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, 2021. 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) | 2021 | 2020 | % | 2021 | 2020 | % | ||||||||||||
Petroleum and natural gas sales | 120,523 | 41,961 | 187 | 316,763 | 207,156 | 53 | ||||||||||||
Cash provided by operating activities | 52,056 | 3,288 | 1483 | 159,714 | 59,279 | 169 | ||||||||||||
Adjusted funds from operations (1) | 68,155 | 10,758 | 534 | 161,394 | 58,832 | 174 | ||||||||||||
Basic ($/ common share) (1) | 0.36 | 0.06 | 500 | 0.85 | 0.31 | 174 | ||||||||||||
Diluted ($/ common share) (1) | 0.35 | 0.06 | 483 | 0.85 | 0.31 | 174 | ||||||||||||
Net income (loss) and comprehensive income (loss) | 52,996 | 26,018 | 104 | 114,256 | (324,807 | ) | 135 | |||||||||||
Basic ($/ common share) | 0.28 | 0.14 | 100 | 0.61 | (1.73 | ) | 135 | |||||||||||
Diluted ($/ common share) | 0.28 | 0.14 | 100 | 0.60 | (1.73 | ) | 135 | |||||||||||
Capital expenditures, net of A&D (1) | 67,118 | 24,470 | 174 | 213,511 | (353,957 | ) | 160 | |||||||||||
Total assets | 913,497 | 759,987 | 20 | 913,497 | 759,987 | 20 | ||||||||||||
Bank debt | 1,150 | – | – | 1,150 | – | – | ||||||||||||
Net debt (surplus) (1) | 28,220 | (27,655 | ) | 202 | 28,220 | (27,655 | ) | 202 | ||||||||||
Shareholders’ equity | 722,724 | 603,684 | 20 | 722,724 | 603,684 | 20 | ||||||||||||
Weighted average shares outstanding (000s) | ||||||||||||||||||
Basic | 189,134 | 188,551 | – | 188,800 | 188,093 | – | ||||||||||||
Diluted | 192,676 | 189,270 | 2 | 190,807 | 188,093 | 1 |
(1) Refer to advisories regarding non-GAAP and other financial measures.
Financial Statements
Kelt’s audited annual consolidated annual financial statements and related notes for the year ended December 31, 2021 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 10, 2022.
Kelt’s operating results for the fourth quarter and year ended December 31, 2021 are summarized as follows:
OPERATIONAL HIGHLIGHTS | Three months ended December 31 | Year ended December 31 | ||||||||||||||||
(CA$ thousands, except as otherwise indicated) | 2021 | 2020 | % | 2021 | 2020 | % | ||||||||||||
Average daily production | ||||||||||||||||||
Oil (bbls/d) (2) | 6,624 | 4,057 | 63 | 4,692 | 7,057 | -34 | ||||||||||||
NGLs (bbls/d) | 3,255 | 2,722 | 20 | 3,154 | 4,161 | -24 | ||||||||||||
Gas (mcf/d) | 95,616 | 58,179 | 64 | 78,846 | 82,646 | -5 | ||||||||||||
Combined (BOE/d) | 25,815 | 16,476 | 57 | 20,987 | 24,992 | -16 | ||||||||||||
Production per million common shares (BOE/d) (1) | 136 | 87 | 56 | 111 | 133 | -17 | ||||||||||||
Net realized prices, before financial instruments(1) | ||||||||||||||||||
Oil ($/bbl) (2) | 91.43 | 50.30 | 82 | 81.30 | 40.80 | 99 | ||||||||||||
NGLs ($/bbl) | 50.03 | 22.42 | 123 | 40.03 | 15.04 | 166 | ||||||||||||
Gas ($/mcf) | 5.46 | 2.91 | 88 | 4.35 | 2.33 | 87 | ||||||||||||
Operating netbacks ($/BOE) (1) | ||||||||||||||||||
Petroleum and natural gas sales | 50.75 | 27.69 | 83 | 41.35 | 22.65 | 83 | ||||||||||||
Cost of purchases | (0.74 | ) | (1.28 | ) | -42 | (0.83 | ) | (0.92 | ) | -10 | ||||||||
Combined net realized price, before financial instruments(1) | 50.01 | 26.41 | 89 | 40.52 | 21.73 | 86 | ||||||||||||
