Calima Drilling Update for Q2/Q3 2022

Source: 5/16/2022, Location: Not categorized

- Work Program includes the following activities
o 4 well horizontal drilling program in the Brooks Alberta asset area - two Gemini and two Pisces wells commencing in June 2022 – one month ahead of schedule
o Completion and tie-in of the Leo #4 well (drilled Q1 2022) to commence in June 2022.
o A further drilling program is currently being planned for Q4, encompassing both Brooks and Thorsby wells.

- Budget has been designed to:
o Maintain average daily production levels 4,100-4,400 boe (see guidance below)
o Maximize free cash flow while ensuring a healthy balance sheet and provide unhedged exposure to strong energy prices on future production
o Provide funding for a capital return/buyback to during the period
o Continue to utilise the new pipeline and recent infrastructure/facilities upgrades at Brooks
o Better understand the production and resource upside in the high-impact undeveloped area of Holborn Alberta near Thorsby

Calima Energy Limited is pleased to provide an update on the Company’s drilling programs for Q3 of 2022. The drilling activities are designed to maximise free cash flow, while taking advantage of current high commodity prices, and maintaining and developing PDP reserves.

This program is focussed on providing shareholders exposure to high commodity prices through the drilling of our highly economic oil plays, as well as taking advantage of recent upgrades to our infrastructure footprint at Brooks. The work program will commence in June 2022 due to availability of a preferred drilling rig.

Drilling Campaign
Capital expenditure in Q1 was A$16 million and Q2 expected to be A$3.5 million. Q1 capital costs include A$3.9 million associated with the Brooks pipeline which were funded via a 7-year loan agreement. Repayments are ~$65,000 per month with operating cost savings around the same costs as the monthly repayments. Total capital expenditure for the 4 well (Q3) drill program and Leo completion is budgeted at A$7.8 million of which A$4.8 million is estimated to be incurred prior to June 30.

Jordan Kevol, CEO and President, commented:
“The current drilling program is designed to grow and maintain the Company’s base production and maximise cash flow giving financial flexibility to provide returns to shareholders later this year. With continued commodity price strength, and a successful Brooks drilling program, Calima will have the flexibility to plan additional drilling in Q4 2022, following a return to shareholders.

We are excited to be back drilling in our core Brooks area after spring road bans. All four of these new wells are keying off previous successful drilling on our acreage. Three of the wells will utilise our recent expansion to our infrastructure in the Brooks area. We have been able to contract a preferred drilling rig that we have previous experience within the area. Due to the on-lease tie-in nature of these wells, we anticipate expedient drilling to on-stream timeframe for all four wells. Additionally, the upcoming completion and testing of the Leo #4 well at Holborn has the potential to be impactful for the Company with respect to additional reserve bookings, and follow-up drilling locations.”

2 Well Gemini Brooks Program
Gemini #8 (100% WI) is a follow-up to the highly successful vertical well (Gemini #5) drilled in Q1-2022. This well will be drilled off of the same pad as Gemini #5 and will be a low cost on-lease tie-in. The well will tie into the recently completed Brooks Pipeline with fluids going directly to the 2-29 battery.

Gemini #9 (100% WI) is a follow-up to Gemini #3. The well will be drilled from the same pad and will also be an on-lease tie in. Gemini #3 was placed on production in July 2021 for a total cost to drill, complete, equip, and tie in (“DCE&T”) of C$924,000 and has returned net earnings of C$3.5 million to end of March 2022, making it one of the best performing Sunburst wells in our core Brooks region.

Sunburst wells are considered true conventional wells, as they do not require fracture stimulation to produce. Gemini #8 and #9 are budgeted at a total of C$2.7 million (~A$3 million) total to DCE&T. Based on type-curve results at current commodity prices, these wells are expected to pay out in ~6 months and have a reserve life of >10 years.

2 Well Pisces Brooks Program
Following the very successful 3-well Pisces program from January 2022, the Company will drill an additional 2 Pisces wells. Pisces #4 (100% WI) is a follow-up to one of the best performing Glauconitic wells that Blackspur drilled (15-36 well; drilled 2018). 15-36 commenced production in September 2018 with an IP30 of 507 bopd and has produced 130,000 bbls of oil to date. The 3D seismic indicates that Pisces #4 sits within the same Glauconitic Formation pool as the offsetting 15-36 well. The well will be completed as a fracture stimulated well and tied in to our 2-29 battery in Q3-2022.

Pisces #5 (50% WI) is a follow up to a well drilled by Blackspur in 2014 (04-05 well) (refer figure 1). The 04-05 well was an early generation Glauconitic fracture stimulated well with an IP30 of 213 bopd and has produced 85,000 barrels of oil to date. Due to technology advancements with respect to horizontal multi-stage fracturing and a higher number of planned frac stages compared to the 04-05 well, Calima expects Pisces #5 to outperform. Calima holds a 50% working interest in this well.

Glauconitic wells require fracture stimulation to produce. Pisces #4 and #5 total DCE&T costs will be C$4.4 million (~A4.8m). Based on type-curve results at current commodity prices, these wells are expected to pay out in ~8-9 months and have a reserve life of >10 years.

Leo #4 - Holborn (N. Thorsby) update
The Holborn well (Leo #4) was drilled in Q1-2022, targeting the Sparky Formation in an area of undeveloped Calima land north of Thorsby. Calima is planning to multi-stage fracture stimulate and test this step-out Sparky well late in Q2. This well was drilled in a highly prospective area of Calima’s land base within a 40-meter (gross thickness) oil bearing zone where no current reserves are booked for the Company. Oil and gas shows were excellent while drilling this well and it is designed for a 53-stage fracture completion. The well is ready to be fracture stimulated and production tested once spring conditions permit. Calima’s share of completion and tiein costs are ~C$1.5 million (A$1.66 million) Calima holds a 50% working interest in this well, as well as the surrounding 13,000 gross (6,500 net) acres of Sparky Formation prospective land. With success on the completion and subsequent production of Leo #4, the Company will be able to book new reserves in this area and plan future follow-up drilling. Production from Leo #4 is expected in Q3-2022.

This release has been approved by the Board.

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