Kolibri Global Energy — Playing its cards right

Kolibri Global Energy (TSX: KEI)

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Research: Oil & Gas

Kolibri Global Energy — Playing its cards right

Kolibri Global Energy (Kolibri or KEI) is a junior E&P oil and gas company, developing Caney Shale in southern Oklahoma. The company has been ramping up its drilling activity in 2022 and 2023, which led to a strong operational and financial performance. We expect this momentum to continue into FY24, as Kolibri benefits from its large undeveloped proved reserves, the low-cost nature of its operations and its superior operating netbacks. This positions KEI as a fast growing, yet defensive play in the sector, and points to strong near-term potential for returning cash to shareholders. We initiate coverage of KEI with an NPV derived value of US$7.5/share (C$10.1), also noting its undemanding peer-based valuation.

Written by

Andrey Litvin

Energy and Resources Analyst

Kolibri banner

Oil & Gas

Kolibri Global Energy

Playing its cards right

Initiation of coverage

Oil and gas

18 December 2023

Price

C$5.00

Market cap

C$177m

US$/C$1.35

Net debt (US$m) at Q323

24.8

Shares in issue

35.6m

Free float

100%

Code

KEI

Primary exchange

TSX

Secondary exchange

Nasdaq

Share price performance

%

1m

3m

12m

Abs

(11.7)

(15.2)

28.7

Rel (local)

(13.7)

(14.8)

22.9

52-week high/low

C$7.57

C$3.61

Business description

Kolibri is a junior unconventional exploration and production (E&P) company operating in the Tishomingo oil field in southern Oklahoma. The company earned the right to ‘hold by production’ in over 96% of 17,163 net acres in the Caney/Upper Sycamore formations through historical drilling and participation in the Woodford shale. KEI’s total gross reserves stood at 77mmboe as of December 2022.

Next events

FY23 results

March 2024

Analysts

Andrey Litvin

+44 (0)20 3077 5700

Andrew Keen

+44 (0)20 3077 5724

Kolibri Global Energy is a research client of Edison Investment Research Limited

Kolibri Global Energy (Kolibri or KEI) is a junior E&P oil and gas company, developing Caney Shale in southern Oklahoma. The company has been ramping up its drilling activity in 2022 and 2023, which led to a strong operational and financial performance. We expect this momentum to continue into FY24, as Kolibri benefits from its large undeveloped proved reserves, the low-cost nature of its operations and its superior operating netbacks. This positions KEI as a fast growing, yet defensive play in the sector, and points to strong near-term potential for returning cash to shareholders. We initiate coverage of KEI with an NPV derived value of US$7.5/share (C$10.1), also noting its undemanding peer-based valuation.

Year end

Gross revenue (US$m)

EBITDA
(US$m)

EPS*
(US$)

DPS
(US$)

P/E
(x)

Yield
(%)

12/21

19.1

9.3

(0.02)

0.0

N/A

N/A

12/22

48.4

28.9

0.47

0.0

14.4

N/A

12/23e

69.3

42.4

0.64

0.0

10.5

N/A

12/24e

116.1

73.1

1.45

0.0

4.7

N/A

Note: *EPS is normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.

Fast emerging shale play with robust economics

KEI’s Caney/Upper Sycamore shale formation in southern Oklahoma is part of a larger, well-known SCOOP unconventional oil play. However, unlike many other shale reservoirs in the region, Caney is characterised by the high share of oil in its production, which coupled with low operating costs allows Kolibri to take full advantage of favourable oil prices. Having drilled five wells in FY22, KEI is on track for eight well completions in FY23, resulting in strong production and earnings growth, with 9M23 output of 2,780boepd, up 78% y-o-y, EBITDA of US$29m, +35%, and operating netback of US$41/boe versus the basket price of US$62/boe.

Near-term potential to return cash to shareholders

At end FY22, KEI had gross proved, probable and possible reserves of 72mmboe, with the share of undeveloped proved reserves at 82%, one of the highest within its peer group. It also boasts one of the highest operating netbacks compared to its peers, which makes KEI a fast growing yet defensive play. We expect the company to continue building on its strong operational momentum and see its EBITDA rising to US$73m in FY24e (FY23e: US$42m) based on estimated eight well completions and a WTI price of US$80/bbl. This should put Kolibri in a position to start returning cash to shareholders, or to continue accelerated development, as we forecast it to become free cash flow positive in FY24 and net cash positive in FY25.

Valuation: Strong operating momentum not priced in

We value Kolibri using a discounted cash flow analysis based on detailed assumptions regarding the company’s future drilling activity and well economics over the life of the company’s gross proved reserves adjusted for well spacing. To the NPV value of the company’s gross proved reserves we add the risked valuation of its probable and possible reserves, using the peer group multiple of US$3.0/boe. This gives the combined valuation of US$7.5/share (C$10.1/share) at a 10% discount rate and our long-term WTI oil price of US$70/bbl.

Investment summary

Company description: Emerging shale play in Oklahoma

Kolibri is a junior unconventional exploration and production company operating in the Tishomingo oil field in southern Oklahoma. Following the sale of its rights to the Woodford shale to Exxon Mobil in 2013 for US$147m, the company has been focusing on developing its portion of the shallower Caney shale, increasing its total gross reserves to 77mmboe as of December 2022, with the share of undeveloped proved reserves at 82%. Unlike many other shale reservoirs in the area, Caney has a high share of oil in its production, which, coupled with low operating costs, allows the company to take full advantage of favourable oil prices. Kolibri is listed on both TSX (KEI) and Nasdaq (KGEI) and is run by an experienced management team, whose strategy is to grow production, capitalising on KEI’s large undeveloped reserve base and strong well level economics.

Financials: Strong operational and financial momentum

Following several years of no drilling due to COVID-19 induced economic and oil price collapse, Kolibri has recently been ramping up its drilling activity, with five wells completed in FY22 and eight wells scheduled for completion in FY23. As a result, the company has enjoyed a significant improvement in operating and financial performance, with average production of 2,780boepd for the first nine months of FY23 (9M23), up 78% y-o-y, and EBITDA of US$29m, +35% (Edison definition). KEI benefits from a low-cost business model, which results in superior operating netbacks (9M23: US$41/boe, including commodity contracts, vs US$62/boe basket price) compared to peers and low operating leverage (see pages 8/9), making the company a fast growing, yet defensive play on the junior shale sector. We expect KEI’s robust drilling momentum to continue into FY24, driving further earnings growth, and forecast EBITDA improving to US$73m in FY24e (FY23e US$42m) based on our expectations of eight well completions and a US$80/bbl WTI oil price. We expect KEI to become free cash flow positive in FY24 and net cash positive in FY25, putting it in a strong position to start returning cash to shareholders or further accelerate its development.

