Calgary, Alberta–(Newsfile Corp. – May 9, 2024) – Kelt Exploration Ltd. (TSX: KEL) (“Kelt” or the “Company”) reports its financial and operating results to shareholders for the first quarter ended March 31, 2024. The Company’s financial results are summarized as follows:
FINANCIAL HIGHLIGHTS | Three months ended March 31 | ||||||||
(CA$ thousands, except as otherwise indicated) | 2024 | 2023 | % | ||||||
Petroleum and natural gas sales | 126,391 | 139,571 | -9 | ||||||
Cash provided by operating activities | 62,493 | 100,160 | -38 | ||||||
Adjusted funds from operations (1) | 61,176 | 92,000 | -34 | ||||||
Basic ($/ common share) (1) | 0.31 | 0.48 | -35 | ||||||
Diluted ($/ common share) (1) | 0.31 | 0.47 | -34 | ||||||
Net income and comprehensive income | 11,847 | 16,336 | -27 | ||||||
Basic ($/ common share) | 0.06 | 0.09 | -33 | ||||||
Diluted ($/ common share) | 0.06 | 0.08 | -25 | ||||||
Capital expenditures, net of A&D (1) | 80,181 | 76,629 | 5 | ||||||
Total assets | 1,282,456 | 1,174,489 | 9 | ||||||
Net debt (surplus) (1) | 31,961 | (4,899 | ) | -752 | |||||
Shareholders’ equity | 1,018,604 | 919,809 | 11 | ||||||
Weighted average shares outstanding (000s) | |||||||||
Basic | 194,655 | 192,060 | 1 | ||||||
Diluted | 198,285 | 195,370 | 1 | ||||||
(1) Refer to advisories regarding Non-GAAP and Other Financial Measures. |
Financial Statements
Kelt’s unaudited consolidated interim financial statements and related notes for the quarter ended March 31, 2024 will be available to the public on SEDAR+ at www.sedarplus.ca and will also be posted on the Company’s website at www.keltexploration.com on May 9, 2024.
Kelt’s operating results for the first quarter ended March 31, 2024 are summarized as follows:
OPERATIONAL HIGHLIGHTS | Three months ended March 31 | ||||||||
(CA$ thousands, except as otherwise indicated) | 2024 | 2023 | % | ||||||
Average daily production | |||||||||
Oil (bbls/d) (2) | 8,758 | 7,752 | 13 | ||||||
NGLs (bbls/d) | 3,497 | 4,627 | -24 | ||||||
Gas (Mcf/d) | 123,931 | 116,725 | 6 | ||||||
Combined (BOE/d) | 32,910 | 31,833 | 3 | ||||||
Production per million common shares (BOE/d) (1) | 169 | 166 | 2 | ||||||
Net realized prices, before derivative financial instruments(1) | |||||||||
Oil ($/bbl) | 90.15 | 99.33 | -9 | ||||||
NGLs ($/bbl) | 52.18 | 56.48 | -8 | ||||||
Gas ($/Mcf) | 2.94 | 4.03 | -27 | ||||||
Operating netbacks ($/BOE) (1) | |||||||||
Petroleum and natural gas sales | 42.20 | 48.71 | -13 | ||||||
Cost of purchases | (1.61 | ) | (1.56 | ) | 3 | ||||
Combined net realized price, before derivative financial instruments (1) | 40.59 | 47.15 | -14 | ||||||
Realized gain (loss) on financial instruments | – | 6.85 | -100 | ||||||
Combined net realized price, after derivative financial instruments (1) | 40.59 | 54.00 | -25 | ||||||
Royalties | (5.02 | ) | (6.38 | ) | -21 | ||||
Production expense | (10.42 | ) | (11.34 | ) | -8 | ||||
Transportation expense | (3.46 | ) | (3.01 | ) | 15 | ||||
Operating netback (1) | 21.69 | 33.27 | -35 | ||||||
Landholdings | |||||||||
Gross acres | 791,879 | 799,399 | -1 | ||||||
Net acres | 578,975 | 582,641 | -1 | ||||||
(1) Refer to advisories regarding Non-GAAP and Other Financial Measures. |
Message to Shareholders
Kelt’s average production for the three months ended March 31, 2024, was 32,910 BOE per day, up 3% from average production of 31,833 BOE per day during the corresponding quarter in 2023. Production for the first quarter of 2024 was weighted 37% oil and NGLs and 63% gas and operating income was weighted 90% oil and NGLs and 10% gas.
