Kelt Exploration Wembley Asset Review – BOE Intel

Kelt Exploration is a mid-sized producer that generated over 32,300 BOE/d in Q4 2023 corporate production from assets in both Alberta and British Columbia. Predominantly a Montney producer, the company also has Charlie Lake light oil and cretaceous gas assets. This gives the company a varied production base with a significant liquids component (38% according to its 2023 estimate). In our view, Kelt’s Wembley/Pipestone asset (referred to as Wembley through the article) is among its most interesting assets. It is Kelt’s largest holding with respect 2P BOE reserves, accounting for approximately 52.3% of the company’s total (per Kelt’s February 2024 corporate presentation). With this in mind, we wanted to review the asset in order to give our readers an idea of what to expect at Wembley in the year ahead.

Wembley was Kelt’s asset with the highest netback in 2023 ($29.99/BOE, compared to $24.87/BOE at Pouce Coupe/Progress/Spirit River and $18.91/BOE at Oak/Flatrock) and the company appears set to further develop the area. Using Petro Ninja, we generated a map of the company’s spuds, colouring them by year. From 2019 to 2023, the company spud an average of 8.2 wells per year at Wembley. The company’s busiest year was 2022, which saw the company drill 13 wells. According to a February 2024 press release, Kelt intends to exceed this record with 14 spuds at Wembley in 2024 (more on this later). This may be driven by infrastructural development in the area, with the company expecting to increase its firm service raw gas processing capacity from 59 MMcf/d to 124 MMcf/d. In addition, production prospects at Wembley appear promising; the company announced strong IP30s from two wells brought on stream at its 14-2 pad (UWIs 100161407308W600 with 1,285 BOE/d and 102161407308W600 with 1,368 BOE/d) in 2023.

Kelt Exploration has been involved in a number of mineral rights transfers at Wembley over the past two years, but this appears to have mostly been transferring the company’s positions previously held officially by brokers. There is one exception, however: a 2.25 section transfer from CNRL that closed back in 2022. While transfers from brokers aren’t generally headline news, this doesn’t necessarily mean that there’s nothing of note taking place. Companies will sometimes engage in piecemeal transfers from brokers prior to developing land, and it appears as if this might have been precisely what Kelt has been up to at Wembley.

To get a more granular look at the company’s output from the area, we’ve prepared a chart of gross licensed production for the company’s Wembley assets over the past year. Production trended downwards from February 2023 until November 2023, followed by a significant jump that saw the asset’s gross production reach 12,431 BOE/d in December 2023 and 11,885 BOE/d in January 2024 (calculated using the old public data method of “oil” + “gas” and ignoring the incomplete NGL/marketable gas data). The commodity makeup of this production is very intriguing; the asset’s January 2024 production was approximately 53% liquids with over 4,400 BBL/d in oil production. It might be the case that this spike was buoyed in part by a number of wells that were brought on production in Q4 2023: 7 wells were brought on production in October 2023, while 2 wells were brought on in late September 2023. Having said that, it is important to note that Kelt’s wells from 2023 appear to have been granted “confidential” status with respect to public reporting, meaning that marketable gas and NGL data is unavailable. As such, the Wembley BOE/d gross licensed production and liquids % figures provided are for illustrative purposes only and may not accurately reflect the company’s production. As a reference point, the company’s projected full year 2023 average production for Wembley was 9,344 BOE/d in its most recent corporate presentation.

 Gross licensed production by month for all Kelt Exploration wells at Wembley

Looking ahead, the company expects to drill 14 development wells targeting the Montney oil/liquids-rich gas horizons in 2024. According to its February 2024 press release, Kelt will commence the drilling of 5 wells at the first of three planned pads at its 14-2 location by mid-March. This will be followed up by two additional pads comprising 9 new wells, with production added upon the completion of processing infrastructure expansions in the area. As demonstrated in the map below, location 14-2 currently contains 9 UWIs that were licensed in October 2023 that have not yet been spud. The licences are well-situated with the company’s existing infrastructure, suggesting that production ramp up has the potential to be quite quick when the company’s processing expansion projects are completed. It’s also worth noting that a number of existing wells at Wembley have been shut-in as the company waits for this work to be complete, suggesting the potential for a strong H2 2024.

If you want to be the first to know when Kelt begins its next round of drilling at location 14-2, check out BOE Intel.