Valuations: Fast growing yet defensive play with plenty upside

Our approach to valuing Kolibri is based on a discounted cash flow (DCF) analysis. We have made detailed assumptions regarding the company’s future drilling activity, estimating the number of wells to be drilled on an annual basis and certain well economics over the life of the company’s gross proved reserves adjusted for well spacing. To the net present value (NPV) of the company’s gross proved reserves we add the risked valuation of its probable and possible reserves, using the peer group EV/Reserves (gross) multiple of US$3.0/boe. This gives a combined valuation of US$7.5/share (C$10.1/share), at a 10% discount rate and our long-term WTI oil price of US$70/bbl. Given the oily nature of the Caney shale, the key risk, both upside and downside, to our valuation is the oil price. A US$10/bbl reduction in the long-term oil price assumption reduces our valuation to US$6.2/share, while a US$10/bbl increase boosts it to US$8.5/share. Despite an impressive growth profile, due to the low operating leverage, Kolibri can at the same time be viewed as a defensive play compared to the majority of its selected peers, which bodes well for the company should the oil price environment continue to deteriorate.

Sensitivities: Oil price, regulations and decarbonisation

Key risks attached to Kolibri are the commodity price performance, oil in particular, changes in environmental regulations in Oklahoma and the global decarbonisation trends. While we covered the oil price sensitivity above, we note that, while strict, the fracking regulations in Oklahoma are favourable to oil and gas development.

Company description: Caney shale play in Oklahoma

KEI is a junior oil and gas E&P company, focusing on the shale development in the Tishomingo field in southern Oklahoma. In April 2013, the company sold its rights to the Woodford shale to Exxon Mobil for US$147m, retaining the ownership of the Caney and Upper Sycamore formations. The company has subsequently changed its name from BNK Petroleum to Kolibri Global Energy. KEI is listed on the TSX stock exchange and has recently uplisted on Nasdaq. As of December 2022, the company had 77mmboe in total gross reserves, with the share of undeveloped gross proved reserves at 82%, capable of supporting more than 50 wells. Having guided eight well completions in FY23 (with five wells completed to date), we expect Kolibri to main its drilling momentum into FY24, capitalising on its significant undeveloped reserves and attractive cost positioning.

Introducing Caney Shale

Kolibri owns working interests in approximately 17,163 net acres of shale oil acreage in the Caney/Upper Sycamore formations of the Tishomingo oil field in Oklahoma. The Tishomingo field is part of the broader Ardmore basin, which belongs to the so-called SCOOP (South Central Oklahoma Oil Province) unconventional oil and gas play. The latter was introduced by Continental Resources in October 2012. Oil and gas development in SCOOP initially focused on the Devonian to Mississippian-aged prolific Upper and Lower Woodford shale, with the later expansion into the Springer shale. Continental estimated at the time that there could be more than 60 different shale formations in the area. Some of the known formations within the SCOOP play are shown in Exhibit 2 below. Established oil and gas companies present in SCOOP include Exxon Mobil, Continental Resources, OVINTIV and Citizen Energy. Kolibri’s acreage is located in Carter and Johnston counties where Exxon Mobil has a significant presence (Exhibit 1).

Exhibit 1: Ardmore basin, Southern SCOOP region

Exhibit 2: SCOOP shale formations

Source: Kolibri Global Energy

Source: Kolibri Global Energy

Exhibit 1: Ardmore basin, Southern SCOOP region

Source: Kolibri Global Energy

Exhibit 2: SCOOP shale formations

Source: Kolibri Global Energy

Following the sale of its rights in the Woodford and other formations in the Tishomingo field in April 2013, Kolibri (then BNK Petroleum) retained its interests in the Caney/Upper Sycamore formations, earning the right to ‘hold by production’ in over 96% of its acreage through historical drilling and participation in the Woodford shale.

Caney is a late Mississippian age shale and is present across several basins in Oklahoma, Ardmore in particular. It is believed1 that stratigraphically it correlates with the well-known Barnett shale (tight gas) in northern Texas and Fayetteville shale (tight gas) in northeastern Oklahoma. In 2002–10, Barnett, arguably the oldest shale play in the US, was the most productive source of shale gas in the US and is now the third largest. The Fayetteville shale within the Arkoma basin that spans Arkansas and Oklahoma (in the so-called STACK – Sooner Trend (oil field), Anadarko (basin), Canadian and Kingfisher (counties)) began in 2004 and at some point has been recognised as one of the 10 largest natural gas fields in the US. As is the case with many other shale formations, Woodford in particular, Caney started as a gas play in the Arkoma Basin in eastern Oklahoma. However early well completions yielded relatively poor results with low initial production (IP) rates. More recent drilling (from 2012) in southern Oklahoma has been more successful, as evidenced by Kolibri’s own drilling results (Exhibit 3). We note that all Caney oil wells are in southern Oklahoma where Kolibri operates.

  1 Some of the information presented in this report is based on the following publications: ‘Multiscale Characterization of the Caney Shale — An Emerging Play in Oklahoma’, Wang, at al., 2021; ‘Produced Fluid Induced Mineralogy and Elemental Alterations of Caney Shale, Southern Oklahoma’, Awejory, at al., 2023; ‘Oklahoma shale resource plays’, Cardott, 2017; ‘Core shale plays’, www.kimmeridge.com; ‘Shale Resource Plays of Oklahoma’, Oklahoma geological survey workshop, 2020; ‘An integrated geoscience workflow to improve unconventional play assessment – an example from the SCOOP/STACK, Oklahoma’, Perez, at al., 2020.

In the table below we show some of the parameters of the selected wells drilled and completed by Kolibri following its Woodford sale (note: the company did not drill any wells in 2015–16 and 2019–21 due to ultra-low oil prices). The vast majority of the wells shown in Exhibit 3 can be classified as oil, based on the gas-to-oil ratio (GOR), with higher IP rates generated by the deeper wells (ie likely within the areas of higher fluid pressures). Some of the company’s more recent wells delivered even better results. Thus, Emery 17-2H, Barnes 8-4H and Brock 9-3H, all completed in 2022, generated impressive IP30 rates of 715 barrels of oil equivalent per day (boepd), 605boepd and 970boepd, respectively. To put this into perspective, the initial 30-day production rates used by the company for wells in this corridor assume an IP30 rate of 472boepd. Among possible factors we attribute this improved well performance to the company’s better understanding of the shale and, as a consequence, modifications made to the fracking techniques (for example, producing more fractures closer to the well bore and using more sand to improve permeability).

