In addition to the three drilling operations (two new wells and 1 reentry) completed in March 2021, Calima carried out additional reconditioning and well optimizations in April and May, which resulted in a production of 3,100 barrels in May. oil equivalent / day.
() revised its operational and financial forecast for the remainder of 2021 to reflect higher realized oil and gas prices, increased sales volumes based on production to date and expected production results from the start of the company’s drilling campaign in Canada.
The company’s subsidiary, Blackspur Oil Corp, recently drilled the first of three horizontal Sunburst wells (Gemini # 1) in its central Brooks area and on June 7 the rig was released from Gemini # 1 and moved to the second well of the Brooks Sunburst program. (Gemini # 2), with completion trades on Gemini # 1 expected to begin shortly.
As such, the company updated its operational and financial estimates for May, with output production for the month expected at 3,100 barrels of oil equivalent / day, an 11% increase from April.
The cash flow forecast for operations for May is AU $ 2.6 million – an increase of 18% from the previous month – and the output of the forecast for December 2021 has therefore been increased to 4,500. barrels of oil equivalent / day (a 32% increase).
Adjusted EBITDA for 2021 (8 months) is now AU $ 26.3 million.
“Initial Oil and Gas Show Excellent Results”
As no fracture stimulation is required on these conventional open-hole horizontal wells, the completion process is minimal and Gemini # 1 will soon be linked to Blackspur’s existing infrastructure via a “lease linkâ€.
Blackspur CEO Jordan Kevol said: “Gemini 1 encountered Sunburst sand at target depth in the first of three horizontal wells.
“The early oil and gas exposures were excellent and the chip samples show very high grade reservoir sand.
“Based on the initial quality of the sand encountered, we are satisfied with the potential of this horizontal well.
“We are delighted to move to Gemini # 2 well.”
Highlights of operational and financial estimates for May 2021.
Additional Sunburst Wells
In the Brooks area, the company has year-round access and 147 new well locations.
Brooks wells in the Sunburst formation have EUR 218,000 barrels of oil equivalent with an IRR of over 500% at US $ 60 West Texas Intermediate (WTI).
Well payback periods are six to nine months and the net present value of future cash flows discounted at 10% (NPV 10) is estimated to be C $ 3.2 million.
The company’s proven and probable (2P) reserves at Brooks are 11.6 million barrels of oil equivalent and are growing.
With continued high prices for WTI oil and AECO natural gas, the company is reviewing plans to add 1 to 2 additional Sunburst wells, bringing the Sunburst well campaign to 5 wells.
These 1-2 additional wells should be drilled from late June to early July 2021.
Thorsby drilling plans
The company is finalizing its plans to begin a three-well drilling campaign in Thorsby in July / August 2021.
All three wells are classified as development wells because they are drilled into existing Sparky oil fields, which have been delineated by the existing Sparky wells and 3D seismic.
Eleven wells have been drilled to date with well recoveries estimated at 358,000 barrels of oil equivalent for 468,000 barrels of oil equivalent and 79% oil.
There are 89 Net Sparky wells and 12 Net Nisku wells in inventory identified with several fields to be delineated (28 Sparky locations reserved) with total 2P reserves at Thorsby at 10.9 million barrels of oil equivalent.
Prior to finalizing this program, the company is also evaluating a longer horizontal component and higher proppant hydraulic fracture (frac) stimulation to increase recoveries and yields.
The new wells will feed Blackspur’s existing oil facilities.
The revised forecast for the 8 months until the end of the year.
Hedging strategy
After a strong recovery in benchmark West Texas Intermediate (WTI) prices to pre-COVID levels, coupled with tight Western Canadian Select (WCS) differentials, producers find themselves in an environment that forecasts robust net incomes.
As a result, Calima has put in place a fairly aggressive hedging mandate to mitigate exposure to declining commodity prices for the current three well drilling program and has entered into WTI and WCS swap contracts for the next 12. month.
This strategy will ensure the security of the cost recovery of the capital program and allow the recycling of free cash flow into future drilling programs over the next 24 months.
As decisions are made to drill more wells, the Company will protect the capital of each well by executing hedges on the expected cumulative production that is required to secure the return on invested capital.
Sunburst and Sparky wells have payback periods of six to nine months.
In addition, the company will gradually integrate WTI and WCS swaps as approximately 50% of production forecast for the 12-month forward period is protected by fixed price conditions, ensuring robust net revenues at current prices while by maintaining upward exposure to rising energy prices.
On May 26, 2021, Calima executed swaps totaling 163.8 Mbbl WTI (~ 450 bbl / day) at an average of US $ 62.23 / bbl (C $ 75.30 / bbl) from July 2021 to June 2022 and on June 2, 2021, it executed swaps totaling 163.8 Mbbl WCS (~ 450 bbl / day) at an average of -US $ 14.66 / bbl (C $ 17.73 / bbl) from July 2021 to June 2022 .