Mr. David Wilson reports

KELT REPORTS FINANCIAL AND OPERATING RESULTS FOR THE THREE MONTHS ENDED MARCH 31, 2023

Kelt Exploration Ltd. has released its financial and operating results to shareholders for the first quarter ended March 31, 2023. The company's financial results are summarized in the associated table.

Financial statements

Kelt's unaudited consolidated interim financial statements and related notes for the quarter ended March 31, 2023, will be available to the public on SEDAR and will also be posted on the company's website on May 4, 2023.

In addition, Kelt's updated 2022 sustainability report will be available on the company's website on May 4, 2023.

Kelt's operating results for the first quarter ended March 31, 2023, are summarized in the associated table.

Message to shareholders

Kelt recorded the highest quarterly average production in its 10-year history during the first quarter of 2023. Average production for the three months ended March 31, 2023, was 31,833 boe (barrels of oil equivalent) per day, up 16 per cent from average production of 27,413 boe per day during the first quarter of 2022. Quarter-over-quarter, Kelt recorded production growth of 14 per cent from average production of 28,036 boe per day during the fourth quarter of 2022. Production for the three months ended March 31, 2023, was weighted 39 per cent oil and NGLs (natural gas liquids), and 61 per cent gas.

Kelt's realized average oil price during the first quarter of 2023 was $99.33 per barrel, down 13 per cent from $113.60 per barrel in the first quarter of 2022. The realized average NGLs price during the first quarter of 2023 was $56.48 per barrel, down 12 per cent from $63.90 per barrel in the same quarter of 2022. Kelt's realized average gas price for the first quarter of 2023 was $4.03 per mcf (thousand cubic feet), down 26 per cent from $5.41 per mcf in the corresponding quarter of the previous year.

For the three months ended March 31, 2022, revenue from P&NG (petroleum and natural gas) sales was $139.6-million and adjusted funds from operations was $92-million (47 cents per share, diluted), compared with $138.4-million and $74.2-million (38 cents per share, diluted) respectively, in the first quarter of 2022. Net income rose by 52 per cent to $16.3-million during the first quarter of 2023, compared with $10.7-million for the three-month period ended March 31, 2022. At March 31, 2023, the company had a net surplus of $4.9-million, compared with net debt of $34.7-million at March 31, 2022.

Net capital expenditures incurred during the three months ended March 31, 2023, were $76.6-million. During the first quarter of 2023, the company spent $57-million on drill and complete operations, and $18.7-million on equipment, facilities and pipelines.

In the Pouce Coupe/Progress/Spirit River division, Kelt drilled and completed a four-well Montney pad at Pouce Coupe during the first quarter of 2023. These Montney wells are expected to be brought on production late in the second quarter of 2023. At Spirit River, Kelt drilled and completed two wells from the same pad in the Charlie Lake formation. These wells are expected to be put on production during the second quarter of 2023.

In the Wembley/Pipestone division, Kelt drilled and completed its second Charlie Lake well in the area. This well, located at 100/4-13 (surface, 102/16-8) was put on production with very encouraging results. The IP30 (30-day initial production) (estimated sales volumes) was approximately 1,230 boe per day (70 per cent oil and NGLs). In addition, at Wembley, the company has commenced the drilling of a four-well Montney pad. As previously disclosed, Kelt has entered into agreements with certain third party mid-stream companies to access significant additional gas processing capacity in the area, with an initial tranche expected to become available in early 2024. The company expects to have nine Montney wells drilled and completed at the time this first tranche of additional gas processing capacity at Wembley becomes available, in addition to certain volumes that are currently shut-in.

In the Oak/Flatrock division, Kelt drilled two Montney wells at Oak in the first quarter of 2023 and expects to drill three additional wells at Oak in the second quarter of 2023. These five Montney wells are expected to be completed during the summer of 2023.

Kelt's forecasted capital expenditure program for 2023 remains unchanged at $285-million, and the company's forecasted production range averaging between 32,000 boe per day and 34,000 boe per day also remains unchanged compared with its previous forecast. However, the estimated liquids weighting increased to reflect the higher oil content from new Charlie Lake wells recently put on production. Kelt's forecasted average WTI (West Texas Intermediate) crude oil price for 2023 remains unchanged at $78 (U.S.) per barrel, however, Kelt has reduced its forecasted natural gas prices for 2023. NYMEX (New York Mercantile Exchange) Henry Hub is now forecasted to average $2.95 (U.S.) per MMBtu (million British thermal units) in 2023, down 13 per cent from the company's previous forecast of $3.39 (U.S.) per MMBtu, and AECO (Alberta Energy Company) is forecasted to average $2.69 per GJ (gigajoule) in 2023, down 9 per cent from Kelt's previous forecast of $2.94 per GJ.

Kelt's adjusted funds from operations for 2023 is estimated to be $285-million, unchanged from its previous estimate. Kelt will continue to maintain its strong financial position. At Dec. 31, 2023, the company expects to have net debt of $14.8-million, or only 0.1 times adjusted funds from operations. Kelt will re-evaluate its 2023 guidance after the second quarter is complete.

The associated table summarizes the percentage changes to 2023 guidance compared with the previous forecast and historical changes to 2023 guidance since the company's original forecast was prepared in November, 2022.

Kelt's growth prospects are expected to continue to provide shareholders with high rates of return on capital deployed as the company continues to reinvest cash flow into development of its high-quality Montney and Charlie Lake assets.

Management looks forward to updating shareholders with 2023 second quarter results on or about Aug. 3, 2023.

The information set out herein is financial outlook within the meaning of applicable securities laws. The purpose of this financial outlook is to provide readers with disclosure regarding Kelt's reasonable expectations as to the anticipated results of its proposed business activities for the calendar year 2023. Readers are cautioned that this financial outlook may not be appropriate for other purposes.

We seek Safe Harbor.