Exhibit 3: Description of selected Kolibri wells

Well name

Completion date

County

Shale formation

IP oil/condensate, boepd

GOR*

Well type

Depth**, ft

Hartgraves 5-3H

Oct-13

Johnston

Caney

448

3,663

oil

7,957

Barnes 7-2H

Dec-13

Johnston

Caney

523

1,222

oil

9,522

Wiggins 12-8H

Jan-14

Carter

Caney

300

1,293

oil

10,058

Wiggins 11-2H

Sep-14

Carter

Caney

345

1,878

oil

9,638

Chandler 8-6H

Feb-17

Johnston

Caney

250

636

oil

8,940

Brock 9-2H

Oct-17

Johnston

Caney

613

499

oil

8,334

Glenn 16-2H

Mar-18

Johnston

Caney

562

624

oil

9,833

WLC 14-1H

May-18

Johnston

Caney

145

26,206

gas

7,876

Source: Oklahoma geological survey. Note: *Oklahoma GOR definition: oil – GOR < 5,000cf/bbl, oil and gas – GOR 5,000–20,000, gas – GOR > 20,000. **Vertical to top of shale perforation. All wells are horizontal

Due to the emerging nature of the oily Caney shale play in southern Oklahoma and its relatively smaller aerial extent compared to the more prominent Woodford and Springer formations in the region, publicly available geological data on this formation is relatively scarce. Kolibri’s exploration work on the Caney shale dates back to 2011 when the company conducted analysis and tested the formation by recompleting the existing Nickel Hill 26-1 Woodford well (initially drilled in 2007 and recompleted to Caney in 2011). These results led to the drilling of the company’s operated horizontal Barnes 6-2H well, which targeted two Lower Caney zones and the Upper Sycamore formation, which allowed testing of three different intervals and helped determine stratigraphically where to place laterals for the subsequent wells.

Based on the publicly available information, in 2013 the company recovered 100% of 423ft core from the Barnes 7-2H well (IP oil 523boepd, GOR 1,222), which spanned the interval from the base of the Springer formation across the entire Caney formation and the uppermost Sycamore formation (NB: Sycamore overlies Woodford Shale in Ardmore Basin). The core was analysed using Schlumberger-TerraTek tight rock services. While analysis of the quality of a shale play is complicated, there are a number of parameters that characterise an unconventional shale reservoir and could help assess its potential success. Some of these parameters include organic matter type, total organic carbon (TOC, organic matter quantity), vitrinite reflectance (VRo; thermal maturity, eg oil, condensate or gas window), effective porosity and permeability (see Exhibits 4 and 5).

Exhibit 4: Caney shale TOC and rock evaluation analysis

Source: Kolibri Global Energy

Based on the conducted analysis it was concluded that the Caney shale in the Tishomingo field shares many characteristics of other successful shale plays. In particular the Lower/Upper Caney formation has thickness of 155ft; average TOC of 5% (2–12% range); thermal maturity, or vitrinite reflectance, of 0.99%, ie it is in the peak oil generation window; average effective porosity of 5% (4–5%) and average permeability of 137nD (105-199nD). It was noted that similar reservoir targets are also present in the Lower Caney ‘T Zone’ where the company has not defined any reserves yet. For comparison, the well-known and successful Bakken/Three Forks and Eagle Ford shales have the following characteristics: thickness of 10–250ft and 100–250ft; TOC of 5–20% and 3–7%; effective porosity of 5–10% and 6–9%.

Exhibit 5: Caney shale porosity and permeability characteristics

Source: Kolibri Global Energy

Reserves and historical exploration success

As of December 2022, Kolibri had gross proved reserves of 33.3mmboe, with undeveloped reserves accounting for 82% of total. Proved oil reserves were reported at 24.9mmbbl, or 75% of the total, while shale gas and natural gas liquids (NGL) represented 14% and 11%, respectively. In addition, the company had 21.0mmboe in probable and 23.1mmboe in possible reserves, giving total gross reserves of 77.5mmboe. As shown in Exhibit 9, since the sale of its rights to the Woodford shale, the company has significantly increased its proved and probable (P&P) reserve base. From 2017, Kolibri has consistently maintained the level of gross P&P reserves at a c 52mmboe level, while its gross P&P and possible reserves have remained at a c 77mmboe level.

Exhibit 6: Kolibri proved, probable and possible reserves, as of December 2022

 

Oil, mbbl

Gas, mmcf

NGL, mbbl

Reserves total, mboe

 

Gross

Net

Gross

Net

Gross

Net

Gross

Net

Proved developed producing

4,364

3,425

4,165

3,269

874

686

5,932

4,656

Proved undeveloped

20,584

16,212

18,190

14,253

3,795

2,973

27,411

21,561

Total proved

24,948

19,637

22,355

17,522

4,669

3,659

33,343

26,216

Probable

14,547

11,532

17,221

13,683

3,593

2,855

21,010

16,668

Total proved and probable

39,495

31,169

39,576

31,205

8,262

6,514

54,353

42,884

Possible

16,906

13,559

16,597

13,245

3,462

2,763

23,134

18,530

Total reserves

56,401

44,728

56,173

44,450

11,724

9,277

77,487

61,413

Source: Kolibri Global Energy

Assuming that a typical well produces c 500mboe over its operational life, the company’s undeveloped proved reserves would translate into some 55 wells, while probable and possible reserves would imply another c 88 wells. This is broadly in line with the company’s own calculations, which are based on more detailed analysis and well performance (Exhibit 7). At a rate of eight wells per annum (in line with the company’s drilling programme for 2023 and also our expectations for 2024), undeveloped gross proved reserves would support approximately seven years of drilling, while probable and possible reserves would add another c 11 years. Importantly, the 2022 reported reserves are solely based on Upper/Lower Caney and do not include the ‘T-zone’ portion of the shale that overlies the Upper Sycamore formation. This could represent additional upside to the reserve base and operational life of the shale.

Exhibit 7: Kolibri operations map

Source: Kolibri Global Energy

As can be seen from Exhibit 8, Kolibri compares well against a group of selected peers based on the size of its P&P reserves, especially when viewed in the context of current production. The company has one of the highest shares of oil in its reserves, which together with low production costs results in superior operating netbacks (discussed below), and more importantly it has the highest share of undeveloped reserves in its proved reserve base. The latter points to a healthy and relatively low-risk production profile.

