CanAsia Energy Corp. (CEC:TSX.V) released an independently prepared, updated contingent resource report for the Sawn Lake asset in Alberta, reported Research Capital Corp. analyst Bill Newman in a Feb. 27 research note. The Canadian oil and gas company's interest in these 27 sections of heavy oil sands leases is via its 88.2%-owned subsidiary, Andora Energy.
"Sawn Lake represents a considerable resource," Newman wrote.
Notable Potential Return
Research Capital recommends CanAsia as a Speculative Buy and has a CA$0.50 per share price target on it. The target represents a 156% implied return for investors of the energy firm from its current share price of about CA$0.20.
Changes To Report
Sproule Associates, which prepared the previous resource report of March 31, 2022, updated it to reflect its revised commodity price deck as of Dec. 31, 2022, along with tax and project development plan changes.
In the updated version, the 2C risked contingent resource net to CanAsia remained the same, at 219,000,000 barrels, but the after-tax net present value discounted at 15% rose by about 20%. The new value is US$174 million (US$174M), or US$3.51 per share. Previously, it was US$146M, or US$2.92 per share.
Andora's interest is now valued at US$198M, up from US$165M.
Production Restart in 2024
The current plan for developing and restarting production at Sawn Lake calls for three phases to be carried out in 2023-2025.
The first involves refurbishing the facility, expanding the steam-assisted gravity drainage (SAGD) battery #1, and reactivating the existing SAGD well pair. The gross cost for this work is about US$3.1M. At this point, production could restart and is targeted for 2024. Production then would be increased to a total of 620 barrels per day (620 bbl/d).
In stage two, slated for 2025, a second SAGD well pair would be drilled, at an estimated gross cost of US$10M, and production increased to about 1,240 barrels per day (1.24 Mbbl/d).
The third stage calls for adding three more SAGD well pairs (at about US$37M in cost) and taking production higher, to 2.891 Mbbl/d.
With this timeline, peak production of at least 20 Mbbl/d would happen around 2038.
"Full development includes the construction of four additional batteries utilizing Andora's proprietary produced water boiler technology," wrote Newman.
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Disclosures for Research Capital Corp., CanAsia Energy Corp., February 27, 2023
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