By Mark Gordon, Independent Investment Research
Calima Energy (“Calima” or “the Company”) is farming into highly prospective acreage (the “Calima Lands”) in the world class unconventional liquids-rich Montney Formation of eastern British Columbia, Canada. The Farm-in, which includes the drilling of three horizontal wells, has an ultimate entry cost of C$25 million to earn 55% of ~70,000 acres, an average entry price of C$650/acre. Over recent years the liquids-rich areas of the Montney have seen a boom in activity, driven both by falling gas prices (making the dry gas areas less attractive) and strong demand and prices for condensate, largely for use as a diluent in the Alberta oil sands operations. Transaction prices over the last few years for undeveloped land have averaged ~C$2,000/acre, however have reached up to C$5,500/acre in recent BC Land Sales. The Calima Lands are along trend from currently producing acreage, with work to date highlighting the potential of the Company’s acreage which has a very low entry price, and hence presents a highly leveraged play.