Exhibit 8: Kolibri proved and probable reserves comparison to peers

 

Gear Energy

InPlay Oil

Journey Energy

Lucero Energy

Perpetual Energy

Petrus Resources

ROK Resources

Touchstone Exploration

Kolibri

Region

Alberta, Saskatchewan

Alberta

Alberta

North Dakota

Alberta

Alberta

Alberta, Saskatchewan

Oklahoma

Country

Canada

Canada

Canada

US

Canada

Canada

Canada

Trinidad

US

Gross proved reserves:

Oil, mbbl

13,030

21,460

23,489

34,796

2,869

3,127

6,480

10,445

24,948

NGL, mbbl

1,037

7,100

5,411

9,920

1,480

10,203

554

3,571

4,668

Gas, mmcf

15,986

107,423

131,475

54,913

101,333

165,111

16,157

146,677

22,355

Oil equivalent, mboe

16,731

46,464

50,813

53,868

21,238

40,848

9,727

38,462

33,342

Share of oil, %

78

46

46

65

14

8

67

27

75

Gross probable reserves:

Oil, mbbl

7,930

8,183

12,572

12,328

1,128

3,107

3,460

9,127

14,547

NGL, mbbl

431

2,037

4,636

3,883

763

5,397

502

3,342

3,593

Gas, mmcf

6,929

30,943

77,706

20,618

50,969

99,966

14,127

144,850

17,221

Oil equivalent, mboe

9,516

15,377

30,159

19,647

10,386

25,164

6,316

36,611

21,010

Share of oil, %

83

53

42

63

11

12

55

25

69

Total proved and probable, mboe

26,247

61,841

80,972

73,516

31,624

66,013

16,043

75,073

54,352

Proved undeveloped, mboe

6,879

28,410

10,148

22,035

7,957

22,777

2,402

15,326

27,411

Share of undeveloped in proved reserves, %

41

61

20

41

37

56

25

40

82

9M23 production, boepd

5,734

8,833

12,355

10,891

6,585

10,580

3,764

2,457

2,780

Source: Edison Investment Research, Refinitiv


Caney project economics: Impressive operating netbacks

The company’s Caney shale produces three types of energy products – tight oil, shale gas and NGL. Given the oily nature of the shale, its production is heavily weighted towards oil, whose share in 9M23 output was 76% (on an oil equivalent basis), broadly in line with the gross proved reserves (75%). NGL contributed 14% to production, with the remainder accounted for by shale gas. Broadly speaking, production is a function of drilling activity and prevailing commodity prices. Thus, as a result of extremely low oil prices, Kolibri did not drill any wells in 2015–16 and 2019–21 (COVID-19 pandemic), essentially deferring production to later years.

More recently, however, the company has been ramping up drilling activity, capitalising on its substantial undeveloped reserves and the favourable commodity prices. In 2022, Kolibri drilled five wells and is guiding eight well completions in 2023 (five wells completed in January-November and three more wells are scheduled for completion in December). Increased drilling activity has translated into a visible step up in production, with an average output of 1,640boepd in 2022 and 2,780boepd in 9M23.

In addition to eight well completions in FY23, Kolibri has recently announced that it is planning to begin drilling the first well in its next three-well pad (consisting of two lower Caney wells and one T-zone well) in mid-December. Given that the oil price remains at relatively favourable levels for KEI, we expect the company to maintain its strong production momentum at least into 2024 and potentially further into 2025, capitalising on its significant undeveloped reserve base and attractive cost positioning.

Exhibit 9: Kolibri historical drilling activity, production and reserves dynamics

Year

Number of wells drilled

Average production, boepd

Opening gross P&P reserves, mboe

Net additions**, mboe

Production, mboe

Closing gross P&P reserves, mboe

2013*

5

654

44,655

-29,350

239

15,544

2014

5

1,053

15,544

21,422

384

37,351

2015

0

1,092

37,351

3,658

398

41,407

2016

0

1,045

41,407

228

381

42,017

2017

3

1,092

42,017

10,163

399

52,579

2018

4

1,662

52,579

78

607

53,264

2019

0

1,379

53,264

(1,188)

503

52,579

2020

0

1,151

52,579

(803)

420

52,196

2021

0

975

52,196

732

356

53,284

2022

5

1,640

53,284

1,668

601

54,352

2023e

8

3,034

54,352

N/A

1,107

53,244

Source: Kolibri Global Energy, Edison investment Research. Note: *Kolibri sold its share in Woodford shale in 2013. **Net additions include technical and economic revisions as well as divestments and acquisitions.

A significant advantage of Kolibri’s business model is its attractive well economics. This leads to relatively high operating netbacks, as the company benefits from low operating costs and the high share of oil in its production. Exhibit 10 demonstrates the historical performance of Kolibri’s netbacks. We note that in Q1 and Q223, when the oil price was broadly in line with the current spot price of c US$70/bbl, the company generated an impressive operating netback of US$40/boe (NB: boe is not directly comparable to bbl as it includes gas and NGL production). Solid netbacks imply a relatively high oil break-even price, which in turn reduces earnings sensitivity to changes in commodity prices. Based on Q323 cost and revenue data, we estimate that the company’s break-even oil price was c US$40/bbl (including opex, royalties, capex and G&A), which compares well to the average WTI price during the quarter of US$82/bbl and the current spot price of US$72/bbl.

Exhibit 10: Kolibri historical quarterly operating netback performance, US$/boe

 

Q121

Q221

Q321

Q421

Q122

Q222

Q322

Q422

Q123

Q223

Q323

WTI price, US$/bbl

57.9

66.1

70.5

77.1

95.0

108.5

91.4

82.6

76.0

73.7

82.2

Revenue

45.5

50.0

56.5

63.6

75.0

92.0

80.9

72.5

62.9

58.0

65.0

Royalties

9.9

10.9

12.2

13.9

16.5

21.2

18.0

15.8

13.2

12.0

14.4

Opex*

7.3

8.8

8.4

8.8

9.6

7.8

7.8

8.3

6.0

6.1

7.3

Operating netback before commodity contracts

28.3

30.3

35.9

40.9

48.9

63.1

55.2

48.4

43.7

40.0

43.3

Commodity contracts

3.6

6.8

8.8

11.9

12.0

9.4

5.5

2.3

1.4

1.4

1.6

Operating netback after commodity contracts

24.8

23.5

27.0

29.0

36.9

53.7

49.7

46.1

42.2

38.6

41.6

Source: Kolibri Global Energy, Refinitiv. Note: *Opex includes capitalised compressor costs.

The cost competitiveness of the company’s business becomes apparent when its operating netbacks are compared to those of the peer group. As can be seen from Exhibit 11, where we show a selected group of broadly comparable mainly unconventional oil and gas plays, in 9M23 Kolibri had the highest operating netback (before commodity contracts), closely followed by Rubellite Energy (a heavy crude oil producer in Alberta, Canada). One of the main reasons for the company’s superior netbacks is a relatively high share of oil in its production mix and low operating expenses. The latter can be attributed to a number of reasons including the lower amount of naturally accruing water in the reservoir and the use of own gas required in the production process.

In 9M23, Kolibri’s opex of US$6.5/boe (including gas and NGL transportation costs, but excluding oil transportation, which is subtracted from the oil price) compared to a range of US$6.4/boe for Petrus and US$23.6/boe for ROK Resources, and the peer group median of US$10.9/boe. Low operating costs are somewhat offset by relatively high royalties, which we estimate are equivalent to c 22% of revenues. In all, the company’s 9M23 operating netback of US$42.5/boe compares to the peer median of US$18.9/boe. The high operating netback positions Kolibri as a defensive play among the selected peers, with lower operating leverage translating into less pronounced earnings volatility and therefore providing additional protection should the oil price continue to soften.