Realized gain (loss) on financial instruments | (2.62 | ) | (2.51 | ) | 4 | (2.14 | ) | 0.99 | -316 | |||||||||
Combined net realized price, after financial instruments(1) | 47.39 | 23.90 | 98 | 38.38 | 22.72 | 69 | ||||||||||||
Royalties | (4.17 | ) | (2.13 | ) | 96 | (3.58 | ) | (1.13 | ) | 217 | ||||||||
Production expense | (9.91 | ) | (9.54 | ) | 4 | (9.13 | ) | (9.56 | ) | -4 | ||||||||
Transportation expense | (3.31 | ) | (3.83 | ) | -14 | (3.38 | ) | (3.62 | ) | -7 | ||||||||
Operating netback (1) | 30.00 | 8.40 | 257 | 22.29 | 8.41 | 165 | ||||||||||||
Land holdings | ||||||||||||||||||
Gross acres | 722,281 | 800,270 | -3 | 722,281 | 800,270 | -3 | ||||||||||||
Net acres | 558,763 | 579,764 | -4 | 558,763 | 579,764 | -4 |
(1) Refer to advisories regarding non-GAAP and other financial measures.
(2) “Oil” includes crude oil and field condensate combined.
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, 2021.
Average production for the three months ended December 31, 2021 was 25,815 BOE per day, up 32% compared to average production of 19,621 BOE per day during the third quarter of 2021. 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. Of the 24,992 BOE per day average production for 2020, 9,052 BOE per day related to the Inga Assets. Average production for 2021 was 20,987 BOE per day, an increase of 32% from pro-forma (excluding Inga Assets) average production of 15,940 BOE per day in 2020. Production for the three months ended December 31, 2021 was weighted 38% to oil and NGLs and 62% to gas.
With political turmoil around the globe, supply chain disruptions stemming from the COVID-19 pandemic, a broad swathe of commodity prices are on the rise globally including crude oil and other fuels.
Kelt’s petroleum and natural gas sales during the fourth quarter of 2021 increased 187% to $120.5 million, up from $42.0 million in the same period of the previous year. Oil and gas sales for the year were $316.8 million, up 53% from $207.2 million in 2020. Kelt’s realized average oil price during the fourth quarter of 2021 was $91.43 per barrel, up 82% from $50.30 per barrel in the fourth quarter of 2020. The Company’s realized average NGLs price during the fourth quarter of 2021 was $50.03 per barrel, up 123% from $22.42 per barrel in the fourth quarter of 2020. Kelt’s realized average gas price for the fourth quarter of 2021 was $5.46 per MCF, up 88% from $2.91 per MCF in the fourth quarter of 2020.
For the three months ended December 31, 2021, adjusted funds from operations was $68.2 million ($0.35 per share, diluted), compared to $10.8 million ($0.06 per share, diluted) in the fourth quarter of 2020. Year over year, adjusted funds from operations increased 174% to $161.4 million ($0.85 per share, diluted) from $58.8 million ($0.31 per share, diluted) in 2020. During 2021, Kelt recorded net income of $114.3 million ($0.60 per share, diluted) compared to a net loss of $324.8 million ($1.73 per share, diluted) in the previous year.
At December 31, 2021, Kelt had net debt of $28.2 million compared to a net surplus of $27.7 million at December 31, 2020. With the sale of the Inga Assets in 2020 and an environment of rising commodity prices, Kelt continues to maintain a strong financial position.
