Kelt Reports Financial and Operating Results for the Quarter and Year Ended December 31, 2023

Calgary, Alberta--(Newsfile Corp. - March 8, 2024) - 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, 2023. 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)		2023			2022			%			2023			2022			%
Petroleum and natural gas sales		129,000			152,720			-16			495,580			613,358			-19
Cash provided by operating activities		62,477			63,742			-2			283,224			306,022			-7
Adjusted funds from operations (1)		66,618			92,851			-28			276,200			326,992			-16
Basic ($/ common share) (1)		0.34			0.48			-29			1.43			1.71			-16
Diluted ($/ common share) (1)		0.33			0.47			-30			1.40			1.67			-16
Net income and comprehensive income		23,729			54,238			-56			85,974			158,758			-46
Basic ($/ common share)		0.12			0.28			-57			0.45			0.83			-46
Diluted ($/ common share)		0.12			0.28			-57			0.44			0.81			-46
Capital expenditures, net of A&D (1)		62,695			68,594			-9			282,646			317,540			-11
Total assets											1,260,292			1,128,104			12
Bank debt											-			11,300			-100
Net debt (1)											12,997			9,789			33
Shareholders' equity											1,003,663			901,424			11
Return on average capital employed (%) (1)(2)											12			25			-52
Weighted average shares outstanding (000s)
Basic		194,359			191,812			1			193,116			191,101			1
Diluted		199,223			195,828			2			197,063			195,456			1
(1) Refer to advisories regarding Non-GAAP and Other Financial Measures. (2) The three-year average ROACE as of December 31, 2023 was 19%. Refer to additional information under "Non-GAAP and Other Financial Measures".

Financial Statements

Kelt's audited annual consolidated financial statements and related notes for the year ended December 31, 2023 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 March 8, 2024.

Kelt's operating results for the fourth quarter and year ended December 31, 2023 are summarized as follows:

OPERATIONAL HIGHLIGHTS		Three months ended December 31									Year ended December 31
(CA$ thousands, except as otherwise indicated)		2023			2022			%			2023			2022			%
Average daily production
Oil (bbls/d) (2)		8,832			6,416			38			7,979			5,640			41
NGLs (bbls/d)		3,422			3,478			-2			3,759			4,049			-7
Gas (mcf/d)		120,541			108,849			11			112,634			105,280			7
Combined (BOE/d)		32,344			28,036			15			30,510			27,236			12
Production per million common shares (BOE/d) (1)		166			146			14			158			143			10
Net realized prices, before financial instruments(1)
Oil ($/bbl) (2)		95.68			107.88			-11			97.90			117.18			-16
NGLs ($/bbl)		49.79			60.54			-18			49.27			67.64			-27
Gas ($/mcf)		2.75			6.52			-58			3.08			6.63			-54
Operating netbacks ($/BOE) (1)
Petroleum and natural gas sales		43.35			59.21			-27			44.51			61.70			-28
Cost of purchases		(1.66	)		(3.30	)		-50			(1.50	)		(2.16	)		-31
Combined net realized price, before financial instruments(1)		41.69			55.91			-25			43.01			59.54			-28
Realized gain (loss) on financial instruments		0.09			1.66			-95			1.35			(5.68	)		124
Combined net realized price, after financial instruments(1)		41.78			57.57			-27			44.36			53.86			-18
Royalties		(6.03	)		(6.15	)		-2			(5.31	)		(6.60	)		-20
Production expense		(8.62	)		(10.90	)		-21			(9.83	)		(10.22	)		-4
Transportation expense		(3.64	)		(3.03	)		20			(3.48	)		(3.06	)		14
Operating netback (1)		23.49			37.49			-37			25.74			33.98			-24
Land holdings
Gross acres											796,519			795,559			-
Net acres											581,553			579,857			-
(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, 2023.

Average production for the three months ended December 31, 2023 was 32,344 BOE per day, up 15% compared to average production of 28,036 BOE per day during the fourth quarter of 2022. Average production for 2023 was 30,510 BOE per day, an increase of 12% from an average production of 27,236 BOE per day in 2022. Production for the three months ended December 31, 2023 was weighted 38% to oil and NGLs and 62% to gas.