Exhibit 11: Operating netbacks of the selected peers

 

Gear

InPlay

Journey

Lucero

Perpetual

Petrus

ROK

Touchstone

Rubellite

Battalion

Kolibri

9M23 production, boepd

5,734

8,833

12,355

10,891

6,585

10,580

3,764

2,457

3,025

14,377

2,780

– oil, bbld

4,640

3,714

5,445

6,355

972

1,723

2,046

1,197

3,025

6,978

2,110

– share of oil, %

81

42

44

58

15

16

54

49

100

49

76

– gas, mcfd

4,953

22,581

33,832

12,248

30,756

43,752

7,961

7,203

0

24,234

1,698

– NGL, bbld

268

1,355

1,271

2,495

487

1,565

391

59

0

3,359

387

9M23 operating net back, US$/boe

27.9

24.6

13.6

29.7

11.1

16.5

14.4

18.6

41.8

18.9

42.5

– revenues

54.6

42.0

38.6

50.6

21.6

26.3

46.3

40.8

58.1

43.7

62.2

– royalties

6.5

5.2

8.0

8.6

3.5

3.5

8.3

11.7

5.3

8.7

13.2

– operating costs

17.3

11.6

16.4

7.1

5.5

5.1

21.9

10.4

4.9

13.6

6.5

– transportation

2.9

0.7

0.7

1.3

1.5

1.3

1.7

0.0

6.1

0.0

0.0

– production taxes

0.0

0.0

0.0

3.9

0.0

0.0

0.0

0.0

0.0

2.5

0.0

Source: Kolibri Global Energy data, Edison Investment Research, Refinitiv

Experienced management team

The company is run by an experienced management team. With over 36 years of conventional and unconventional E&P experience, KEI’s CEO and President Wolf Regener was instrumental in the formation of BNK Petroleum (now Kolibri) and its subsequent spinoff from Bankers. His career includes key senior executive positions with Tartan Energy, Alanmar Energy and R&R Resources, which involved heavy oil and enhanced recovery operations. Having an extensive operations and finance background, Wolf Regener has been at the forefront of Kolibri’s acquisition of unconventional projects on an international scale and development of the company’s Tishomingo Field interests.

The company’s CFO Gary Johnson (CPA) brought over 30 years of accounting and finance experience, of which 20 years in the oil and gas industry, to the company. His career includes roles with Occidental Petroleum Corporation, a Fortune 200 NYSE traded company, as director of technical accounting, Ascent Media Corporation as assistant controller and Western Atlas as the manager of financial reporting and analysis.

Greg Presley, KEI’s VP of engineering, and Allan Hemmy, senior geologist, have over two decades and over 13 years of industry related experience, respectively.

Financials, guidance and earnings estimates

9M23 results and full year guidance

On 13 November Kolibri released its Q323 and 9M23 results. Production averaged 2,737boepd in Q3, an increase of 61% y-o-y, and 2,780boepd in 9M23, up 78% y-o-y. The increase in output was driven by new well completions, with three new wells commissioned in late 2022 and three more wells put into production in June 2023. Q3 production was partly affected by temporary well shut-ins to the tune of 200boepd. Net revenues after royalties were reported at US$12.7m, an increase of 29% y-o-y, with strong production offset by lower commodity prices. Operating expenses came in at US$7.3/boe versus US$7.8/boe in Q322, but were as low as US$6.5/boe in 9M23 (9M22: US$8.2/boe). The company achieved an impressive operating netback after commodity contracts of US$41.7/boe in Q323 (US$49.7/boe) and US$41.0/boe in 9M23 (US$48.5/boe). As a result, EBITDA came in at US$9.8m (Edison definition; company adjusted EBITDA of US$9.5m) in Q3 and US$29.2m (company adjusted US$28.6m) in 9M23, implying healthy gross revenue margins of 60% and 62%, respectively.

Net operating cash flow (OCF) was US$9.6m in Q323 and US$28.7m in 9M23. As the company continues to ramp up drilling and production activity, free cash flow remained negative at US$16.0m (OCF less capex and lease payments) in Q3 and US$35.1m in 9M23. The company reported net debt of US$24.8m at end September 2023, which translated into a comfortable net debt to annualised 9M23 EBITDA of 0.6x. At end Q3, it had available borrowing capacity of US$16m.

Exhibit 12: Q323 and 9M23 results summary

 US$m

Q323

Q322

9M23

9M22

Average production, boepd

2,737

1,702

2,780

1,563

Average basket price, US$/boe

65.0

80.9

62.2

84.2

Net revenues

12.7

9.9

37.16

27.87

Opex

1.6

1.2

4.33

3.49

G&A

1.2

0.9

3.12

2.44

EBITDA (Edison definition)

9.8

7.7

29.2

21.7

Operating netback, US$/boe

41.7

49.7

41.0

48.5

Net debt

24.8

11.0

24.8

11.0

Source: Kolibri Global Energy, Edison Investment Research

On 10 October, Kolibri provided updated production and financial guidance for FY23. It expects average production of 3,100–3,400boepd, revenue of US$57–62m and EBITDA of US$45–50m. This guidance is based on a WTI price of US$80/bbl, a Henry Hub gas price of US$3.0/mmbtu and an NGL price of US$32/bbl. Capex was guided at US$51–56m and year-end net debt at US$24–26m.

Earnings estimates and commodity price expectations

Our operational and financial forecasts for Kolibri are based on detailed well modelling using the public information provided by company. Our initial well production assumptions are based on the reported first 30-day well output (IP30). For the new wells we assume a share of oil/gas/NGL per barrel of oil equivalent output in line with the respective shares in the company’s reported proved reserves. Our decline rate assumptions are based on the exponential decline curve commonly used in the oil industry. While the full information on well flow rates, production decline rates and timing is not publicly available, our short-term production estimates could somewhat differ from the numbers reported by the company. With this in mind, we expect Kolibri to report average FY23 production of 3,034boepd, net revenues of US$54.4m and EBITDA of US$42.4m. One of the reasons our forecasts somewhat differ from the company’s guidance is commodity prices, as we assume an FY23 WTI benchmark price of US$77.5/bbl and a Henry Hub price of US$3.3/mmbtu.

Exhibit 13: Summary of Kolibri financial forecasts

 US$m

FY23e

FY24e

FY25e

Number of gross wells drilled

8

8

6

Average production, boepd

3,034

4,921

5,130

Benchmark WTI price, US$/bbl

77.5

80.0

75.0

Benchmark Henry Hub price, US$/mmbtu

3.3

3.3

3.5

Average basket price, US$/boe

62.6

64.6

60.5

Net revenues

54.4

90.5

88.4

Opex*

6.6

11.7

12.2

G&A

4.8

5.7

6.0

EBITDA

42.4

73.1

70.2

Net income

23.0

51.5

43.1

Operating cash flow

41.6

71.9

64.2

Free cash flow

(7.8)

20.5

25.5

Net debt/(cash)

26.1

6.1

(18.9)

Source: Edison Investment Research. *Opex excludes capitalised compressor costs.

