Calima Energy has filled its war chest to the brim with an oversubscribed $25m private placement to fund its highly anticipated drilling campaign in the revered Montney oil and gas play in British Columbia, Canada.
The two tranche placement of 462.97 million shares priced at 5.4c each, representing a 10.8% discount to the market, was corner-stoned by Australian boutique fund manager Tribeca Investment Partners, who has also agreed to arrange a project development finance facility of up to $40m.
Calima is planning to kick off its drilling campaign in December this year with one vertical well to provide stratigraphic calibration and core samples for measurement and analysis.
It will then drill two horizontal wells that will be fracture stimulated and put on an extended production test over a period of 4-6 weeks.
Montney horizontal wells drilled in 2017 achieved a peak average daily gas production of just over 5.5 million cubic feet per day and Calima is looking to at least match this output.
The success rate in the Montney has also been extremely high with just 2% of the 5000 wells drilled to date failing, due largely to mechanical issues.
Earlier this month, Calima secured 100% ownership of drilling rights over 72,104 acres of the potentially liquids-rich Montney Formation shales after completing the acquisitions of joint venture partners, TSV Montney and TMK Montney.
Owning 100% of the project in preference to a staged farm in arrangement, makes it more likely for Calima to attract interest from major oil and gas companies, many of whom have been throwing their financial weight around in the Montney in a big way.
Respected broker, Euroz Securities, said that Calima’s ability to secure the private placement had brought the effective valuation of the company’s acreage more in line with the current market rates of CAD$2500 to CAD$5500 per acre.
According to Euroz, this gives Calima an implied enterprise value of between $190m to $360m, well in excess of its current enterprise value of about $55m.
As a result, Euroz has set a price target for Calima at 15c a share, nearly three times its current price.
It takes a long time and a lot of money to get to the pointy end when executing an oil and gas strategy, however Calima looks like it is now poised and ready to throw the spear.
Just where it lands will be fascinating to watch, particularly in light of the fact that this is not the first rodeo for experienced oil and gas man and Calima Managing Director Alan Stein.
The last company he built in the UK, Ophir Energy, ended up being worth 2 billion pounds.
By Matt Birney
