Mr. David Wilson reports

KELT REPORTS FINANCIAL AND OPERATING RESULTS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023

Kelt Exploration Ltd. has released its financial and operating results to shareholders for the three and nine months ended Sept. 30, 2023.

Financial statements

Kelt's unaudited consolidated interim financial statements and related notes for the quarter ended Sept. 30, 2023, will be available to the public on SEDAR+ and will also be posted on the company's website on Nov. 9, 2023.

Message to shareholders

Kelt's average production for the three months ended Sept. 30, 2023, was 28,179 BOE (barrels of oil equivalent) per day, up 9 per cent from average production of 25,791 BOE per day during the corresponding period in 2022 and down 5 per cent from average production of 29,705 BOE per day during the second quarter of 2023. Quarter-over-quarter production was down primarily due to third party gas plant facility constraints and maintenance. During the third quarter, the NRM McMahon gas plant was shut in for approximately a month as it conducted its periodic turnaround operations. As a result, Kelt was required to shut in its Oak production during that period. At Wembley, the TWM Pipestone gas plant was only able to process 84 per cent of Kelt's firm gas processing capacity during the third quarter of 2023 due to facility restrictions. The TWM Pipestone gas plant is expected to be shut in for approximately two weeks in November as it repairs the cause of the facility restrictions.

Production for the three months ended Sept. 30, 2023, was weighted 38 per cent oil and NGLs (natural gas liquids) and 62 per cent gas.

Kelt's realized average oil price during the third quarter of 2023 was $104.73 per barrel, down 10 per cent from $115.92 per barrel in the third quarter of 2022. The realized average NGLs price during the third quarter of 2023 was $48.11 per barrel, down 24 per cent from $63.59 per barrel in the same quarter of 2022. Kelt's realized average gas price for the third quarter of 2023 was $2.92 per Mcf (thousand cubic feet), down 54 per cent from $6.38 per Mcf in the corresponding quarter of the previous year.

For the three months ended Sept. 30, 2023, petroleum and natural gas sales were $117-million and adjusted funds from operations was $58.8-million (30 cents per share, diluted), compared with $143.3-million and $65.2-million (33 cents per share, diluted), respectively, in the third quarter of 2022. On Sept. 30, 2023, net debt was $15.9-million or 0.1 time trailing 12 months adjusted funds from operations.

Net capital expenditures incurred during the three months ended Sept. 30, 2023, were $98.3-million. During the third quarter of 2023, the company spent $76.9-million on drill and complete operations and $20.5-million on facilities, pipelines and equipment.

Kelt expects to spend $285-million in its capital expenditure program for 2023, unchanged from its previous forecast. Production during 2023 is forecasted to average between 30,500 and 31,750 BOE per day, an increase of 14 per cent using the midpoint of the range compared with average production of 27,236 BOE per day in 2022. Production guidance for 2023 has been reduced from previous guidance of 31,000 to 33,000 BOE per day to account for the shut-in production described earlier in this news release. Adjusted funds from operations for 2023 are forecasted to be $280-million or 1 per cent higher than the company's previous forecast of $276-million. On Dec. 31, 2023, the company expects to have net debt of $11.3-million, 41 per cent lower than its previous forecast of $19-million.

2024 budget

The company's board of directors has approved an initial capital expenditure budget of $350-million for 2024. Kelt expects to drill 35 gross (34.0 net) wells in 2024 and expects to complete 37 gross (36.0 net) wells during the year. The 2024 capital expenditures are expected to be allocated as follows: $247-million for drilling and completing wells; $83-million for facilities, pipeline and equipment; and $20-million for land and seismic.

Preparation of the 2024 budget includes the forecasted average commodity price assumptions herein (with estimated average forecasted 2023 commodity prices shown for comparative purposes).

Financial and operating highlights for the company's 2024 budget plan compared with its 2023 forecast are highlighted in the attached table.

In its Pouce Coupe/Progress/Spirit River division, during 2024, Kelt expects to drill 11 (gross) and 10.0 (net) wells targeting Montney gas and Charlie Lake oil horizons. Kelt currently has access to approximately 72 MMcf (million cubic feet) per day of raw gas processing capacity through a plant ownership interest and third party facility firm service arrangements. Kelt expects to increase its overall raw gas processing capacity in the area to 107 MMcf per day over the next two years with incremental firm service arrangements, giving the company access to five different gas plants in the area.

In its Wembley/Pipestone division, during 2024, Kelt expects to drill 16 (gross) and 16.0 (net) wells targeting Montney and Charlie Lake oil horizons. The company plans to have three multiwell pad development operations consisting of four wells, five wells and four wells, respectively, as it prepares to add production upon start-up of incremental gas processing capacity. Kelt expects to increase firm service raw gas processing capacity from 37 MMcf per day to 109 MMcf per day over the next 15 months. The company has entered into gas processing arrangements with certain mid-stream companies that are building a new gas processing plant and expanding an existing gas processing plant in the area. The additional 22 MMcf per day of firm service processing capacity that was anticipated by Kelt to become available in the first quarter of 2024 could become available in late 2023. The remaining 50 MMcf per day of firm service processing capacity is expected to become available in the fourth quarter of 2024.

New production additions at Wembley/Pipestone resulting from increased gas processing capacity are expected to increase the company's oil and NGLs weighting as this production is expected to be 57 per cent to 62 per cent weighted to oil and NGLs.

In its Oak/Flatrock division, Kelt expects to commence drilling operations on an 11-well development program in November, 2023, and anticipates completing drilling operations by spring breakup in 2024. The first well is expected to be spud on Nov. 17, 2023. Kelt has the ability to increase firm service raw gas processing capacity from 25 MMcf per day to 90 MMcf per day over the next 30 months through gas processing arrangements with a third party at Oak.

Management looks forward to updating shareholders with 2023 year-end results on or about March 8, 2024. The company also expects to provide an updated reserves evaluation report, effective Dec. 31, 2023, during February, 2024.

We seek Safe Harbor.