Capital expenditures, net of A&D incurred during the three months ended December 31, 2021 were $67.1 million, up 174% compared to capital expenditures, net of A&D of $24.5 million during the fourth quarter of 2020. During the fourth quarter of 2021, the Company spent $28.8 million on drill and complete operations and $37.6 million on well equipment, facilities and pipelines.
As at December 31, 2021, Kelt’s net working interest land holdings were 558,763 acres (873 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, 2021, Kelt’s net Montney land holdings were 356,719 acres (557 sections). In addition, Kelt holds 73,347 net acres (114.6 net sections) in the Triassic Charlie Lake play in Alberta.
At Oak/Flatrock, Kelt commenced operations at its newly constructed Oak 6-35 gas compression and oil battery facility as outlined in a comprehensive operations update previously reported in the Company’s news release on February 17, 2022. The seven Upper Montney wells that were put on production during the month of November 2021 continue to meet and in most cases exceed expectations.
At Pouce Coupe, Kelt drilled, completed, and put on production four Montney wells in the oil-prone area of the Company’s land base during 2021. At Pouce Coupe West, Kelt drilled two Montney wells during the fourth quarter of 2021 in its high deliverability gas-prone area. Subsequently, in early 2022, the Company completed both wells. The first well has been put on production and the second well is expected to commence production in the second quarter after construction of a pipeline connection is completed. At Spirit River, Kelt drilled, completed and put on production two Charlie Lake wells during 2021. The Company plans to follow-up with six additional Charlie Lake wells on its Progress/Spirit River land base in 2022.
At Wembley/Pipestone, on the southeastern portion of its 168-section Montney land block, Kelt completed the construction of its Phase 1 pipeline in late 2021 and is currently constructing Phase 2. On the northwestern portion of its land base, Kelt has commenced a 4-well pad and a 3-well pad development program. One of the wells on the 4-well pad will be drilled in a previously untested lower Montney zone (D1) that, if successful, could unlock significant inventory upside at Wembley/Pipestone where Kelt is already developing three other layers in the Montney formation. The Company expects to bring 15 Montney wells on production at Wembley/Pipestone during 2022.
In anticipation of continued production growth, Kelt has been proactively seeking additional gas processing capability in all of its core operating areas through agreements with third party facility owners. In Alberta, Kelt expects to add 15 MMcf/d of additional gas processing capacity in 2022, 25 MMcf/d of capacity in 2023 and an additional 25 MMcf/d of capacity in late 2023/early 2024. At Oak in British Columbia, Kelt has the ability to add firm capacity as needed as the Company continues to develop its large Montney acreage.
With the strong performance in crude oil pricing, Kelt has revised its 2022 outlook and guidance. The Company has changed its 2022 forecasted average commodity prices as follows: the WTI crude oil price is forecasted to average US$85.00 per barrel, up 18% from the previous forecast of US$72.00 per barrel; and the NYMEX Henry Hub natural gas price is forecasted to average US$4.15 per MMBtu, up 1% from the previous forecast of US$4.10 per MMBtu. The Company will continue to monitor commodity prices and expects to provide updated 2022 guidance, if necessary, by mid-year.
Kelt has increased its 2022 capital expenditure program to $250.0 million, up from a range of $200.0 million to $210.0 million in its previous guidance. Production in 2022 is forecasted to average 31,000 BOE per day, up by 3% or 1,000 BOE per day from the Company’s previous guidance. Exit 2022 production is expected to show a higher increase as the additional capital spending will be in the second half of the year giving the Company a strong start to 2023. Adjusted funds from operations is forecasted to be $300.0 million in 2022, up by 22% or $55.0 million from Kelt’s previous forecast. The Company’s financial position continues to remain strong as Kelt is forecasting a net surplus of $19.0 million at the end of 2022, giving the Company the ability to act on additional opportunities as they arise.
Kelt expects to report to shareholders its 2022 first quarter results on or about May 5, 2022.
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 2022. Readers are cautioned that this financial outlook may not be appropriate for other purposes.