Drilling rights for one of the world's biggest companies in thousands of shale acreage in British Columbia is a testament to its potential, Calima Energy said.

Conoco Phillips announced last week it spent $120 million to acquire 35,000 net acres in the Montney shale play in British Columbia, bringing its net total to 140,000 acres. Exploration and appraisal activity would be supported by what's already in the company's budget.

Matt Fox, an exploration leader at Conoco, said in a statement the Canadian acreage supports the company's "low cost of supply resource base without requiring significant near-term capital commitments."

Calima Energy, an Australian company, said Conoco's acquisition is close to its Canadian acreage and the commitment came even without reported production from the acreage.

"This transaction is significant as it underlines continued interest from major companies in the Montney play in Northeast British Columbia and provides a market price for undeveloped acreage in the vicinity of the Calima lands," Calima Managing Director Alan Stein said in a statement.

Calima operates more than 70,000 acres in the Montney shale formation in British Columbia and has the permits necessary from the provincial oil and gas commission to build, maintain and operate a road into its holdings.

Oil and gas exploration since the 1950s has utilized conventional operations to tap into a basin that straddles the borders of Alberta and British Columbia. Advances in horizontal drilling and hydraulic fracturing, or fracking, have uncorked new opportunities and Calima said federal data point to as much as 449 trillion cubic feet of marketable natural gas and 1.1 billion barrels of marketable oil in the Montney formation.

Through a government land auction in December, Calima it increased its holdings in the Montney shale formation by 2,738 acres, or about 4 percent. From a cash flow perspective, the company said the Montney shale has one of the most competitive break-even costs in North America.

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