During the month of February 2024, the Company’s production was negatively affected due to a third-party gas plant at Wembley that was temporarily shut-in for approximately two weeks, where Kelt has 25 MMcf per day of raw gas firm processing capacity. This gas plant was back to near 100% run-time during March 2024. In addition, also at Wembley, another third-party gas plant experienced processing constraints where Kelt has 34 MMcf per day of raw gas processing capacity. The average run-time for Kelt at this plant during the first quarter of 2024 was approximately 80% of the Company’s firm gas processing capacity. This gas plant is expected to be shut-in for approximately two weeks during May and June 2024 for repairs and replacement of amine equipment. Kelt expects the plant to run at closer to 100% of its firm gas processing capacity after these operations are completed.
Average production for the month of March 2024 was approximately 34,000 BOE per day, weighted 38% oil and NGLs and 62% gas.
Kelt’s realized average oil price during the first quarter of 2024 was $90.15 per barrel, down 9% from $99.33 per barrel in the first quarter of 2023. The realized average NGLs price during the first quarter of 2024 was $52.18 per barrel, down 8% from $56.48 per barrel in the same quarter of 2023. Kelt’s realized average gas price for the first quarter of 2024 was $2.94 per Mcf, down 27% from $4.03 per Mcf in the corresponding quarter of the previous year.
For the three months ended March 31, 2024, petroleum and natural gas sales were $126.4 million and adjusted funds from operations was $61.2 million ($0.31 per common share, diluted), compared to $139.6 million and $92.0 million ($0.47 per common share, diluted) respectively, in the first quarter of 2023. On March 31, 2024, net debt was $32.0 million or 0.1 times trailing twelve months adjusted funds from operations.
Capital expenditures, net of A&D incurred during the three months ended March 31, 2024, were $80.2 million. During the first quarter of 2024, the Company spent $43.0 million on drill and complete operations and $35.9 million on facilities, pipelines, and equipment.
Kelt expects to spend $325.0 million in its capital expenditure program for 2024, unchanged from its previous forecast. Production during 2024 is forecasted to average between 36,000 and 39,000 BOE per day, an increase of 18% at the low end of the range and an increase of 28% at the high end of the range compared to average production of 30,510 BOE per day in 2023. Adjusted funds from operations for 2024 is forecasted to be $292.0 million or 1% higher than the Company’s previous forecast of $290.0 million. On December 31, 2024, the Company expects to have net debt of $46.0 million, representing 0.2 times forecasted 2024 adjusted funds from operations.
2024 Guidance
The Company’s 2024 capital expenditure budget of $325.0 million includes the drilling of 28 wells and the completion of 32 wells during the year. The 2024 capital expenditures are expected to be allocated as follows: $220.5 million for drilling and completing wells, $84.5 million for facilities, pipeline, and equipment and $20.0 million for land and seismic.
