Kelt Exploration Ltd. ("Kelt" or the "Company") (TSX:KEL) has released its
financial and operating results for the three and nine months ended September
30, 2013. Summary of financial results are as follows:
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Three months Nine months
(CA$ thousands, except as otherwise ended ended
indicated) September 30, September 30,
2013 2013
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Revenue, before royalties and financial
instruments 12,388 28,113
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Funds from operations(1) 5,473 14,260
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Basic ($/ common share)(1) 0.06 0.22
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Diluted ($/ common share)(1) 0.06 0.21
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Profit (loss) (2,400) (3,277)
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Basic ($/ common share) (0.03) (0.05)
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Diluted ($/ common share) (0.03) (0.05)
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Capital expenditures, prior to completion
of the Arrangement (27) 23,253
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Capital expenditures, subsequent to
completion of the Arrangement 42,255 74,561
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Total capital expenditures 42,228 97,814
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Total assets 333,832 333,832
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Bank debt - -
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Working capital surplus 123,774 123,774
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Shareholders' equity 294,820 294,820
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Weighted average common shares
outstanding (000's)
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Basic 89,262 66,234
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Diluted 89,829 66,560
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(1) Refer to advisory regarding non-GAAP measures
Financial Statements
Kelt's unaudited interim financial statements and related notes for the quarter
ended September 30, 2013 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 November 6, 2013.
Kelt's operating results for the three and nine months ended September 30, 2013
are summarized in the table below:
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Three months Nine months
ended ended
September 30, September 30,
(CA$ thousands, except as otherwise indicated) 2013 2013
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Average daily production
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Oil (bbls/d) 566 417
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NGLs (bbls/d) 356 233
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Gas (mcf/d) 22,285 16,269
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Combined (BOE/d)(2) 4,636 3,361
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Production per million common shares (BOE/d) 52 51
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Average realized prices, after financial
instruments
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Oil ($/bbl) 88.30 90.33
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NGLs ($/bbl) 51.50 49.77
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Gas ($/mcf) 2.79 3.26
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Operating netbacks(1) ($/BOE)
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Oil and gas revenue 29.05 30.63
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Cash premium on financial instruments 0.54 0.25
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Realized loss on financial instruments (1.42) (0.41)
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Average realized price, after financial 28.17 30.47
instruments
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Royalties (5.56) (4.18)
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Production and transportation expense (9.67) (10.30)
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Operating netback(1) 12.94 15.99
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Undeveloped land
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Gross acres 196,999 196,999
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Net acres 124,376 124,376
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(1) Refer to advisory regarding non-GAAP measures
(2) Average daily production reported for the nine month period is
calculated over the 273 day period ended September 30, 2013. Production for
the 216 day period following commencement of active operations on February
27, 2013, averaged 4,249 BOE per day.
Message to Shareholders
The Company is pleased to report its third quarter interim results to
shareholders for the period ended September 30, 2013.
Kelt was incorporated on October 11, 2012 for the purpose of participating in a
Plan of Arrangement between ExxonMobil Canada Ltd., ExxonMobil Celtic ULC and
Celtic Exploration Ltd. and Kelt (the "Arrangement"). The Arrangement was
completed on February 26, 2013, at which time Kelt commenced active operations.
During the third quarter of 2013, production averaged 4,636 BOE per day, up 13%
from average production of 4,097 BOE per day during the second quarter of 2013,
and up 29% from the average production of 3,588 BOE per day for the 33-day
period ended March 31, 2013.
For the three months ended September 30, 2013, revenue was $12.4 million and
funds from operations was $5.5 million. At September 30, 2013, Kelt did not have
any outstanding bank debt on its $56.0 million demand loan facility with a
chartered bank in Canada. The working capital surplus position, including cash
and cash equivalents, at the end of the third quarter was $123.8 million.
On August 27, 2013, the Company completed an equity financing that resulted in
aggregate gross proceeds of $111.6 million. Pursuant to the bought deal private
placement, 11.5 million common shares were issued at a price of $8.00 per share
for gross proceeds of $92.0 million and 2.0 million flow-through common shares
were issued at a price of $9.80 per share, providing additional gross proceeds
of $19.6 million. Certain insiders participated in the private placement,
acquiring 500,000 common shares and 500,000 flow-through common shares for an
aggregate subscription price of $8.9 million.
