Calgary, Alberta – Kelt Exploration Ltd. (TSX: KEL) (“Kelt” or the “Company”) has released its financial and operating results for the fourth quarter and year ended December 31, 2020. The Company’s financial results are summarized as follows:
|FINANCIAL HIGHLIGHTS||Three months ended December 31||Year ended December 31|
|(CA$ thousands, except as otherwise indicated)||2020||2019||%||2020||2019||%|
|Petroleum and natural gas sales||41,961||97,763||-57||207,156||394,356||-47|
|Cash provided by operating activities||3,288||35,396||-91||59,279||162,488||-64|
|Adjusted funds from operations (1)||10,758||46,655||-77||58,832||182,521||-68|
|Basic ($/ common share) (1)||0.06||0.25||-76||0.31||0.99||-69|
|Diluted ($/ common share) (1)||0.06||0.25||-76||0.31||0.99||-69|
|Profit (loss) and comprehensive income (loss)||26,018||(2,628||)||-1090||(324,807||)||6,572||-5042|
|Basic ($/ common share)||0.14||(0.01||)||-1500||(1.73||)||0.04||-4425|
|Diluted ($/ common share)||0.14||(0.01||)||-1500||(1.73||)||0.04||-4425|
|Total capital expenditures, net of dispositions||24,470||63,983||-62||(353,957||)||315,624||-212|
|Net bank debt (surplus (1)||(26,261||)||328,080||-108||(26,261||)||328,080||-108|
|Weighted average shares outstanding (000s)|
|(1) Refer to advisories regarding non-GAAP financial measures and other key performance indicators.|
Kelt’s audited annual consolidated annual financial statements and related notes for the year ended December 31, 2020 will be available to the public on SEDAR at www.sedar.com and will also be posted on the Company’s website at www.keltexploration.com on March 11, 2021.
Kelt’s operating results for the fourth quarter and year ended December 31, 2020 are summarized as follows:
|OPERATIONAL HIGHLIGHTS||Three months ended December 31||Year ended December 31|
|(CA$ thousands, except as otherwise indicated)||2020||2019||%||2020||2019||%|
|Average daily production|
|Production per million common shares (BOE/d) (1)||87||169||-49||133||163||-18|
|Average realized prices, before financial instruments (1)|
|Operating netbacks ($/BOE) (1)|
|Petroleum and natural gas sales||27.69||33.99||-19||22.65||36.06||-37|
|Cost of purchases||(1.28||)||(1.35||)||-5||(0.92||)||(1.53||)||-40|
|Average realized price, before financial instruments (1)||26.41||32.64||-19||21.73||34.53||-37|
|Realized gain (loss) on financial instruments||(2.51||)||(0.11||)||2182||0.99||(0.08||)||-1338|
|Average realized price, after financial instruments (1)||23.90||32.53||-27||22.72||34.45||-34|
|Operating netback (1)||8.40||18.65||-55||8.41||18.89||-55|
|(1) Refer to advisories regarding non-GAAP financial measures and other key performance indicators.
Message to Shareholders
Kelt Exploration Ltd. (“Kelt” or the “Company”) reports its financial and operating results to shareholders for the fourth quarter and year ended December 31, 2020.
The energy sector experienced a tumultuous year in 2020 that began with the unprecedented impact to global oil demand destruction resulting from the COVID-19 pandemic, as well as excess oil supplies, as many oil producing nations ramped up oil production as they sought to gain global market share.
Kelt was pro-active and took several initiatives to preserve shareholder value during a period of economic uncertainty including cost-cutting measures, financial hedge contracts, production shut-ins and application to certain government programs.
On August 21, 2020, Kelt completed the sale of its Inga/Fireweed/Stoddart Division (the “Inga Assets”) for net cash proceeds of $503.9 million. Proceeds from the sale of the Inga Assets were directed towards re-payment of outstanding amounts under the Company’s syndicated credit facility and towards the redemption of Kelt’s outstanding convertible debentures, leaving the Company with a positive working capital position at December 31, 2020.
Average production for the three months ended December 31, 2020 was 16,476 BOE per day, down 47% compared to average production of 31,262 BOE per day during the fourth quarter of 2019. Daily average production in the fourth quarter of 2020 was 7% higher than pro-forma (excluding production related to the Inga Assets) production of 15,444 BOE per day for the fourth quarter of 2019.
Kelt’s 2020 fourth quarter production exceeded its previous guidance for the quarter by 17% as the Company brought on-stream two Wembley/Pipestone wells earlier than anticipated. Production for the three months ended December 31, 2020 was weighted 41% to oil and NGLs and 59% to gas.
