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Kelt Exploration Ltd
Symbol KEL
Shares Issued 187,793,857
Close 2020-03-09 C$ 1.62
Recent Sedar Documents

Kelt earns $6.57-million in 2019

2020-03-09 11:12 ET - News Release

Mr. David Wilson reports


Kelt Exploration Ltd. has released its financial and operating results for the fourth quarter and year ended Dec. 31, 2019.

                                     FINANCIAL HIGHLIGHTS                   
                          ($ thousands, except as otherwise indicated) 
                                                 Three months ended Dec. 31,   Year ended Dec. 31,     
                                                             2019       2018       2019       2018    
Petroleum and natural gas sales                            97,763    100,350    394,356    389,277  
Cash provided by operating activities                      35,396     63,656    162,488    186,383  
Adjusted funds from operations                             46,655     47,140    182,521    186,839  
Basic ($ per common share)                                   0.25       0.26       0.99       1.02  
Diluted ($ per common share)                                 0.25       0.26       0.99       1.01 
Profit (loss) and comprehensive income (loss)             (2,628)      2,843      6,572      8,154 
Basic ($ per common share)                                 (0.01)       0.02       0.04       0.04  
Diluted ($ per common share)                               (0.01)       0.02       0.04       0.04 
Total capital expenditures, net of dispositions            63,983     70,332    315,624    285,498   
Total assets                                            1,605,465  1,423,521  1,605,465  1,423,521  
Net bank debt                                             328,080    196,416    328,080    196,416  
Convertible debentures                                     82,789     78,390     82,789     78,390  
Shareholders equity                                       923,062    893,796    923,062    893,796  

Financial statements

Kelt's audited annual consolidated annual financial statements and related notes for the year ended Dec. 31, 2019, will be available to the public on SEDAR and will also be posted on the company's website on March 9, 2020.

                                         OPERATIONAL HIGHLIGHTS                                   
                             ($ thousands, except as otherwise indicated) 
                                                       Three months ended Dec. 31,   Year ended Dec. 31,           
                                                                   2019       2018       2019       2018  
Average daily production                                                                                              
Oil (bbl/d)                                                       9,900      9,301      9,361      8,403   
NGLs (bbl/d)                                                      4,888      3,783      4,490      3,186   
Gas (mcf/d)                                                      98,844     93,759     96,658     92,502   
Combined (boe/d)                                                 31,262     28,711     29,961     27,006   
Production per million common shares (boe/d)                        169        156        163        148   
Average realized prices, before financial instruments                                                             
Oil ($/bbl)                                                       63.25      38.77      66.94      65.82   
NGLs ($/bbl)                                                      21.01      27.75      20.62      33.81   
Gas ($/mcf)                                                        2.95       6.37       3.26       3.76  
Operating netbacks ($/boe)                                                                                        
Petroleum and natural gas sales                                   33.99      37.99      36.06      39.49   
Cost of purchases                                                (1.35)     (1.05)     (1.53)     (2.19)  
Average realized price, before financial instruments              32.64      36.94      34.53      37.30   
Realized gain (loss) on financial instruments                    (0.11)     (2.23)     (0.08)     (0.60)  
Average realized price, after financial instruments               32.53      34.71      34.45      36.70   
Royalties                                                        (1.25)     (2.10)     (1.76)     (3.11) 
Production expense                                               (9.09)     (8.58)     (9.18)     (9.11)
Transportation expense                                           (3.54)     (4.64)     (4.62)     (3.92)   
Operating netback                                                 18.65      19.39      18.89      20.56  
Total landholdings                                                                                                     
Gross acres                                                   1,053,445  1,075,090  1,053,445  1,075,090  
Net acres                                                       819,557    838,990    819,557    838,990  

Message to shareholders

The energy sector is currently experiencing high volatility with fluctuating crude oil prices driven by fears of a retraction in global economic growth. In addition, natural gas prices in most major United States gas hubs are trading at low levels coming out of a warmer-than-average winter in North America. Kelt has taken measures to mitigate near-term commodity price volatility by entering into fixed price swap contracts for the first half of 2020 on crude oil and for the summer of 2020 on natural gas.

Average production for the three months ended Dec. 31, 2019, was 31,262 barrels of oil equivalent per day, up 9 per cent compared with average production of 28,711 boe per day during the fourth quarter of 2018. Daily average production in the fourth quarter of 2019 was marginally higher than average production of 31,150 boe per day in the third quarter of 2019. Kelt achieved a record-high calendar year average production in 2019 of 29,961 boe per day, up 11 per cent from average production of 27,006 boe per day in 2018. Production for 2019 was weighted 46 per cent to oil and natural gas liquids and 54 per cent to gas.

Kelt's realized average oil price during the fourth quarter of 2019 was $63.25 per barrel, up 63 per cent from $38.77 per barrel in the fourth quarter of 2018 and down 3 per cent from $65.41 per barrel in the third quarter of 2019. The company's realized average NGLs price during the fourth quarter of 2019 was $21.01 per barrel, down 24 per cent from $27.75 per barrel in the fourth quarter of 2018 and up 26 per cent from $16.64 per barrel in the third quarter of 2019. Kelt's realized average gas price for the fourth quarter of 2019 was $2.95 per thousand cubic feed (MCF), down 54 per cent from $6.37 per MCF in the fourth quarter of 2018 and up 27 per cent from the realized average gas price of $2.32 per MCF in the third quarter of 2019.

