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Kelt Exploration Adds Five Inga Wells in H2 2015

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   |    Wednesday,August 12,2015

Kelt Exploration Ltd. has released its financial and operating results for the three and six months ended June 30, 2015.

Highlights

• strong>Kelt achieved record average production levels in the second quarter of 2015. Average production for the three months ended June 30, 2015 was 19,473 BOE per day, up 71% from average production of 11,381 BOE per day during the second quarter of 2014. On a production per share basis, second quarter 2015 production was up 35% compared to the same period in 2014. Daily average production in the second quarter of 2015 was 22% higher than the average production of 16,005 BOE per day in the first quarter of 2015. Kelt showed strong production growth in the second quarter of 2015 despite having approximately 1,630 BOE per day of production downtime during the quarter resulting from third party transportation restrictions and plant/facility downtime.
• strong>At June 30, 2015, bank debt, net of working capital was $250.1 million, representing 83% of its $300 million bank credit facility. Subsequent to the end of the second quarter, on July 7, 2015, Kelt completed equity offerings for gross proceeds of $90.0 million which have initially been used to pay down outstanding bank debt.
• strong>During the three months ended June 30, 2015, Kelt did not drill any new wells; however, the Company did incur capital expenditures completing previously drilled wells. In addition, Kelt incurred significant capital expenditures during the second quarter of 2015 on facilities and pipelines. These infrastructure expenditures will benefit the Company in the future by providing its oil and gas production with transportation to market and ultimately, production/transportation cost savings for products previously being trucked. Recently drilled wells in the Company's B.C. properties that were completed using slick-water in both the Doig and Montney formations, continue to perform at better than average type curve rates. 
• As a result, the Company expects to drill five additional wells at Fireweed/Inga in the second half of 2015. The Company also expects to drill three Montney oil wells at its Pouce Coupe property near Grande Prairie, Alberta, during the remainder of 2015.
• Net capital expenditures incurred during the second quarter were $341.9 million, of which $5.9 million was for completing wells, $11.5 million was for facilities, pipelines and well equipment and $11.4 million was for land, seismic and property acquisitions. 
• During the second quarter of 2015, Kelt completed a strategic property acquisition at Karr, Alberta resulting in access to key infrastructure, including a 3.3% ownership interest in the Karr Gas Plant. In addition, the Company incurred $313.1 million to complete the acquisition of Artek.
• On April 16, 2015, Kelt completed the acquisition of Artek by acquiring all of the issued and outstanding common shares of Artek on the basis of 0.34 of a Kelt common share for each Artek common share. Based on the volume-weighted average trading price of the Kelt common shares for the five trading days ended February 20, 2015 (the announcement date) of $8.10 on the Toronto Stock Exchange (TSX), the deemed acquisition price was approximately $313.1 million, comprised of the issuance of approximately 26.9 million Kelt common shares and the assumption of approximately $95.2 million of estimated net debt as at April 16, 2015. At closing, Artek was re-named Kelt Exploration (LNG) Ltd. (Kelt LNG). Kelt has transferred all of its B.C. assets to Kelt LNG and at the same time, Kelt LNG has transferred all of its Alberta assets to Kelt. Kelt LNG operates in B.C. as a wholly-owned subsidiary of Kelt.
• Kelt's Board of Directors has approved an amended 2015 capital expenditure budget of $500.0 million. In aggregate, the Company expects to spend $106.8 million on drilling and completing wells, $44.0 million on facilities, equipment and pipelines, and $36.0 million on land, seismic and property acquisitions. The acquisition of Artek in the amount of $313.2 million makes up the remainder of the budget.
• Kelt expects production in 2015 to average between 19,500 and 20,000 BOE per day. Production is expected to be weighted 28% oil, 9% NGLs, and 63% gas; however, operating income in 2015 is expected to be derived 70% from oil production, 12% from NGLs production, and 18% from gas production.
• The Company's average commodity price assumptions for 2015 are US$56.50 per barrel for W TI oil, US$2.95 per MMBTU for NYMEX natural gas, $2.75 per GJ for AECO natural gas and a US/Canadian dollar exchange rate of US$0.786.
• After giving effect to the aforementioned production and commodity price assumptions, the increased capital expenditure budget and the July 2015 equity offerings, funds from operations for 2015 is forecasted to be approximately $83.0 million or $0.53 per common share, diluted. Kelt estimates that the Company's bank indebtedness, net of working capital, will be approximately $187.5 million as at December 31, 2015 or 62% of its current credit facility borrowing capacity.
• In light of the current energy business environment with much lower oil and gas prices compared to 2014, Kelt has taken steps to take advantage of acquisition opportunities and has positioned itself financially to create sufficient financial flexibility to carry out its operations during the remainder of the year. Management is excited about the Company's prospects and looks forward to updating shareholders with 2015 third quarter results on or about November 10, 2015.