Kelt’s realized average oil price during the fourth quarter of 2020 was $50.30 per barrel, down 20% from $63.25 per barrel in the fourth quarter of 2019. The Company’s realized average NGLs price during the fourth quarter of 2020 was $22.42 per barrel, up 7% from $21.01 per barrel in the fourth quarter of 2019. Kelt’s realized average gas price for the fourth quarter of 2020 was $2.91 per MCF, down 1% from $2.95 per MCF in the fourth quarter of 2019.
For the three months ended December 31, 2020, revenue was $42.0 million and adjusted funds from operations was $10.8 million ($0.06 per share, diluted), compared to $97.8 million and $46.7 million ($0.25 per share, diluted) respectively, in the fourth quarter of 2019. At December 31, 2020, Kelt had no bank debt and a working capital surplus of $26.3 million compared to net bank debt of $328.1 million and outstanding convertible debentures of $89.9 million at December 31, 2019.
Net capital expenditures incurred during the three months ended December 31, 2020 were $24.5 million, down 62% compared to net capital expenditures of $64.0 million during the fourth quarter of 2019. During the fourth quarter of 2020, the Company spent $16.5 million on drill and complete operations and $7.3 million on equipment, facilities and pipelines.
As at December 31, 2020, Kelt’s net working interest land holdings were 579,764 acres (906 sections). Kelt is focused on long-term value creation by accumulating significant land acreage on resource style plays, with a primary focus on the Triassic Montney oil and liquids-rich gas plays. At December 31, 2020, Kelt’s net Montney land holdings were 370,564 acres (579 sections). In addition, Kelt holds 74,714 net acres (117 sections) in the Triassic Charlie Lake play in Alberta.
At Oak/Flatrock, Kelt currently has two Montney wells that have been drilled, completed and tested and eight additional wells that have been drilled and are awaiting completion. The Company expects to construct a gas compression and oil battery facility at Oak during the third quarter of 2021 and expects to bring on production, ten new wells during October 2021.
At Pouce Coupe, Kelt drilled two high deliverability Montney gas wells during the fourth quarter of 2020 and subsequently, in early 2021, the Company completed and tied-in both wells. The two wells have initially come on-stream at a combined rate in excess of 20.0 MMcf per day. The Company has an inventory of 32 additional locations on its high deliverability gas land block at Pouce Coupe West.
At Wembley/Pipestone, Kelt currently has three Montney wells that have been drilled, completed and tested and two additional wells that have been drilled and are awaiting completion (“DUCs”). The Company expects to complete the two DUCs and tie-in the wells by mid-year 2021.
In anticipation of rising steel prices and given the upcoming completion programs, both at Oak and at Wembley, Kelt has pre-purchased casing and line pipe in order to mitigate higher capital costs.
Kelt has actively reduced its exposure to rental equipment in all of its areas of operation in an effort to reduce future operating expenses. Kelt is committed to its goal of being a low-cost producer.
With the strong performance in crude oil pricing, Kelt has revised its 2021 outlook and guidance. The Company has changed its 2021 forecasted average commodity prices to reflect current futures strip pricing as follows: WTI crude oil prices are expected to average US$59.95 per barrel, up 56% from the previous forecast of US$38.50 per barrel; and NYMEX Henry Hub natural gas prices are expected to average US$2.82 per MMBtu, down 9% from the previous forecast of US$3.10 per MMBtu. The Company will continue to monitor commodity prices and expects to provide updated 2021 guidance, if necessary, by mid-year.
Kelt has increased its 2021 capital expenditure program to $120.0 million, up by 33% or $30.0 million from its previous guidance. Production in 2021 is forecasted to average 19,000 BOE per day, up by 9% or 1,500 BOE per day from the Company’s previous guidance. Adjusted funds from operations are forecasted to be $107.0 million in 2021, up by 61% or $40.5 million from Kelt’s previous forecast. Kelt does not plan to have any bank debt at December 31, 2021. The Company’s working capital surplus position is expected to be $7.0 million at the end of 2021, up by 75% or $4.0 million compared to the Kelt’s previous forecast.
Kelt expects to report to shareholders its 2021 first quarter results on or about May 6, 2021.
Changes in forecasted commodity prices and variances in production estimates can have a significant impact on estimated funds from operations and profit. Please refer to the advisories regarding forward-looking statements and to the cautionary statement below.
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 2021. Readers are cautioned that this financial outlook may not be appropriate for other purposes.