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TICKERS: CE1; CLMEF

No Asset Sale, But Oil and Gas Co. Sees High Free Cash Flow
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Calima Energy Ltd.'s second-quarter 2023 production and cash flow is estimated to beat one analyst's forecasts.

While unsolicited offers to acquire assets from Canadian oil and gas producer and explorer Calima Energy Ltd. (CE1:ASX; CLMEF:OTCPK) could not complete, the company's second-quarter 2023 production and cash flow is estimated to beat forecasts, according to a research note by Actus Advisers analyst Stephane Foucaud.

The company received three offers from Canadian entities for the assets at a premium to Calima's current market cap, but the transaction could not complete because of the volatility of the market, Foucaud wrote on June 26.

Production for 2Q 2023 is estimated at 4,125 barrels of oil equivalent per day (boe/d), close to the company's previous indications but above Foucaud's more conservative forecasts.

The company also anticipates free cash flow of AU$7.5 million in that quarter, also well above the analyst's forecasts.

"The high free cash flow reflects very low WTI/WCS differentials of just ~US$14/bbl (barrel of crude oil)," the analyst wrote. "This is well below our forecasts of US$20/bbl."

Foucaud reiterated his target price of AU$0.50 per share on the stock.

'Resilient Production' in 2H23

The company said its assets were an attractive target for the Canadian entities that made the unsolicited officers because of the disconnect between the earnings multiples at which Calima shares trade in Australia (~1.5x P/E for 2023, according to Actus' forecasts) and similar Canadian multiples (2.5-3.5x according to Calima).

Calima also has confirmed a second dividend distribution of AU$3 million payable during the third quarter, Foucaud wrote.

The analyst predicted "resilient production in 2H23," with an estimated "~4.0-4.3 mboe/d with Calima's capex program focusing on maintaining stable production. We are now conservatively assuming the same strategy for following years."

"While we have reduced our production and capex forecast over 2024-2027, we have also reduced our expected WTI/WCS discount by ~US$2/bbl to reflect recent market movements," Foucaud wrote. "We now forecast overall FCF (free cash flow) of >AU$40 mm over 2023 and 2024 (almost unchanged versus our previous forecasts)."


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Important Disclosures:

  1. Steve Sobek wrote this article for Streetwise Reports LLC and provides services to Streetwise Reports as an employee.
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Disclosures for Actus Advisors LLP, Calima Energy Ltd., June 26, 2023

Calima Energy Ltd (“Calima” or the “Company”) is a corporate client of Auctus Advisors LLP (“Auctus”). Auctus receives, and has received in the past 12 months, compensation for providing corporate broking and/or investment banking services to the Company, including the publication and dissemination of marketing material from time to time.

MiFID II Disclosures This document, being paid for by a corporate issuer, is believed by Auctus to be an ‘acceptable minor non-monetary benefit’ as set out in Article 12 (3) of the Commission Delegated Act C(2016) 2031 which is part of UK law by virtue of the European Union (Withdrawal) Act 2018. It is produced solely in support of our corporate broking and corporate finance business. Auctus does not offer a secondary execution service in the UK.
This note is a marketing communication and NOT independent research. As such, it has not been prepared in accordance with legal requirements designed to promote the independence of investment research and this note is NOT subject to the prohibition on dealing ahead of the dissemination of investment research.

Author: The research analyst who prepared this research report was Stephane Foucaud, a partner of Auctus.
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Note prepared in good faith and in reliance on publicly available information: Comments made in this note have been arrived at in good faith and are based, at least in part, on current public information that Auctus considers reliable, but which it does not represent to be accurate or complete, and it should not be relied on as such. The information, opinions, forecasts and estimates contained in this document are current as of the date of this document and are subject to change without prior notification. No representation or warranty either actual or implied is made as to the accuracy, precision, completeness or correctness of the statements, opinions and judgements contained in this document.
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The information and opinions expressed in this note have been compiled from sources believed to be reliable but, neither Auctus, nor any of its partners, officers, or employees accept liability from any loss arising from the use hereof or makes any representations as to its accuracy and completeness. Any opinions, forecasts or estimates herein constitute a judgement as at the date of this note. There can be no assurance that future results or events will be consistent with any such opinions, forecasts or estimates. Past performance should not be taken as an indication or guarantee of future performance, and no representation or warranty, express or implied is made regarding future performance. This information is subject to change without notice, its accuracy is not guaranteed, it may be incomplete or condensed and it may not contain all material information concerning the company and its subsidiaries. Auctus is not agreeing to nor is it required to update the opinions, forecasts or estimates contained herein.

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