Calima Initiates Process to Maximize Montney Assets

Source: 9/16/2021, Location: North America

Contiguous Montney land position of more than 60,000 acres in NEBC
o Development ready prospective resources of 1.68 Tcfg and 84 Mmbbl
o Owned infrastructure connected to sales market, Tommy Lakes Facilities, designed for 50Mmcfd and 2,500 bod, with replacement cost of $85 million plus
• Rising North American and international LNG gas prices
• Initiation of process to identify value maximizing alternatives for the Montney Assets via engagement of leading Canadian investment bank, Peters & Co

Calima Energy Limited has initiated a process to identify, examine and consider potential alternatives related to its Montney assets in NEBC with a view to value maximization. Such potential alternatives may include, but are not limited to, an asset sale, joint venture, asset exchange, or other potential transactions.

Peters & Co. Limited has been retained by Calima to assist in this review of alternatives for the Montney assets. Calima does not intend to provide further updates on the Montney process until such time as binding agreements are executed in respect of this process, which could take up to 6 months.

Over the past 12 months the M&A activity in Canada has continued to strengthen, with over $6 Billion in Montney transactions announced over the past 12 months. Further, with the renewed focus on the gas market as a substitute for coal, gas pricing has continued to climb to over C$4.65/GJ for AECO spot prices at 15 September 2021, with January 2022 Futures trading at C$5.00/GJ.

Calima currently owns and operates more than 60,000 acres of Montney rights (Calima Lands) in NEBC, Canada. Calima maintains a 10-year PNG lease over 49 contiguous sections (33,643 acres) resulting from the successful 2019 drilling program. The remainder of the acreage is held by drilling licenses that require validation before their scheduled expiry in 2022.

Calima drilled 3 wells in 2019, retrieving ~240m of Montney core from Calima 1. Calima 2 and 3 were 2,500m horizontal wells with 92 stage completions. Calima 2 yielded a gas rate of 10.2MMcf/d during testing and long-term reservoir monitoring confirmed the pressure-depth ration of ~11.5kPa/m (19,382 kPa reservoir pressure).

The Montney has a large resource in place, providing for long-term value with 195.6MMboe (2C) Resources1. Estimated Ultimate Recovery (EUR) of 8.4 Bcf per well yielding ~50 barrels per MMcf of high-value liquids according to McDaniel and Associates 2021 resource update.

The Montney assets have been maintained in a development ready state, with all major approvals in place to construct a short tie in pipeline from the Calima 2 and 3 wells to the Tommy Lakes infrastructure tie-in point. The Tommy Lakes infrastructure has egress capacity in excess of 50Mmcfd and 2,500 bod (~11,000 boed) with the existing well-pad sized to accommodate up to 20 wells.

Calima acquired the Tommy Lakes Infrastructure, which has a replacement value in excess of A$85 million and provides an immediate sales tie-in to NorthRiver Midstream, in Q1 2020. The NorthRiver system provides access to all major gas pipeline networks such as T-South, NGTL, Alliance and Coastal Gas Link

LNG export in Canada remains on track to commence in 2024 when LNG Canada is expected to be on stream. Enthusiasm continues to grow with Ksi Lisims LNG filing an Initial Project Description with the BC and Federal governments, seeking an eventual regulatory approval. The Ksi Lisims LNG facility aims to be a leader with respect to carbon emissions with a goal of net zero.

Jordan Kevol, CEO and President:
“Peters & Co. brings the necessary experience to identify, evaluate and execute potential alternatives for Calima’s Montney assets. They have executed on a majority of transactions in the Montney and know the value opportunity better than most. Our Montney acreage is a material long life asset with significant resources and upside in a proven basin that is currently the center of activity in gas consolidation in Canada. With the commissioning on LNG Canada by SHELL drawing nearer and continued strength in gas prices, we feel that now is the time to either find a strategic partner to fund the development or to monetize the asset. Calima continues to undertake its drilling campaign on the Blackspur lands in Alberta and looks forward to updating stakeholders on the progress of it Leo drilling campaign in the Thorsby area.”

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