As at November 5, 2013, the Company has 97.6 million common shares issued and
outstanding. Directors and officers of Kelt own (including shares that they
exercise control or direction over) 20.9 million common shares or 21.4% of the
total shares outstanding.
During the third quarter, Kelt participated in the drilling of 3 gross (1.2 net)
horizontal wells at Inga, British Columbia. These wells were drilled for Doig
production and one of the wells is testing the southern portion of the Company's
land base. At Chicken, in the greater Grande Cache area of Alberta, Kelt drilled
a horizontal well targeting the Wilrich/Falher formation. This well is currently
being completed. On September 20, 2013, the Company spud a horizontal well at
Karr, Alberta targeting Montney oil production. This well has now been drilled
and is awaiting completion.
Entering the fourth quarter of 2013, Kelt is well positioned financially and
expects that it will have sufficient financial flexibility to carry out its
operations during the remainder of the year and pursue new opportunities as they
arise. Management is excited about the Company's prospects and looks forward to
updating shareholders with drilling results in the near future.
2013 Guidance
Kelt remains optimistic about its future prospects. The Company is opportunity
driven and is confident that it can grow its production base by building on its
current inventory of development projects and by adding new exploration
prospects. Kelt will endeavor to maintain a high quality product stream that on
a historical basis receives a superior price with reasonably low production
costs. In addition, the Company will focus its exploration efforts in areas of
multi-zone hydrocarbon potential, primarily in west central Alberta and
northeastern British Columbia.
Kelt's Board of Directors has approved a 2013 capital expenditure budget of
$147.0 million, including approximately $23.3 million incurred by Kelt with
respect to capital projects, including land acquisitions, prior to the
completion of the Arrangement on February 26, 2013. In aggregate, the Company
expects to spend $96.0 million on drilling and completing wells, $18.0 million
on facilities, equipment and pipelines, $18.0 million on land and seismic, and
$15.0 million on property acquisitions. During the nine months ended September
30, 2013, Kelt incurred $97.8 million of capital expenditures, leaving $49.2
million of budgeted expenditures to be incurred during the remainder of the
year.
Kelt expects production in 2013 to average approximately 3,500 BOE per day
during the 365 day year (4,150 BOE per day, for the 308 day period following
commencement of active operations on February 27, 2013). Production is expected
to be weighted 21% oil & NGLs and 79% gas; however, operating income in 2013 is
expected to be derived 59% (previously 52%) from oil & NGL production and 41%
(previously 48%) from gas production.
The Company's average commodity price assumptions for the period from February
27, 2013 to December 31, 2013 are US$98.00 per barrel (previously US$90.00 per
barrel) for WTI oil, US$3.75 per MMBTU (previously US$4.10 per MMBTU) for NYMEX
natural gas, $2.95 per GJ (previously $3.55 per GJ) for AECO natural gas and a
US/Canadian dollar exchange rate of US$0.9804. These prices compare to average
calendar 2012 prices of US$94.20 per barrel for WTI oil, US$2.80 per MMBTU for
NYMEX natural gas, $2.26 per GJ for AECO natural gas and a US/Canadian dollar
exchange rate of US$0.9994. After giving effect to the aforementioned production
and commodity price assumptions, funds from operations for 2013 is forecasted to
be approximately $20.0 million or $0.26 per common share, diluted (previously
$25.9 million or $0.35 per common share, diluted). The significant decrease in
forecasted 2013 average natural gas prices were a result of the unprecedented
widening of the NYMEX-AECO basis differential during the third quarter of 2013.
Subsequent to September 30, 2013, the NYMEX-AECO basis differential has narrowed
to historical levels.
Kelt estimates that the Company's will have a working capital surplus of
approximately $84.3 million at December 31, 2013. Kelt has established a demand
operating loan facility with a Canadian chartered bank with an authorized
borrowing limit of $56.0 million.
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 cautionary statement on forward-looking statements and information
set out below.
