Summary
Kolibri has ample reserves and a growing production with an enormous upside. Q1 production was above expectations. The balance sheet is strong. Q1 profit was above expectation. Profits are good with a medium/low to low PE. Shareholder returns in 2025 are limited, but thereafter can reach high levels.
In my 85 oil and gas companies ranking, Kolibri sit at the top the rankings (1st).
Production
• Kolibri production grew from 1.0 K BoE/d (2019) to 3.5 K BoE/d (2024).
• Q1 production (4,077 BoE/d) was below Q4 (4.440 K BoE/d) as no new wells were brought on stream in Q1.
• Q1 production (4,077 BoE/d) was well above my expectation (3.800 BoE/d), indicating that the decline rate from the three 1.5-mile laterals Alicia 3H, Alicia 4H and Alicia 5H wells is more benign than what I had anticipated.
• The 2025 outlook was re-iterated at 4.5-5.1 K BoE/d. The outlook looks low and could be a case of “under-promise and over-deliver”.
• Calibrating my production model with the Q1 actuals, I now expect a 2025 production of 5.4-6.0 K BoE/d, with production in H2 picking up after the start-up of the four new Lovina 1.5-mile Caney wells drilled in Q2 and two more Caney wells in H2.
• High reserves enable Kolibri to triple its production to levels of 10-11 K BoE/d in 2029.
• If the east side Forguson well is successful, then long term production levels of > 15 K BoE/d are possible.
- Kolibri Q1 Production.jpg (44.58 KiB) Viewed 185 times
Forguson well
• A well (Forguson 17-20-3H) was spudded in May to test the economics of the Caney formation in the untested eastern area. Kolibri will operate and have a 46% working interest in this well, as a large integrated oil company (=Exxon?) has elected to participate.
• The east side area (3,000 net acres) is not included in the reserves and the Forguson well can lead to significant reserves bookings in 2025 and add numerous drilling locations and significant production.
Balance sheet
• The balance sheet is very strong.
• Q1 equity ratio (equity/balance sheet total) of 76.7% is very high and similar to the 75.9% in Q4.
• Q1 long-term debt $ 27.3 M) was well below Q4 ($ 32.2 M).
• Q1 debt/EBITDA ratio on an annual basis was a very low 0.52. Debt is not an area of concern.
• The balance sheet allows generous shareholder return.
Profitability
• Kolibri is a very profitable company.
• Q1 eps ($ 0.16) was similar to Q4 ($ 0.16) and higher than my expectation of $ 0.10.
• The high eps was due to the high production and high realized oil, NGL and gas
• Royalties are a high 21-22%
• Unit costs (including depreciation, interest, and overheads) are a low $ 22.71/BoE.
• In 2025, with WTI=$ 60-65/bbl, the eps can be 0.64-0.84 (PE is a medium /low7.4-8.4).
• After 2025 the eps can increase to $ 1.32-1.54 (PE is a low 4.0-4.7) in 2029
• Kolibri profits are very robusta under low oil prices
Shareholder returns
• The balance sheet allows shareholder returns.
• With capex increasing from $ 31 M in 2024 to $ 48-53 M the 2025 the FCF will be limited. This is especially true for Q2 where the bulk of the capex will be spent.
• With the low 2025 FCF the shareholder returns in 2025 will be limited.
• Kolibri bought back 280 K share in January. I expect the share buybacks to reach 1 M shares in 2025, equivalent to a return of 3.1%.
• In 2026 returns can increase to 8-10%, to increase to levels to 18-22% in 2029r.
Conclusions
Kolibri has a growing production with an enormous upside. Q1 production was above expectations.
The balance sheet is strong. Q1 profit was above expectation. Profits are good with a medium/low to low PE. Shareholder returns in 2025 are limited, but thereafter can reach high levels.
In my 85 oil and gas companies ranking, Kolibri sit at the top the rankings (1st).