Despite the recent downward pressure on oil prices, we currently expect Kolibri to maintain its strong drilling momentum into 2024, which should continue to drive earnings in FY24 and further in FY25. Having guided to eight well completions in FY23, we expect the company to drill another eight wells in 2024 followed by six wells in 2025. Based on our commodity price assumptions, we expect Kolibri to generate US$73m in EBITDA in FY24 and US$70m in FY25. The key risk to our forecasts is the oil price performance, which could affect drilling activity and well economics. However, we believe that the company’s consistently high operating netbacks and low operating leverage somewhat protect it from commodity price pressures.

More importantly, on the back of the increased drilling, we expect Kolibri to become free cash flow positive in FY24 and net cash positive in FY25. This suggests that the company could be in a strong position to start returning cash to shareholders or further accelerate development. While we do not factor any dividends or share buy backs into our model, we note that US$26m of free cash flow in FY25e equates to c 20% of the company’s current market capitalisation.

Exhibit 14: Commodity price expectations

 

2023e

2024e

2025e

2026e

Long term

WTI, US$/bbl

 

 

 

 

– consensus

79.7

81.6

80.0

75.0

– forward curve

77.4

72.3

70.0

67.0

Henry Hub, US$/mmbtu

 

 

 

 

– consensus

2.9

3.4

4.0

4.0

– forward curve

2.5

2.8

3.5

3.8

Edison expectations

 

 

 

 

– WTI, US$/bbl

77.5

80.0

75.0

75.0

70.0

– Henry Hub, US$/mmbtu

3.3

3.3

3.5

3.5

3.5

Source: Refinitiv, Edison Investment Research

We do not attempt to forecast commodity prices and our oil and gas price assumptions are a blend between forward curve prices and consensus estimates, which are shown in the table above. Oil prices are driven by global supply and demand fundamentals and to a significant extent by OPEC+ decisions to reduce or increase production by its member states. However, while Saudi Arabia and other OPEC+ members have been implementing production cuts, oil prices have recently continued to weaken as a result of a strong supply side response coming from the US crude oil producers, in particular from the shale Permian basin in West Texas and New Mexico. With improving well level productivity and technological advances in fracking, shale players in the US have been actively ramping up production, with the US Energy Information Administration (EIA) estimating earlier this year that US oil crude production would rise 850mbd to a record level of 12.8mmbd in 2023. While Kolibri is a marginal producer in term of volumes, it is part of a general trend of increasing shale oil output in the US, benefiting from relatively favourable oil prices and its competitive cost position.

Valuation: Strong operational momentum is not priced

Our approach to valuing Kolibri is based on a DCF analysis. We have made detailed assumptions regarding the company’s future drilling activity, estimating the number of wells to be completed on an annual basis and certain well economics over the life of the company’s gross proved reserves adjusted for well spacing. Since our modelling is based on the last reported reserve data, it does not take into account potential additional resources from the so-called T-zone portion of the shale, which could further extend the life of the company’s operations. We value the company’s probable and possible reserves on a peer group EV/Reserves (gross) multiple, applying 50% risking to probable and 25% to possible reserves. Our NPV model for proved reserves is based a 10% discount rate. We assume a capital cost per well of US$6.2m based on the FY23 numbers, noting that the company has recently reported an average capex per well of about US$6.0m and a reduced drilling time of only 11 days per well. While Kolibri currently does not pay any tax, which is offset against still significant tax losses carried forward, for valuation purposes our model assumes tax payments start from FY26.

Exhibit 15: Kolibri valuation summary

Sum of discounted FCF

US$'000

232,803

Less FY22 net debt

US$'000

16,811

Implied equity value

US$'000

215,992

Add risked value of probable and possible reserves

US$'000

49,658

Total equity value

US$'000

265,650

Number of shares

m

35.6

Value per share

US$

7.5

Value per share

C$

10.1

Current share price

C$

5.0

Source: Edison Investment Research

All in all, our combined valuation of the company stands at US$7.5 per share, or C$10.1/share. Given that Kolibri’s production is heavily weighted towards oil, our valuation is most sensitive to changes in our oil price assumptions. Below we show our valuation sensitivity analysis to changes in both the discount rate and the oil price. Based on the current share price and our operational assumptions, it appears that the market discounts a c US$55/bbl oil price at a 10% discount rate, or a higher discount rate of, say, 14%, and an oil price of c US$65/bbl.

Exhibit 16: Kolibri DCF sensitivity to changes in oil price and discount rate

 US$/share

Long-term oil price, US$/bbl

50

60

70

80

90

Discount rate

6%

6.6

8.1

9.7

11.3

12.8

8%

5.7

7.0

8.4

9.7

11

10%

5.1

6.2

7.5

8.5

9.6

12%

4.5

5.5

6.5

7.5

8.4

14%

4.1

5.0

5.8

6.7

7.5

Source: Edison Investment Research

Kolibri’s peer group comparison is complicated by the fact that the majority of oil and gas producers in SCOOP and STACK are either private or much larger players. Nevertheless, we have put together a peer group for illustrative purposes, which predominantly comprises the Canadian unconventional plays. Based on our estimates, Kolibri trades on an FY24e EV/EBITDA multiple of just 2.1x, versus the peer average of 2.4x. On an EV/reserves (gross P&P) multiple, the stock trades at 2.9x compared to the average of 3.0x. As discussed above we use the peer average EV/reserves multiple in our risked P&P reserves valuation for Kolibri. KEI has been the best performing stock within its peer group YTD as well as over one and three years (see Exhibit 18).

