Australian firm Calima Energy eyes Montney drilling start in 2018

Company has permission to build, maintain and operate an oil and gas road to open up the 72,000 acres where it has drilling rights

Aerial view of a pre-existing track within the Calima Lands that could provide road access | Calima Energy

Calima Energy has the necessary approvals in hand to begin building a road into its Montney holdings, with an eye to open access and begin drilling as early as this winter.

The company announced Tuesday it has BC Oil and Gas Commission permission to construct, maintain and operate an oil and gas road to open up the 72,000 acres where it has drilling rights.

“The award of the road authorisation represents a significant milestone as the company shifts its focus from building its land position and sub-surface geoscience towards the operational activity necessary to drill wells,” Calima’s Managing Director Alan Stein said in a statement.

Calima is proposing to drill three wells in the winter of 2018-19 to prove its reserves, according to a presentation given to investors in December.

The company, based in Perth, Australia, has been amassing its holdings in a liquids-rich slice of the Montney in the Caribou area north of Fort St. John. Its holdings are in good company, with Black Swan, CNRL, Progress Energy, and Saguaro as neighbours. 

But it's Saguaro's holdings to the immediate south in particular that have caught Calima's interest. Saguaro is “one of the fastest growing companies in the region,” Calima told investors, spending $500 million to develop its acreage, which is producing more than 16,000 barrels of oil equivalent per day. Production there is expected to rise to 25,000 boepd this year, with the majority of revenues driven by condensate and other natural gas liquids, Calima said.

Calima expects the wells drilled on its lands will deliver similar results to those drilled by Saguaro, based on geological audits.

Calima says it has spent $4 million of its initial $5 million commitment to acquire, evaluate, and develop its holdings so far.

The lands are covered by a network of tracks that can provide access for drilling, however, none have been maintained. Calima says it plans to use compacted snow on an existing track to create a road surface.

“This is common practice for early stage drilling in many parts of the Montney Basin with more expensive all-weather road access being constructed once development is under way and cash flow imminent,” the company said in Tuesday’s announcement.

Calima is listed on the Australian Securities Exchange. Shares were at $0.056 at close on Wednesday.