Preparation of the 2024 capital expenditure budget includes the following forecasted average commodity price assumptions (with average 2023 commodity prices shown for comparative purposes):
Commodity Index | 2024 Forecast | 2023 | Change |
WTI Crude Oil (USD/bbl) | 79.50 | 77.63 | 2% |
MSW Crude Oil (CAD/bbl) | 102.35 | 100.40 | 2% |
NYMEX Henry Hub Daily Index Natural Gas (USD/MMBtu) | 2.35 | 2.53 | (7%) |
DAWN Gas Daily Index (USD/MMBtu) | 2.30 | 2.34 | (2%) |
AECO NIT 5A Gas Daily Index (CAD/GJ) | 1.87 | 2.50 | (25%) |
STATION 2 Gas Daily Index (CAD/GJ) | 1.81 | 2.14 | (15%) |
Exchange Rate (USD/CAD) | 0.7326 | 0.7410 | (1%) |
Exchange Rate (CAD/USD) | 1.3650 | 1.3495 | 1% |
Financial and operating highlights for the Company’s 2024 forecast compared to its 2023 results are highlighted in the table below:
Financial and Operating Highlights ($ MM, unless otherwise specified) |
2024 Forecast | 2023 | Change |
Production [2] | |||
Oil & NGLs (bbls/d) | 14,000 – 15,500 | 11,738 | 26% |
Gas (Mcf/d) | 132,000 – 141,000 | 112,634 | 21% |
Combined (BOE/d) | 36,000 – 39,000 | 30,510 | 23% |
P&NG Sales [1] | 587.0 | 495.6 | 18% |
Adjusted Funds from Operations [1] | 292.0 | 276.2 | 6% |
AFFO per share, diluted ($/share) [1] | 1.47 | 1.40 | 5% |
Capital Expenditures, net of A&D [1] | 325.0 | 282.6 | 15% |
Net Debt, at year-end [1] | 46.0 | 13.0 | 254% |
Net Debt / AFFO ratio | 0.2 x | 0.0 x | |
Notes: [1] Refer to advisories regarding “Non-GAAP and Other Financial Measures”. [2] Percent change for production is calculated using the mid-point of each production range. |
In its Pouce Coupe/Progress/Spirit River Division, during 2024, Kelt expects to drill and complete six wells targeting Montney or Charlie Lake horizons. At Pouce Coupe West, the Company has drilled three Montney wells on its high gas deliverability land block. Kelt expects to complete these wells in the summer and put them on production early in the third quarter.
Kelt currently has access to approximately 82 MMcf per day of raw gas processing capacity through a plant ownership interest and third-party facility firm service arrangements at Pouce Coupe/Progress/Spirit River. Kelt expects to increase its overall raw gas processing capacity in the area to 117 MMcf per day over the next two years with incremental firm service arrangements, giving the Company access to five different gas plants in the area.
In its Wembley/Pipestone Division, during 2024, Kelt expects to drill and complete 14 wells targeting the Montney horizon. The Company plans to have three multi-well pad development operations consisting of six wells, five wells and three wells respectively as it prepares to add production upon start-up of an incremental 50 MMcf per day of gas processing capacity at a newly constructed third-party gas plant in the fourth quarter of 2024. Kelt expects to frac these 14 wells over the June to October period and may preferentially produce the wells using existing gas plant processing capacity prior to the start-up of the new gas plant.
During the first quarter of 2024, Kelt drilled and completed its third Charlie Lake horizontal well at Wembley/Pipestone with encouraging production results that are similar to its previous wells and with cumulative oil and NGLs of approximately 78% of total production to date.
At Wembley/Pipestone, Kelt expects to increase its firm service raw gas processing capacity from 59 MMcf per day to 124 MMcf per day by 2026. New production additions at Wembley/Pipestone resulting from increased gas processing capacity is expected to increase the Company’s oil and NGLs weighting as this production is expected to be 57% to 62% weighted to oil and NGLs.
In its Oak/Flatrock Division, Kelt has drilled an eight well development program that commenced in November 2023. Two of these wells were completed in the first quarter of 2024 and have now been put on production. Three wells are expected to be completed in May 2024 and the remaining three wells are expected to be completed in the summer. Kelt has the ability to increase firm service raw gas processing capacity from 45 MMcf per day to 90 MMcf per day over the next 24 months through gas processing arrangements with a third-party at a gas plant located just south of the Company’s Oak property.
Management looks forward to updating shareholders with 2024 second quarter results on or about August 8, 2024.
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 2024. Readers are cautioned that this financial outlook may not be appropriate for other purposes.