Exhibit 17: Selected peer group comparison

 

Gear Energy

InPlay Oil

Journey Energy

Lucero Energy

Perpetual Energy

Petrus Resources

ROK Resources

Touchstone Exploration

Kolibri

Average 

Net debt Q323 (US$m)

15.6

32.2

40.9

(48.0)

40.0

30.0

10.1

27.3

24.8

 

Current share price (US$)

0.49

1.63

2.73

0.42

0.31

1.00

0.21

0.73

3.69

 

Market cap (US$m)

128.2

145.2

166.5

274.9

20.8

123.9

46.3

170.0

131.4

 

EV (US$m)

143.8

177.4

207.4

226.9

60.8

153.8

56.3

197.4

156.2

 

EBITDA (US$m)

 

 

 

 

 

 

 

 

 

 

FY23e

55.9

74.6

52.6

105.8

25.8

64.7

24.6

17.9

42.4

 

FY24e

65.7

90.8

60.0

120.6

16.2

61.8

43.1

71.7

73.1

 

FY25e

53.7

79.5

N/A

213.3

18.4

N/A

N/A

N/A

70.2

 

Production, boepd

 

 

 

 

 

 

 

 

 

 

FY23e

5,787

9,115

12,290

10,680

6,446

10,400

3,864

4,247

3,034

 

FY24e

6,013

10,290

12,050

10,130

5,467

10,500

4,777

13,640

4,921

 

FY25e

6,222

11,060

11,910

10,730

5,781

10,500

5,572

-

5,130

 

EV/EBITDA (x)

 

 

 

 

 

 

 

 

 

 

FY23e

2.6

2.4

3.9

2.1

2.4

2.4

2.3

11.0

3.7

3.6

FY24e

2.2

2.0

3.5

1.9

3.8

2.5

1.3

2.8

2.1

2.4

FY25e

2.7

2.2

N/A

1.1

3.3

N/A

N/A

N/A

2.2

2.3

EV/production, US$/boe

 

 

 

 

 

 

 

 

 

FY23e

68.1

53.3

46.2

58.2

25.9

40.5

39.9

127.3

141.0

66.7

FY24e

65.5

47.2

47.2

61.4

30.5

40.1

32.3

39.6

87.0

50.1

FY25e

63.3

43.9

47.7

57.9

28.8

40.1

27.7

N/A

83.4

49.1

EV/P&P reserves, US$/boe

FY22

5.5

2.9

2.6

3.1

1.9

2.3

3.5

2.6

2.9

3.0

Source: Edison Investment Research, Refinitiv. Note: Prices as at 15 December 2023.

Exhibit 18: Peer group share price performance, %

Source: Edison Investment Research, Refinitiv

Risks and sensitivities

The key risks attached to Kolibri are commodity price performance, changes in environmental regulations and the global decarbonisation trends.

The company’s drilling activity and financial performance is highly dependent on oil and gas pricing. More recently, KEI did not complete any wells in 2019–21, as the WTI price averaged US$39/bbl in 2020 against the backdrop of a sharp economic slowdown due to COVID-19. While COVID-19 was an unprecedented exogenous shock to the global economy, in more normal economic conditions the company is relatively protected from soft oil prices due to its superior well level economics and netbacks. Yet KEI continues to rely on debt to grow output and needs to maintain high drilling volumes to gain production momentum and become free cash flow positive. As such, any pronounced decline in the oil price could affect the company’s ability and willingness to drill and therefore to grow production and cash flows.

In the longer term, the transition to a greener global economy poses a risk to oil and gas consumption and pricing, eventually leading to slowing demand for the company’s energy products. However, this transition is going to be a lengthy process, and the global economy will still require significant volumes of hydrocarbons before decarbonisation is achieved over the course of 20–30 years.

Finally, since the company is involved in hydraulic fracturing (or fracking), as part of the wider industry, it is subject to relatively strict environmental rules and limitations, mainly at the state level, that could potentially affect its ability to drill. While Oklahoma’s legal system is in general favourable to oil and gas development, the state has detailed legislation in place to control fracking activity, which is overseen by Oklahoma Corporation Commission’s (OCC’s) Oil and Gas Conservation Division (OGCD). Among other things, the OCC imposes regulations regarding drilling, operation, maintenance and abandonment of hydraulic fracturing wells in the state. In light of the increased seismic activity, in 2018 OCC issued a seismic protocol for oil and gas operators in STACK and SCOOP. It requires real time seismic readings, lowers the minimum level at which operators must take response to 2.0 magnitude and requires some operators to pause their activity for six hours when readings exceed 2.5 magnitude.

Exhibit 19: Financial summary

US$'000s

2021

2022

2023e

2024e

2025e

Year end 31 December

IFRS

IFRS

IFRS

IFRS

IFRS

INCOME STATEMENT

Gross revenue

 

 

19,128

48,376

69,304

116,057

113,290

Royalties

(4,156)

(10,816)

(14,908)

(25,532)

(24,924)

Net revenue, including other income

14,974

37,606

54,396

90,524

88,366

Production costs

(2,962)

(4,904)

(6,597)

(11,676)

(12,170)

SG&A

(2,697)

(3,494)

(4,752)

(5,748)

(5,991)

Share based payments

0

(277)

(681)

0

0

EBITDA

 

 

9,315

28,931

42,368

73,100

70,205

D&A

(3,594)

(7,581)

(15,481)

(18,486)

(19,928)

EBIT

 

 

5,721

21,350

26,888

54,614

50,276

Exceptionals

71,403

0

0

0

0

Net interest

(906)

(1,067)

(2,217)

(2,217)

(2,217)

Other

(5,216)

(3,640)

(1,718)

(839)

(150)

Normalised PBT

 

 

(401)

16,643

22,953

51,558

47,910

Reported PBT

71,002

16,643

22,953

51,558

47,910

Tax

0

0

0

0

0

Reported profit after tax

71,002

16,643

22,953

51,558

47,910

Normalised profit after tax

 

 

(401)

16,643

22,953

51,558

47,910

Average Number of Shares Outstanding (m)

23.3

35.6

35.6

35.6

35.6

EPS - normalised (US$)

 

 

(0.02)

0.47

0.64

1.45

1.34

EPS - reported (US$)

3.05

0.47

0.64

1.45

1.34

Dividend (US$)

0.0

0.0

0.0

0.0

0.0

BALANCE SHEET

Fixed Assets

 

 

147,114

176,602

214,801

248,009

267,236

PP&E

147,076

176,554

213,273

246,481

265,708

Rights of use assets

38

48

1,528

1,528

1,528

Current Assets

 

 

9,902

7,480

7,730

29,911

55,288

Cash

7,316

1,037

1,156

21,660

47,207

Receivables

1,999

5,773

5,480

7,158

6,987

Deposits and prepaid expenses

587

670

1,094

1,094

1,094

Current Liabilities

 

 

(6,079)

(14,049)

(20,484)

(24,316)

(25,801)

Payables

(3,145)

(12,596)

(17,405)

(20,793)

(21,672)

Loans

(1,000)

0

0

0

0

Leases

(43)

(32)

(1,097)

(1,541)

(2,146)

FV of commodity contracts

(1,891)

(1,421)

(1,982)

(1,982)

(1,982)

Long Term Liabilities

 

 

(17,849)

(19,835)

(28,340)

(28,340)

(28,340)

Debt

(15,866)

(17,799)

(25,809)

(25,809)

(25,809)

Leases

0

(17)

(364)

(364)

(364)

Other

(1,983)

(2,019)

(2,167)

(2,167)

(2,167)

Net Assets

 

 

133,088

150,198

173,707

225,264

268,383

Shareholders' equity

 

