Kolibri Global Energy (KGEI) 2025 Guidance - Jan 14

[dan_s]

Kolibri Global Energy Inc. Provides 2025 Guidance With a Forecasted Increase of More Than 35 Percent to Adjusted EBITDA and More Than 38 Percent to Average Production Over 2024 Guidance

Average 2025 production of 4,500 to 5,100 Boepd looks conservative to me.

The strategy of the Company for 2025 is to further build on the success we have had for the last few years. This includes continuing cash flow growth, developing the Company’s reserves, returning capital to shareholders, and testing the economics of nonproven areas.

Based on the successful results of our first three 1.5-mile laterals, we have designed a new full field development plan consisting mainly of 1.5 and 2-mile laterals. The Company’s current plan anticipates bringing nine wells on production this year.

Kolibri plans to drill and complete four 1.5-mile lateral wells (100 percent working interest) from one pad in the second quarter, drill two additional 1.5-mile lateral wells in the second half of the year (99.9 percent working interest), and then fracture stimulate these wells together with the two 1-mile lateral Velin wells (96.7 percent working interest) that the Company had previously drilled.

This is interesting: The ninth planned well, the Forguson 17-20-3H well, will be drilled to test the economics of the Caney Formation on the Company’s eastern acreage. Kolibri will operate and have a 46% working interest in this well, as a large integrated oil company has elected to participate and is expected to be drilled late in the 2nd quarter. The Caney target on the eastern side has similar characteristics and thickness as in the heart of Kolibri’s proved acreage in the main part of the field, except that it is shallower.

Kolibri has approximately 3,000 net acres on its east side acreage. All of the eastern acreage is currently classified as contingent resources by Kolibri’s independent reservoir engineering firm, as no well has been completed in the Caney on this acreage. If the Forguson well proves to be economic, in addition to adding cash flow, it can lead to many additional development locations for the Company.

Wolf Regener, President and CEO, commented, “We are excited to forecast another strong year of growth in 2025, which builds upon the tremendous growth we have already experienced in the last three years. The average production, revenue, and adjusted EBITDA guidance for 2025 again show significant growth from the 2024 forecast numbers, even with a US$70 WTI price assumption. The Company intends to continue repurchasing shares and has, to date, repurchased approximately 280,000 shares.

“The Company’s strong balance sheet and our conservative price forecast allows us the ability to adjust the timing of the wells planned for the second half of 2025 based on the price of oil and the performance of the wells. < Their drilling program is based on WTI averaging $70/bbl and HH natural gas averaging $2.60/MMBtu. Oil and gas prices are much higher today. If they stay high, Kolibri should have enough operating cash flow to drill two more development wells in Q4.

“I am also looking forward to testing the economics of our east side acreage as a successful Forguson well would add additional drilling locations and reserves. A successful drilling campaign on the east side acreage could add significant additional shareholder value.

“I’m very proud of our team’s execution this past year. Our 1.5-mile lateral wells were drilled safely and quickly with an estimated all-in well cost averaging less than US$6.3 million per well. In addition, the wells we drilled in 2024 were almost all classified as possible locations by our independent reservoir engineering firm on our year end 2023 reserve report. We are looking forward to the new reserve report, which will incorporate the wells we drilled, including the longer laterals, and which we anticipate will lead to increases in our reserves value.”

[dan_s]

At the time of this post KGEI was trading at $6.07, up 77% in the last six months thanks to the success of their 3 most recent development wells with 1.5 mile laterals in the Caney formation. Since being completed, all three wells have produced oil at rates that exceed the Company's pre-drill type curve. These wells are in an area of the Tishomingo Field that was considered unproved, so they will increase 1P reserves in Kolibri's 2024 reserve report.

Kolibri believes that the Caney formation is consistent throughout their 17,000 acre leasehold block. They have completed 32 Caney wells and there are numerous older wells that have gone through the Caney. Exxon holds the deep rights under the Tishomingo Field and their producing gas wells in the Woodford hold all of Kolibri's leasehold.

I have updated my forecast/valuation model for Kolibri, and I have posted it to the EPG website.

My valuation of KGEI is now $9.20US per share.

Based on my forecast, Kolibri $63.6 million of operating cash flow this year, which compares to the Company's 2025 Capex budget of $48 to $53 million. Since Kolibri's balance sheet is already in good shape, they can use free cash flow to buy back stock. It has already started. As the number of shares declines, per share valuation increases.

My WAG is that Kolibri's year-end reserve report will show a PV10 Net Asset Value over $12.00 per share, just for their proved (1P) reserves.

[Petroleum economist]

Kolibri Global - 2025 guidance

Production
• The 2025 production outlook which Kolibri issued this week (4.5-5.1 K BoE/d) was lower than I expected, even if the number of wells was as per my expectation.
• I think the outlook is a typical case of “under-promise and over-deliver”,
• I agree with Dan that the outlook looks very conservative.
• In order not to be too overoptimistic, I force fitted my Kolibri production model to meet the upper end (5.1 K BoE/d) of the 2025 guidance.
• Doing so, I get a 2025 production of 5.1 K BoE/d, growing to 6.5 K BoE/d (2026) and 8.0 K BE/d (2029).
• I think the actual production can be well above these numbers.
• After 2029, based on 2023 proven reserves, the production can continue to grow to 11.0 K BoE/d, which is three time the 2024 level (3.9 K BoE/d).

Capex
• The 2025 capex outlook ($ 48-53 M) is less than the $ 61 M I had expected.
• This means that the capex will absorb less of the 2025 FCF than I had assumed, and that cash will be available for share buybacks.

Profitability
• With WTI at $ 72.50/bbl I expect a 2025 eps of $ 0.71 (PE= 8.1).
• With a 6 well per year development pace, the eps can grow to $ 1.22 (PE=5.1) in 2029.
• If more wells per year are drilled, the eps can be considerable higher.

Shareholder returns
• The balance sheet is strong (debt/EBITDA < 0.4, equity ratio = 80%).
• The balance sheet does not need reinforcement.
• Debt is a minimal $ 20-30 M.
• With the lower capex, FCF will be available for share buybacks. The amount for buyback’s is highly dependent on realized oil and gas prices.
• With WTI at $ 70-72.5/bbl, 2025 share buyback’s could be 3.5-5.0% of the total number shares.
• Kolibri already bought back 286 K shares = 0.8% of the total shares.
• After 2025, with higher production, annual share buybacks can go up 10-16% or higher.

Furgason well
• A well (Forguson 17-20-3H) will be drilled in Q2 to test the economics of the Caney formation in the eastern acreage.
• Kolibri will operate and have a 46% working interest in this well, as a large integrated oil company (=Exxon?) has elected to participate.
• This Forguson well can lead to significant reserves bookings in 2025 and add numerous drilling locations.
• Overall, the Furgason well can add significant value to Kolibri Global.

Conclusions
With the outlook changes implemented, Kolibri Global continues to head up (1st) my ranking of 84 oil and gas companies. With a low PE, solid balance sheet, growing production and high shareholder returns it looks very attractive.

Already in first position, Kolibri still has many further upsides (higher production/more reserves/more drilling locations) not yet included in the model.

If the Forguson well in Q2 is a success I would not be amazed if ”a large integrated oil company” would make a bid for Kolibri as it can integrate the Kolibri operations very easily with its existing operations in the area.

[dan_s]

I will be highlighting KGEI on the KEReport podcast today.