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Calima sets off on new Canadian oil hunt

Canada-focused oil and gas producer Calima Energy has wasted no time in chasing down a new Canadian payzone, this week announcing it will be drilling two horizontal wells to drain the newly identified Sunburst formation in its Brooks project in Alberta.

The company said its recently completed Gemini 5 vertical well proved the presence of the Sunburst formation in a previously undeveloped part of the field. It will now drill the Gemini 6 and 7 horizontal development wells within the formation.

The new conventional wells will be about 1.5 kilometres away from Gemini 5 and will help to add to the company’s reserves according to Calima. According to Calima, the wells are anticipated to recoup the costs of the drilling in around six months.

Calima also said it will continue its current hedging strategy of locking in 50 per cent of its net production in order to manage the capital exposure and maintain a strong balance sheet.

It is expected to take around a week to drill the 2,300 metre well with Calima saying Sunburst wells have an Estimated Ultimate Recovery, or “EUR” per well of around 200,000 barrels of oil equivalent and average production for the first 90 days estimated at 140 barrels per day.

We are happy to be drilling additional Sunburst horizontal locations in the Bantry Field. Historically, our Sunburst type curve represents some of the best single well economics in our inventory. These wells are quick to drill and complete without requiring any fracture stimulation.

Calima says the combination of the shallow target depth, relatively short horizontal length and lack of need for stimulation, results in an all-in cost estimate for each well to be approximately C$1.0mm assuming a single horizontal leg and on lease tie-in.

The company said the new Gemini wells should be production tested in the first quarter of 2022 in conjunction with a pipeline project to connect a number of new wells, including those recently drilled but not yet completed Pisces 3 well.

The Brooks reservoirs contain a low quantity of carbon dioxide in the reservoir at about 2 per cent and using multi-well pad drilling reduces its environmental footprint, according to management.

Also noted is the positive impact of stronger commodity prices at US$84/bbl WTI and C$4 per gigajoule.

Earlier this month Calima’s active start to the New Year in Canada was already gathering pace with the company spudding a new Pisces well on its Brooks field and kicking off multi-stage frac operations on two other 2021 Pisces wells.

The combination of the Pisces and Gemini wells, if successful will likely change the complexion of Calima’s production profile and perhaps more importantly, its cashflows.

Even more importantly they will provide valuable feedback for the company about the cost to get a well into production, the average payback period and their profitability into the future.

There are plenty of opportunities for Calima to drill more wells on its ground and if it can get into a steady state of capital outlay, capital return and then profitability, it may just end up with a turn-key money machine on its hands in Canada.

Is your ASX-listed company doing something interesting? Contact: matt.birney@wanews.com.au

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