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Calima Energy explores options for Montney gas asset as it looks to re-use Tommy Lakes infrastructure

Snapshot

The oil and gas company is looking to bring the Montney acreage on-stream sooner through the potential re-use of Tommy Lakes infrastructure.

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Quick facts: Calima Energy Ltd

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ASX:CE1
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Calima Energy Limited (ASX:CE1) (FRA:R1Y) is set to prepare its Montney acreage for development on the back of an improving Canadian gas market as the country’s energy policies change and become more supportive of the sector.

This main asset lies within a liquids-rich sweet-spot of the Montney Formation in northeast British Columbia and development plans are likely to be supported by the Tommy Lakes facilities acquired in April 2020.

The oil and gas company is looking to bring the Montney acreage on-stream sooner through the potential re-use of Tommy Lakes infrastructure, which includes compression facilities, associated pipelines, camp and other items.

Advisor appointment

Chase Edgelow has been appointed in an advisory capacity to help Calima identify joint-venture partners and/or funding for the Calima Lands.

It is also seeking opportunities to add reserves capable of delivering near-term profitable production with growth upside as the markets recover further.

Calima Lands

Calima owns and operates 100% interest in 63,103 acres of Montney drilling rights in British Columbia, which according to a 2019 resource report by McDaniel & Associates, estimates maiden contingent resource of 1.176 TCFE/1,247 Pje (Pentajoules).

The Calima Lands in British Columbia.

These prospective resources are being updated and the company anticipates a reserves update later this summer, it said during a webinar today.

Initial production test results of 1,640 boe/d rank in the top quartile of peer group Montney wells.

The company noted the acquisition of land owned by Canada’s largest natural gas producer, Tourmaline Oil Corp (TSE:TO), of TSX-listed Chinook Energy Inc (TSE:CKE) and unlisted Polar Star Canadian Oil and Gas Inc, which covers 8,460 net acres in the North Montney for C$82 million in February 2020.

Calima said: “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 facilities

Describing Tommy Lakes as a "game-changer" during the webinar, CFO Mark Freeman 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 Mmscf/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.

Tommy Lakes infrastructure plan.

They have been set aside for future recommissioning and have an estimated replacement value of A$85 million.

The facilities, which will save Calima three years in permitting and authorisation, also have the following benefits:

  • Cost-efficient access to the North River Midstream pipeline and the Jedney processing facility;
  • Access to regional markets via the major pipeline networks, including NOVA Gas Transmission Ltd (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 bbls/d of condensate;
  • Year-round condensate storage and off-loading facilities;
  • Field office with a control centre and flexible camp facilities suitable for drilling operations; and
  • Ability to restart facilities within six months.

The camp at Tommy Lakes.

Calima said it was in talks with NorthRiver Midstream to secure the ability to deliver up to 50 million cubic feet (MMcf)/d into their Jedney processing plant versus its current capacity of 25 MMcf/d.

It noted that although the raw gas line to Jedney could handle well-head condensate, the company planned to remove most of the condensate at the Tommy Lakes offloading station east of the Sikanni River.

Additional condensate and other natural gas liquids would then be recovered from subsequent processing at Jedney, it added.

Working capital

The company’s working capital of A$3.6 million as at the end of April 2020, post the Tommy Lakes acquisition, gives it 18-25 months wiggle room.

With effect from April 1, 2020, all directors have agreed to convert both their director and executive fees to shares, potentially saving the company around $280,000 per year.

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 consumes 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.

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