonne of LNG, against the global average of between 0.26 and 0.36 tonnes of carbon dioxide.
In addition, Canadian oil sands producers are making commitments to net-zero emissions by 2050. The oil sands consume over 2 billion cubic feet (bcf)/day of Canadian gas.
Canada is also leading in methane gas reductions, with the Federal Government announcing a C$750 million funding to support a 40% reduction over 2012 emission levels.
Major pipelines and export routes in Canada