For the three months ended Dec. 31, 2019, revenue was $97.8-million and adjusted funds from operations were $46.7-million (25 cents per share, diluted), compared with $100.3-million and $47.1-million (26 cents per share, diluted), respectively, in the fourth quarter of 2018. At Dec. 31, 2019, bank debt, net of working capital, was $328.1-million, up 67 per cent from $196.4-million at Dec. 31, 2018. The ratio of net bank debt to annualized quarterly adjusted funds from operations for the year was 1.8 times at Dec. 31, 2019.

Net capital expenditures incurred during the three months ended Dec. 31, 2019, were $64-million and for the year ended Dec. 31, 2019, net capital expenditures were $315.6-million. During 2019, the company spent $184.7-million on drill and complete operations, $129-million on equipment, facilities and pipelines, and $3.6-million on land and seismic. During the year, Kelt realized proceeds of $8.9-million from asset dispositions and incurred $7.2-million on asset acquisitions.

As at Dec. 31, 2019, Kelt's net working interest landholdings were 819,557 acres (1,280 sections). Kelt is focused on long-term value creation by accumulating significant land acreage on resource-style plays, with a primary focus on Triassic Montney oil and liquids-rich gas plays. At Dec. 31, 2019, Kelt's net Montney landholdings were 517,208 acres (808 sections).

At Inga/Fireweed, Kelt continued operations on its first 24-well Montney cube pad. All 24 wells were drilled by the end of 2019 and the company moved forward the completion of three of the wells from the third group of six wells to the fourth quarter of 2019, leaving six wells from the fourth group to be completed in the first quarter of 2020. During the fourth quarter of 2019, the company commenced the installation of a 40-kilometre, 16-inch pipeline that will be capable of transporting 300 million cubic feet per day of natural gas from its Inga 2-10 facility to the newly constructed AltaGas Townsend deep-cut gas plant, expected to be on stream in April, 2020. Kelt will benefit from higher liquids recoveries, increased netbacks for its propane barrels based on current far-east Asia prices and lower processing fees for its Inga/Fireweed gas that will be diverted to the AltaGas Townsend deep-cut gas plant.

At Oak/Flatrock, Kelt began the drilling of a nine-well development program in late December, 2019, that is expected to be finished during the first half of 2020. Capital expenditures relating to completion operations for these wells, pipeline tie-ins and battery construction are all planned for the second half of 2020. Ten wells (three previously drilled and completed, and seven new wells from the 2020 program) are expected to be tied into the Oak facility in 2020 and an additional two wells are slated to be connected during 2021. The company's single well tested in the Middle Montney formation at Oak appears to have lower condensate-to-gas ratios than the Upper Montney, which has ratios ranging from 100 to 150 barrels per million cubic feet of raw gas. All nine wells planned in the 2020 development program at Oak will be targeting the Upper Montney formation.

At Wembley/Pipestone, Kelt installed compression at its newly constructed battery and facility located at 01-14-072-08W6. Although this project was originally planned for 2020, it was brought forward to 2019 as it allows the company to produce into a higher-than-anticipated line pack delivering gas and condensate to the Tidewater Pipestone sour deep-cut gas processing plant. Although run times at the Pipestone plant have not met Kelt's expectations, the operator of the plant continues to troubleshoot items, which should lead to more consistent run times in the future. Kelt wells in the Wembley/Pipestone area have been performing well with oil/condensate-to-gas ratios during the fourth quarter of 2019 averaging approximately 170 barrels per million cubic feet of raw gas.

Kelt's current commodity price forecast for 2020 assumes that West Texas intermediate crude oil prices will average $52 (U.S.) per barrel and New York Mercantile Exchange Henry Hub natural gas prices will average $2.25 (U.S.) per million British thermal units. With the recent volatility in both oil and gas prices, the company expects to provide an updated 2020 commodity price forecast to shareholders early in May when Kelt reports its 2020 first quarter results.

The company will re-evaluate its spending plans for the remainder of 2020 after the first quarter is complete. Kelt is currently planning to defer certain capital expenditures that were previously expected to be incurred in the second quarter of 2020 to the second half of 2020. The company's forecasted capital expenditures for 2020 is $225-million, which is in line with forecasted adjusted funds from operations of $225-million. Kelt will continue to monitor oil and gas prices and, if necessary, will adjust its capital expenditures downward if commodity prices continue to drift lower during 2020.

Kelt expects to report to shareholders its 2020 first quarter results on or about May 7, 2020.

Changes in forecasted commodity prices and variances in production estimates can have a significant impact on estimated funds from operations and profit.

The information set out herein is a 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 2020. Readers are cautioned that this financial outlook may not be appropriate for other purposes.

We seek Safe Harbor.

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