Kolibri Luncheon on May 21 - My notes

[dan_s]

What I learned today.

> KGEI is trading at less than 50% of Fair Value based on their year-end reserve report.
> The four Lovina wells were completed in 10.5 days per well, compared to 14 days per well for the Alicia Renee wells.  Lower completed well costs increase well level economics.  If oil price averages $70/bbl, the internal rate of return based on what they expect the 4 wells to produce is 177% and at $60 oil the IRR is 117% < Wells still pay out in less than one year after being completed to sales, which should happen in early Q3.
> Lovina laterals stayed in what Wolf believes is the best part of the Caney Zone (key to success for horizontal wells), which is ~325 feet thick.  Logs of all four wells look good, similar to the Alicia Renee wells.
> If Lovina wells are as good as the average of the three Alicia Renee wells they should increase Kolibri's production in July by over 2,800 Boepd with ~2,000 bpd of oil.
> If successful, the Forguson horizontal well would add several dozen more proved locations. The location of the well is in the middle of the only 3,000 acres of the Tishomingo Field that is classified as "possible" reserves (3P)
> Two more 1.5 mile horizontal development wells will be drilled and completed in a "proved" area of the Tishomingo Field in Q4 this year.
> If all goes as planned, Netherland Sewell should significantly increase Kolibri's proved reserves since the Alicia Renee wells continue to produce are rates above the NS type curves. NS is a very conservative engineering company.

> Wolf said that they have not yet decided how many wells would be drilled in 2026, but my guess is 6 to 10 depending on the price of oil.  The company will continue to fund all growth entirely with operating cash flow.
> They are continuing to buy back stock.
> Wolf did say that if someone wanted to buy the Company, to be considered the offer would need to be more than the PV10 NAV based only on proved reserves.  In other words, he believes that the "probable" reserves are actually proved locations.
> MY WAG: A sale of the company will only be made after they prove up the entire Tishomingo Field, which might take 15 to 20 more wells. Plus, now is not a Sellers Market.
> Natural gas prices in my model for the remainder of 2025 and for 2026 are too low.  Exxon markets all of their natural gas and NGLs, so they should get better realized gas prices, but oil is still ~88% of Kolibri's revenues.
> Kolibri's actual realized prices went from $2.65/mcf in Q4 to $3.85/mcf in Q1 and realized NGLs prices went from $23.38/bbl in Q4 to $30.67/bbl in Q1.

Bottomline:
> If this year's drilling program is successful, Kolibri should exit 2025 with ~7,000 Boepd of production.
> My current valuation of $11/share is conservative based on what we know for sure today. < First Call's current price target is $10.50.
> If all goes as planned, my valuation should be $18 to $20 per share early in 2026.

[dan_s]

Plus: Wolf said other companies are reporting good wells in the Upper Sycamore zone, which looks good in the Tishomingo Field.

[Petroleum economist]

Dan, a Kolibri 2025 production exit rate at 7.0 K BoE/d looks a bit low to me. I can see an exit rate of > 8.0 K BoE/d based on the five elements shown below.

Existing production
• Existing Q1 production (4.08 K BoE/d – no new wells ) was down 0.32 K BoE/d on Q4 (4.40 K BoE/d).
• Extrapolating this to late 2025 Q4 exit rate for the existing production could be 4.08-4*0.32=2.8 K BoE/d.

Lovina wells
• The four Lovina wells should start up in Q3 at 4* 800 BoE/d = 3.2 K BoE/d.
• Allowing for a 10% decline towards late 2025 these wells could add 2.9 K BoE/d in late 2025.

Furguson well
• The Ferguson well can add 600 BoE/d in Q3.
• Allowing for a 10% decline the late 2025 contribution can be 0.5 K BoE/d.

Two Caney wells in H2
• Kolibri will drilling and completing in H2 two more 1.5-mile lateral Caney wells.
• These wells can add 2*800 = 1.6 K BoE/d.

Two Velin wells
• Kolibri will be completing in H2 two 1-mile Velin wells.
• These wells can add 2*400 = 0.8 K BoE/d

2025 exit rate
Combining the above the 2025 exit rate can be 2.8 + 2.9 + 0.5 + 1.6 + 0.8 = 8.6 K BoE/d.

[ChuckGeb]

The points listed by Dan and the level of confidence displayed by Wolf Wregner yesterday confirmed the confidence in execution of the plan. Great luncheon.

Expect this company to provide transparent credible guidance with my expectation they will over deliver. Great entry point now before announcement on 4-5 completions early Q3. If as expected stock should pop but if not still a good value.

[dan_s]

Harry;

I definitely agree with your estimated production exit rate, but for now I will stick with the high end of the Company's guidance. Wolf did say that their guidance is based on NS type curves, which are definitely conservative.

I did talk to Wolf on the phone yesterday to confirm that the laterals of the four Lovina wells were all in the sweet spot of the 300+ foot thick Caney zone and all four logs look good, "almost identical to the Alicia Renee well logs".

He also told me that the other operators in the area just north of Tishomingo Field have reported very good wells in the Upper Sycamore zone, which is present in most of the Tishomingo Field. Continental Resources (now a private company) and Ovintiv (OVV) have reported several wells with IP30 rates of more than 1,200 barrels of oil per day.