Calima Energy’s three new Leo Sparky wells are flowing at the Thorsby oil field in Alberta Canada. First oil from Leo 3 arrived only one week after production commenced and it is currently producing 250 barrels of oil equivalent per day of oil and gas.
All three third-generation Leo wells at Thorsby have been connected to the wholly owned 16-5 oil battery production facilities located on the same pad as the three wells.
While all three wells require additional time for stimulation fluids to be recovered before achieving stabilised oil flow, the company says the results so far are exceeding expectations with production rates improving daily. Leo 3 got an 8-day head start on Leo 1 and 2 so Leo 1 and 2 are expected to achieve first oil in the next seven to ten days.
According to the company, these third-generation Leo Sparky wells are anticipated to achieve IP90 rates of 270-460 boe/d each. IP90, or Initial Production90 refers to the average daily production rate after 90 days.
The Leo Sparky wells IP30 oil/gas/formation water and stimulation fluid rates will be reported around mid-December with sustained oil production rates to be achieved in the two months between mid-December and mid-February.
When combined with its other producing wells, Calima says it is on track to achieve a year-end target of 4,500boe/d.
The company is applying a strategy of putting greater effort into the stimulation of its third generation Leo wells. The strategy includes additional horizontal length, more openings to the reservoir and more sand proppant pumped into each completion using more fluid. The wells will then flow back the nearly 6,000 cubic metres of fluid used to stimulate each well before stable oil flow is achieved.
According to the company, the third generation Leo Sparky wells will achieve payback in 5-10 months. Each well is expected to achieve IP90 flow rates of 270-460boe/d with 80 per cent oil and provide a cumulative production of up to 462,000boe. The before tax net present value of each well is estimated by the company at between C$6.5 million and C$9.0 million with a total CAPEX per well of just C$3.2 million. Based on current CAPEX and OPEX, each well has a break-even to WTI of US$33.22-US$35.10. While the WTI holds above US$80, the potential return from the Leo Sparky wells does look inviting.
Calima has previously indicated that it expects to return up to thirty per cent of the free cash flows from its Canadian oil and gas operation back to shareholders in 2022 by way of a maiden dividend. Remaining cash flows will be used to drive additional wells into Calima’s twenty-one million barrels of oil reserves with 64 locations booked for the drill bit.
The company says that it expects to plough C$35 million into drilling of 3 Glauconitic and 4 Sunburst wells at its Brooks oil field and 6 Sparky wells at its Thorsby oil field targeting an average production of 5,500boe/d in 2022
During the September Quarter Calima racked up some good scores including 3,290boe/d production average, sales of A$17.8 million, and earnings of A$8.4 million. Higher earnings were assisted by increasing prices for products including an average price for Western Canadian Crude of C$71.79/bbl and C$3.41/GJ for Alberta natural gas.
Calima and Calgary-based Peters and Company Limited continue to discuss sale or farm-in opportunities for its rich Montney acreage in British Columbia. According to the company, Calima’s Montney prospective resources of 300Mmboe is gaining global attention with LNG Canada coming close to exporting Canadian gas that has recently achieved prices greater than $5/mcf. With its aggressive drilling program and continued buoyant market Calima says it forecasts an increase in adjusted EBITDA from C$26 million in 2021 to C$66 million for 2022.
In the rapid approach to the season of giving, Calima has a lot to offer, with new oil wells coming on stream, high energy prices, hints of a maiden dividend and a Montney deal in the making.
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