The information set out herein under the heading "2013 Guidance" 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 2013. Readers are cautioned that this financial outlook may not
be appropriate for other purposes.
Advisory Regarding Forward-Looking Statements
Certain information with respect to the Company contained herein, including
expectations, beliefs, plans, goals, objectives, assumptions, information and
statements about future events, conditions, results of operations, performance,
Kelt's planned capital expenditure program, or management's assessment of future
potential, contains forward-looking statements. These forward-looking statements
are based on assumptions and are subject to numerous risks and uncertainties,
certain of which are beyond the Company's control, including the impact of
general economic conditions, industry conditions, volatility of commodity
prices, currency exchange rate fluctuations, imprecision of reserve estimates,
environmental risks, competition from other explorers, stock market volatility,
and ability to access sufficient capital. We caution that the foregoing list of
risks and uncertainties is not exhaustive.
Statements relating to "reserves" or "resources" are deemed to be forward
looking statements as they involve the implied assessment, based on current
estimates and assumptions that the reserves and resources can be profitably
produced in the future.
Kelt's actual results, performance or achievement could differ materially from
those expressed or implied by these forward-looking statements and, accordingly,
no assurance can be given that any events anticipated by the forward-looking
statements will transpire or occur. As a result, undue reliance should not be
placed on forward-looking statements.
In addition, the reader is cautioned that historical results are not necessarily
indicative of future performance. The forward-looking statements contained
herein are made as of the date hereof and the Company does not intend, and does
not assume any obligation, to update or revise any forward-looking statements,
whether as a result of new information, future events or otherwise unless
expressly required by applicable securities laws.
Certain information set out herein may be considered as "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 periods indicated. Readers are cautioned that the financial outlook may
not be appropriate for other purposes.
Non-GAAP Measures
This document contains certain financial measures, as described below, which do
not have standardized meanings prescribed by GAAP. As these measures are
commonly used in the oil and gas industry, the Company believes that their
inclusion is useful to investors. The reader is cautioned that these amounts may
not be directly comparable to measures for other companies where similar
terminology is used. "Operating netback" is calculated by deducting royalties,
production expenses and transportation expenses from oil and gas revenue. "Funds
from operations" is calculated by adding back settlement of decommissioning
obligations and change in non-cash operating working capital to cash provided by
operating activities. Funds from operations per common share is calculated on a
consistent basis with profit (loss) per common share, using basic and diluted
weighted average common shares as determined in accordance with GAAP. Funds from
operations and operating netbacks are used by Kelt as key measures of
performance and are not intended to represent operating profits nor should they
be viewed as an alternative to cash provided by operating activities, profit or
other measures of financial performance calculated in accordance with GAAP.
Measurements and Abbreviations
All dollar amounts are referenced in thousands of Canadian dollars, except when
noted otherwise. Where amounts are expressed on a barrel of oil equivalent
("BOE") basis, natural gas volumes have been converted to oil equivalence at six
thousand cubic feet per barrel and sulphur volumes have been converted to oil
equivalence at 0.6 long tons per barrel. The term BOE may be misleading,
particularly if used in isolation. A BOE conversion ratio of six thousand cubic
feet per barrel is based on an energy equivalency conversion method primarily
applicable at the burner tip and does not represent a value equivalency at the
wellhead. References to oil in this discussion include crude oil and field
condensate. References to natural gas liquids ("NGLs") include, pentane, butane,
propane, and ethane. References to gas in this discussion include natural gas
and sulphur.
bbls barrels
mcf thousand cubic feet
MMBTU million British Thermal Units
AECO-C Alberta Energy Company "C" Meter Station of the Nova Pipeline
System
WTI West Texas Intermediate
NYMEX New York Mercantile Exchange
FOR FURTHER INFORMATION PLEASE CONTACT:
Kelt Exploration Ltd.
David J. Wilson
President and Chief Executive Officer
(403) 201-5340
Kelt Exploration Ltd.
Sadiq H. Lalani
Vice President, Finance and Chief Financial Officer
(403) 215-5310
www.keltexploration.com
Kelt Exploration (TSX:KEL)
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