Calima Energy (ASX:CE1) is poised to become an oil and gas producer through the acquisition of Canada’s Blackspur Oil Corp, which has current operating cash flow of $C1.8m ($1.82m) per month.
Under the binding agreement, the company will pay the vendors $C12.1m in CE1 shares and a cash payment of up to $C4.9m to acquire Blackspur.
Blackspur has proved and probable (2P) reserves of 22.5 million barrels of oil equivalent (boe) at its Alberta assets and had average production of 3,000boe per day during 2021 with a low break-even cost of just $US26 per barrel.
Production is expected to increase to over 5,500boe/d by drilling 24 low risk proven undeveloped (PUD) wells by end of 2022.
This is just the pointy end of the spear with Blackspur maintaining a drilling inventory of more than 60 PUD locations.
It also has infrastructure in place to support production growth to over 10,000boe/d.
The two companies will combine their management teams with Blackspur president and chief executive officer Jordan Kevol to assume the same roles for the combined company.
“The merger with Blackspur creates an emerging oil and gas producer with production and current operating cashflow of ~C$1.8million/month in addition to a substantial reserve and resource base for future growth,” Calima chairman Glenn Whiddon noted.
He added that Calima’s Montney acreage offers upside exposure to rising gas prices that stem from the growth of Canada’s LNG export industry and North American demand, adding to the existing oil and gas production from Blackspur’s projects.
Oil and gas projects
Calima will have oil and gas production from the Thorsby and Brooks production areas alongside with upside from the Montney wet gas play.
Brooks produced 1,860boe/d in the fourth quarter of 2020 from the Sunburst and Glauconitic formations.
Sunburst formation wells have low development costs while delivering economic rates of return and the company has identified 147 drill locations including 16 Sunburst and 17 Glauconitic PUDs.
Thorsby contributed 740boe/d to Blackspur’s production during the same period.
Like Brookes, it has a large inventory of wells to drill with 89 Sparky formation locations, including 28 Sparky PUDs.
Over at the Montney, Calima has approval to construct and operate a multi-well production facility along with a permit to construct a pipeline to connect the field with regional pipeline and processing infrastructure.