During 2020, revenue generated by sales of oil and gas were adversely affected by the precipitous decline in oil and gas prices as a result of the unprecedented destruction in demand for the commodities due to global lockdowns and business interruptions. Several pharmaceutical companies have now developed vaccines as a measure to prevent or reduce COVID infections. As the global economy recovers, the demand for oil and gas has also commenced a recovery leading to current oil and gas selling prices trading at or above pre-pandemic levels.
Kelt is optimistic that oil and gas prices will continue to remain strong leading into 2022 as the massive cuts in global spending whereby long-term energy related projects were put on hold or cancelled completely, will ultimately affect supply of hydrocarbons.
Kelt’s board of directors has approved an increase to the Company’s capital expenditure program for 2021. Kelt expects to spend $150.0 million in 2021, up 25% from its previous forecast of $120.0 million. The Company has elected to bring forward certain expenditures previously planned for 2022 in order to take advantage of current commodity prices. In doing so, Kelt expects higher production and funds from operations in 2021. In addition, the Company will put itself in a position to show continued growth in production in 2022 by accelerating capital expenditure plans.
Kelt will continue to maintain its strong financial position. At December 31, 2021, the Company expects to have debt, net of working capital, of $11.0 million or only 0.1 times adjusted funds from operations.
Production in 2021 is now forecasted to average 21,000 BOE per day, up 11% from its previous forecast of 19,000 BOE per day. Adjusted funds from operations for 2021 is forecasted to be $118.0 million, a 10% increase from its previous forecast of $107.0 million.
The following table summarizes the changes to 2021 guidance since the Company’s original forecast was prepared in November 2020:
|WTI Crude Oil (USD/bbl)||38.50||59.95||60.00||+ 56%|
|NYMEX Natural Gas (USD/MMBtu)||3.10||2.82||2.90||– 6%|
|Exchange Rate (CAD/USD)||1.340||1.267||1.227||– 8%|
|Oil & NGLs (bbls/d)||6,500||7,145||7,850||+ 21%|
|Gas (MMcf/d)||66.00||71.13||78.90||+ 20%|
|Combined (BOE/d)||17,500||19,000||21,000||+ 20%|
|Revenue ($MM)||175.0||238.0||256.4||+ 47%|
|Adjusted Funds from Operations ($MM)||66.5||107.0||118.0||+ 77%|
|AFFO per share, diluted||0.35||0.56||0.62||+ 77%|
|Capital Expenditures ($MM)||90.0||120.0||150.0||+ 67%|
|Bank Debt, net of working capital deficit
Kelt has a significant number of wells that it plans to bring on production during the remainder of 2021. Below is a summary of the wells and their current status.
The following wells are expected to be put on production during the third quarter of 2021:
(a) Wembley (sfc 14-34) 02/13-32-074-09W6 Montney D3 – drilled and completed;
(b) Wembley (sfc 14-34) 00/13-10-075-09W6 Montney D3 – drilled and completed;
(c) Spirit River (sfc 8-27) 08-25 Upper Charlie Lake – drilled and completed;
(d) Spirit River (sfc 8-27) 01-25 Lower Charlie Lake – drilled and completed;
(e) Pouce Coupe (sfc 1-32) 04/13-32-077-11W6 Montney D1 – drilled (DUC);
(f) Pouce Coupe (sfc 1-32) 05/13-32-077-11W6 Montney D2 – drilled (DUC); and
(g) Pouce Coupe (sfc 1-32) 02/14-32-077-11W6 Montney D2 – drilled (DUC).
The following wells are expected to be put on production during the fourth quarter of 2021:
(a) Oak (sfc 5-31) 00/13-05-087-18W6 Upper Montney – drilled and completed;
(b) Oak (sfc 5-31) 00/16-06-087-18W6 Middle Montney – drilled and completed;
(c) Oak (sfc 5-33) 00/01-09-087-18W6 Upper Montney – drilled (DUC);
(d) Oak (sfc 5-33) 00/04-10-087-18W6 Upper Montney – drilled (DUC);
(e) Oak (sfc 6-35) 00/12-12-087-18W6 Upper Montney – drilled (DUC);
(f) Oak (sfc 6-35) 00/08-11-087-18W6 Upper Montney – drilled (DUC);
(g) Oak (sfc 13-12) 00/14-24-087-18W6 Upper Montney – drilled (DUC);
(h) Oak (sfc 13-12) 00/16-23-087-18W6 Upper Montney – drilled (DUC);
(i) Oak (sfc 13-12) 00/08-16-087-18W6 Upper Montney – drilled (DUC); and
(j) Oak (sfc 13-12) 02/08-16-087-18W6 Upper Montney – drilled (DUC).
Kelt has a strong financial position and expects to show continued growth in production and funds from operations as it brings on-stream wells from its portfolio of high rate of return projects. The Company will continue to monitor commodity prices and will announce any further changes to its 2021 guidance accordingly.
Management looks forward to updating shareholders with 2021 second quarter results on or about August 5, 2021.