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Calima Energy's increased production guidance for the remainder of 2021 “conservative” says Auctus Advisors

Published: 13:31 11 Jun 2021 AEST

Calima Energy Ltd - Calima Energy increased production guidance for the remainder of 2021 “Conservative” says Auctus Advisors
The target price of A$0.035 per share is unchanged.

Calima Energy Ltd’s (ASX:CE1) increased production for May and increased guidance for the remainder of 2021 from its Brooks drilling campaign in Canada has secured a price target of A$0.035 from Auctus Advisors LLP anaylst Stephane Foucaud.

Foucaud said: “Production at the end of May was 3,100 barrels of oil equivalent/day with a further eight wells expected on stream by YE21.

“This level of production is above forecast and reflects the strong performance of the drilling at Brooks.

“Calima is increasing its capex programme from C$17 million to C$20 million with two new wells being added to the FY21 drilling program (excluding the 3 wells drilled by the end of April).

“In addition, the length and hydraulic fracturing (frac) intensity (stage count and proppant) for the three Thorsby wells has been increased (C$0.6 million per well).

“Calima shares continue to offer a combination of value and cashflow and reserves growth.

“Our target price of A$0.035 per share is unchanged.”

Conservative production guidance

The analyst said that, as a result of current production and the two additional Brooks wells, YE21 production guidance has been increased from 3,400 barrels of oil equivalent/day to 4,500 barrels of oil equivalent/day.

“This has likely positive implications for FY22 production that we now forecast at ~5,240 barrels of oil equivalent/day (4,800 barrels of oil equivalent/day previously).

“The YE21 production guidance appears conservative given the nature of the three upcoming Thorsby wells (longer horizontals/larger frac).

“They could deliver IP rates 30-80% higher than was initially planned.

“A 40 stage well could for instance have an IP oil rate of 460 barrels/day.”

Valuation update

The impact of higher YE21 production and FY22 production at Brooks is largely offset by YE21 net debt (C$14 million) and higher WTI/WCS differentials – which are expected to be ~US$2.5/barrels higher at US$14.5/barrels (negative impact of ~C$1.5 million).  

The analyst said: “Our 2P NAV for the company continues to be ~A$0.014 per share with a RENAV of A$0.033 per share (at US$60/barrels Brent).

“At current oil price (US$72/barrels), the free cash flow generated from 2022 to the end of 1Q24 is higher than the market cap.”

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