Calima Energy sells Blackspur Oil to local Canadian firm in $83.3 million deal

Australian oil and gas junior Calima Energy (ASX: CE1) is set to reap a significant boost to its bank balance with the proposed $83.3 million sale of its wholly-owned Canadian subsidiary Blackspur Oil.

Calima’s share price jumped more than 60% in early Friday trading on the news it had entered into a binding definitive agreement with Astara Energy for the cash sale of its subsidiary, which owns the Brooks and Thorsby production assets in Alberta, Canada.

Astara is a privately-owned Canadian company that will have around 8,500 barrels of oil equivalent of production in Alberta and Saskatchewan following completion of the Blackspur sale.

Calima’s board of directors has recommended the Blackspur sale because the value is approximately double the current market capitalisation of the company.

The balance of the proceeds from the sale are intended to be used to fund Calima’s future exploration programs and to pay for ongoing operational and administrative costs.

Calima says it will also aim to distribute no less than 85% of the funds received from the sale to its shareholders in the most tax-effective form.

Share price not a reflection of assets

“For some time, the share price of Calima has not accurately reflected the value of Calima’s oil and gas assets vis-a-vis our Canadian peers,” chair Glenn Whiddon said.

“The Blackspur sale presents an excellent opportunity for Calima shareholders to benefit from this differential.”

“It is the board’s objective to return the maximum amount of these proceeds to shareholders.”

It is anticipated that Canadian Competition Act approval will be granted to Calima prior to a proposed shareholders’ meeting.

Calima says an extraordinary general meeting seeking shareholder approval for the sale is expected to be held on 15 February 2024.

The sale is anticipated to close ten days post that meeting and by no later than 30 March 2024.

Astara has provided a $5.5m escrow deposit to secure its obligations pursuant to the definitive agreement in respect of the Blackspur sale, which shall be executed via a share purchase agreement.

ASX listing to be retained

Mr Whiddon said that, upon the closing of the Blackspur sale and distribution to shareholders, Calima will continue to be listed on the ASX and will focus on maintaining production from the Paradise well in British Columbia and the acquisition of further oil and gas assets that align with its current portfolio.

Calima’s Paradise asset, held via subsidiary Calima Energy Inc. in British Columbia, generates approximately $350,000 in annual free cash flow.

Calima Energy Inc. also has approximately $4.1m in cash, which remains with Calima together with a $400,000 bond with the British Columbia Oil and Gas Commission.

Calima’s estimated expenditure over the 12 months post-closing is approximately $1m, subject to any project expenditure requirements.

Montney asset sale

In August 2023, Calima announced the sale of its Montney assets in Canada for $11.4m.

The sales included 33,643 net acres of Montney licences/acreage and the Tommy Lakes facilities.

The company noted at the time that despite a short-term increase in Canadian gas prices, prices in north-east British Columbia continued to remain weak, reducing the financing and equity opportunities for the Montney assets.

It also revealed that a minimum work program of between $55m and $112m would have been necessary to generate acceptable returns from those assets.