Followers of ASX-listed oil and gas specialist Calima Energy Ltd (ASX: CE1) have had plenty to celebrate over the New Year period with the company successfully hitting a number of key targets – both in the field and in the marketplace.

Calima, which is currently fully focused on developing its exciting opportunities in the world-class Montney oil and gas play in Canada, has recently completed a multi well drilling campaign – which has ticked all the boxes – while the company has also become a producer for the first time.

The company’s share price has already spiked a number of times in 2019 as the drill bit hit prime reservoir targets in what has been deemed to be a technically and potentially commercially successful vertical and horizontal drilling programme, which has proven that the Montney play is thick in the company’s 72,000 acre Calima Lands project area.

The recently completed three well campaign kicked off in the first week of January with the spudding of the Calima-1 vertical well before reaching a total depth of 1,872.5m a fortnight later.

Interspersed between spud and reaching TD was a very successful coring operation which recovered 230m of core through the target Montney Formation – with core recovery exceeding pre-drill expectations.

Notably elevated gas readings were recorded during those coring operations and gas escape bubbles were also noted on the rig floor as the core was recovered to surface, while the background gas readings in the lower parts of the Montney were particularly elevated.

Importantly the well encountered the top of the Montney Formation at a near pre-spud prognosis depth of 1,559.5m with the Formation found to be 256.5m thick at the location.

Calima’s Managing Director, Alan Stein, described this first phase of the drilling programme as a great success in confirming the company’s commercial hopes.

“We have encountered zones with enhanced reservoir characteristics containing gas and natural gas condensates with a calculated API gravity of 550.

“This is particularly significant for our economics because condensates from the Montney are generally priced close to West Texas Intermediate (WTI) crude oil,” he told the ASX.

Further confirming the potential of the Calima-1 well a full suite of wireline logs with preliminary analyses of log data showing hydrocarbon saturations and porosity measurements throughout the Montney to be comparable with offset wells that are currently producing in adjacent acreage.

The success of the programme continued to flow strongly through the drilling of the subsequent Calima-2 and Calima-3 horizontal wells.

The Calima- 2 horizontal well drilled a horizontal section of approximately 2,508m, while Calima- 3 successfully drilled a horizontal section with a total length of 2,561m.

The three wells in this campaign were drilled ahead of schedule and Mr Stein noted that the performance of the drilling team has matched the best performance of other operators in the region.

The next stage of the operation is to run a production test on the Calima-2 and -3 horizontal wells with fracture stimulation undertaken prior to production testing commencing in early March.

Notably, Calima has a permit to produce 105 million cubic feet of gas and associated liquids per well during testing operations.

The testing programme has been optimised, based on reservoir modelling studies, to maximise the recovery of condensate and other natural gas liquids, which will provide the best estimate of the condensate yield that can be expected once the wells are put on long-term production.

Those bonus production testing earnings will add nicely to the cash earnings that recently kicked off at the company’s Paradise well project. Located 180 km south east of the Calima Lands Montney interests in northeast British Columbia, the historic Paradise well has been brought back onto production with minimal capital investment.

Calima recently moved to 100% ownership of the Paradise well project after a desktop feasibility study confirmed its potential to be brought back into commercial production.

The well had been shut-in since 2016. Prior to being shut-in the well had produced from the Triassic, Boundary Lake Formation. The well came back online at a stabilised rate of 16- 20 barrels of oil per day and based on current oil prices the well should net around CAD$350,000-$400,000 per annum.

Once a production profile has been established consideration will be given to production enhancement operations.

Mr Stein says the revenue from the well will make a useful contribution to Calima’s Canadian overheads without distracting from the company’s primary focus on the Calima Lands

With a number of key testing results set to be announced and the potential for important additional cash flow likely in the near future, Calima Energy is definitely a company to keep a close eye on.