 

133,088

150,198

173,707

225,264

268,383

CASH FLOW

Profit after tax

71,002

16,643

22,953

51,558

43,119

D&A

3,594

7,581

15,481

18,486

19,928

Working capital

551

(2,140)

1,836

1,710

1,050

Other

(68,844)

(42)

1,376

150

150

Net operating cash flow

 

 

6,303

22,042

41,646

71,904

64,247

Capex

(696)

(37,097)

(51,200)

(50,400)

(37,800)

Lease payments

(74)

(54)

(920)

(1,000)

(900)

Other

4,252

8,016

2,696

0

0

Net Cash Flow

9,785

(7,093)

(7,778)

20,504

25,547

Opening net debt/(cash)

 

 

19,939

9,593

16,811

26,114

6,054

FX and other

561

(125)

(1,525)

(444)

(605)

Closing net debt/(cash)

 

 

9,593

16,811

26,114

6,054

(18,887)

Source: Kolibri Global Energy accounts, Edison Investment Research

Contact details

925 Broadbeck Drive, Suite 220
Southand Oaks, California
91320
US
805-484-3613
www.kolibrienergy.com

Management team

President and CEO: Wolf Regener

CFO: Gary Johnson

Mr Regener brings over 36 years of conventional and unconventional E&P experience to Kolibri Global Energy. In his role as executive vice president of Bankers Petroleum and president of its wholly owned US subsidiary, Mr Regener was instrumental in the formation of BNK Petroleum (now Kolibri) and its subsequent spinoff from Bankers. His career also includes key senior executive positions with Tartan Energy, Alanmar Energy and R&R Resources, which involved heavy oil and enhanced recovery operations. He holds a business of economics degree, with an emphasis on computer science, from the University of California, Santa Barbara, and has served on the board of directors of the California Independent Petroleum Association for more than 24 years.

Mr Johnson is a CPA and brings to the company over 30 years of accounting and finance experience, 20 years in the oil and gas industry. Prior to joining Kolibri, Mr Johnson’s career included roles with Occidental Petroleum Corporation, a Fortune 200 NYSE traded company, as director of technical accounting, where he was responsible for the company’s public filings and worldwide accounting compliance, assistant controller at Ascent Media Corporation and manager of financial reporting and analysis at Western Atlas. Mr Johnson graduated from Loyola Marymount University with a BSc in accounting and he also holds an MBA from Auburn University.

VP of engineering: Greg Presley

Senior geologist: Allan Hemmy

Mr Presley brings over two decades of industry related experience, holds numerous drill bit patents and is recognised as an expert on good drilling practices. He has extensive engineering, drilling, completions and operations experience. Throughout his career, he has held various management and engineering positions and has put together many successful teams. He has been credited for developing cost-saving fracture techniques and completion methods and is published on the topic of drilling practices. Mr Presley holds an MBA and a BSc in mechanical engineering.

Mr Hemmy has over 13 years of experience in oil and gas exploration and development, with extensive unconventionals experience in the evaluation of source rock reservoirs and other tight reservoirs. His expertise includes total petroleum system evaluation, basin analysis, sequence stratigraphic interpretation and petrophysical evaluation of log and core data. Mr Hemmy holds bachelor degrees in geology and biology from the University of Kansas.

Management team

President and CEO: Wolf Regener

Mr Regener brings over 36 years of conventional and unconventional E&P experience to Kolibri Global Energy. In his role as executive vice president of Bankers Petroleum and president of its wholly owned US subsidiary, Mr Regener was instrumental in the formation of BNK Petroleum (now Kolibri) and its subsequent spinoff from Bankers. His career also includes key senior executive positions with Tartan Energy, Alanmar Energy and R&R Resources, which involved heavy oil and enhanced recovery operations. He holds a business of economics degree, with an emphasis on computer science, from the University of California, Santa Barbara, and has served on the board of directors of the California Independent Petroleum Association for more than 24 years.

CFO: Gary Johnson

Mr Johnson is a CPA and brings to the company over 30 years of accounting and finance experience, 20 years in the oil and gas industry. Prior to joining Kolibri, Mr Johnson’s career included roles with Occidental Petroleum Corporation, a Fortune 200 NYSE traded company, as director of technical accounting, where he was responsible for the company’s public filings and worldwide accounting compliance, assistant controller at Ascent Media Corporation and manager of financial reporting and analysis at Western Atlas. Mr Johnson graduated from Loyola Marymount University with a BSc in accounting and he also holds an MBA from Auburn University.

VP of engineering: Greg Presley

Mr Presley brings over two decades of industry related experience, holds numerous drill bit patents and is recognised as an expert on good drilling practices. He has extensive engineering, drilling, completions and operations experience. Throughout his career, he has held various management and engineering positions and has put together many successful teams. He has been credited for developing cost-saving fracture techniques and completion methods and is published on the topic of drilling practices. Mr Presley holds an MBA and a BSc in mechanical engineering.

Senior geologist: Allan Hemmy

Mr Hemmy has over 13 years of experience in oil and gas exploration and development, with extensive unconventionals experience in the evaluation of source rock reservoirs and other tight reservoirs. His expertise includes total petroleum system evaluation, basin analysis, sequence stratigraphic interpretation and petrophysical evaluation of log and core data. Mr Hemmy holds bachelor degrees in geology and biology from the University of Kansas.

Principal shareholders

(%)

Principal shareholders

(%)

TFG Asset Management UK

19.85%

Livermore Partners

14.41%

Harrington Global

11.44%

ClariVest Asset Management

0.23%

Russell Investments Canadian Equity Pool

0.23%

Dimensional Fund Advisors

0.17%

Dimensional Global Targeted Value Fund

0.06%

TFG Asset Management UK 19.85%

Livermore Partners 14.41%

Harrington Global 11.44%

ClariVest Asset Management 0.23%

Russel Investments Canadian Equity Pool 0.23%

Dimensional Fund Advisors 0.17%

Dimensional Global Targeted Value Fund 0.06%


General disclaimer and copyright

This report has been commissioned by Kolibri Global Energy and prepared and issued by Edison, in consideration of a fee payable by Kolibri Global Energy. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2023 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for ‘wholesale clients’ within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are ‘wholesale clients’ for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a ‘personalised service’ and, to the extent that it contains any financial advice, is intended only as a ‘class service’ provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the ‘FPO’) (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the ‘publishers' exclusion’ from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

General disclaimer and copyright

This report has been commissioned by Kolibri Global Energy and prepared and issued by Edison, in consideration of a fee payable by Kolibri Global Energy. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2023 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for ‘wholesale clients’ within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are ‘wholesale clients’ for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a ‘personalised service’ and, to the extent that it contains any financial advice, is intended only as a ‘class service’ provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the ‘FPO’) (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the ‘publishers' exclusion’ from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

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