Petroleum and natural gas sales during the fourth quarter of 2023 decreased 16% to $129.0 million, down from $152.7 million in the same period of the previous year. Petroleum and natural gas sales for the year were $495.6 million, down 19% from $613.4 million in 2022. Kelt's net realized average oil price during the fourth quarter of 2023 was $95.68 per barrel, down 11% from $107.88 per barrel in the fourth quarter of 2022. The Company's net realized average NGLs price during the fourth quarter of 2023 was $49.79 per barrel, down 18% from $60.54 per barrel in the fourth quarter of 2022. Kelt's net realized average gas price for the fourth quarter of 2023 was $2.75 per Mcf, down 58% from $6.52 per Mcf in the fourth quarter of 2022.

For the three months ended December 31, 2023, adjusted funds from operations was $66.6 million ($0.33 per share, diluted), compared to $92.9 million ($0.47 per share, diluted) in the fourth quarter of 2022. Year over year, adjusted funds from operations decreased 16% to $276.2 million ($1.40 per share, diluted) from $327.0 million ($1.67 per share, diluted) in 2022. During 2023, Kelt recorded net income of $86.0 million ($0.44 per share, diluted) compared to $158.8 million ($0.81 per share, diluted) in the previous year.

Kelt's return on average capital employed ("ROACE") was 12% in 2023 and 25% in 2022. The three year average ROACE was 19%, showing a significant return on capital employed as the Company transitions from exploration and resource delineation to development and multi-well pad drilling.

At December 31, 2023, Kelt had net debt of $13.0 million compared to $9.8 million at December 31, 2022. At a net debt to adjusted funds from operations ratio of 0.05 times, Kelt continues to maintain its strong financial position.

Capital expenditures, net of A&D incurred during the three months ended December 31, 2023 were $62.7 million, down 9% compared to net capital expenditures of $68.6 million during the fourth quarter of 2022. During the fourth quarter of 2023, the Company spent $26.6 million on drill and complete operations and $35.9 million on well equipment, facilities and pipelines.

Kelt expects to report to shareholders its 2024 first quarter results on or about May 9, 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.

Non-GAAP and Other Key Financial Measures

This press release contains certain non-GAAP financial measures and other specified financial measures, as described below, which do not have standardized meanings prescribed by GAAP and do not have standardized meanings under the applicable securities legislation. As these non-GAAP, and other specified financial 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.

Non-GAAP Financial Measures

Net realized price

Net realized price is a non-GAAP measure and is calculated by dividing the Company's P&NG sales after cost of purchases by the Company's production and reflects Kelt's realized selling prices plus the net benefit of oil blending and third-party natural gas sales. In addition to using its own production, the Company may purchase butane and crude oil from third parties for use in its blending operations, with the objective of selling the blended oil product at a premium. Marketing revenue from the sale of third-party volumes is included in P&NG sales as reported in the Consolidated Statement of Net Income and Comprehensive Income in accordance with GAAP. Given the Company's per unit operating statistics disclosed throughout this press release are calculated based on Kelt's production volumes, and excludes the sale of third-party marketing volumes, management believes that disclosing its net realized prices based on P&NG sales after cost of purchases is more appropriate and useful, because the cost of third-party volumes purchased to generate the incremental marketing revenue has been deducted.

Combined net realized prices referenced throughout this press release are before derivative financial instruments ("combined net realized price, before financial instruments"), except as otherwise indicated as being after derivative financial instruments ("combined net realized price, after financial instruments").

See the "Petroleum and Natural Gas Sales" section of Kelt's MD&A as at and for the year ended December 31, 2023, which provides a reconciliation of the net realized price to P&NG sales, which is a GAAP measure.

Operating income and operating netback

Operating income is a non-GAAP measure calculated by deducting royalties, production expenses and transportation expenses from petroleum and natural gas sales, net of the cost of purchases and after realized gains or losses on derivative financial instruments. The Company also presents operating income on a per BOE basis, referred to as "operating netback" or "operating income per BOE", which allows management to better analyze performance against prior periods, on a comparable basis, and is a key industry performance measure of operational efficiency.

See the "Adjusted Funds from Operations" section of Kelt's MD&A as at and for the year ended December 31, 2023, which provides a reconciliation of the operating income from P&NG sales, which is a GAAP measure.

Capital expenditures

"Capital expenditures, before A&D" and "Capital expenditures, net of A&D" are measures the Company uses to monitor its investment in exploration and evaluation, investment in property plant and equipment, and net investment in acquisition and disposition activities. The most directly comparable GAAP measure is Cash used in investing activities, and is calculated as follows:

		Three months ended December 31						Year ended December 31
(CA$ thousands, except as otherwise indicated)		2023			2022			2023			2022
Cash used in investing activities		82,324			95,916			265,485			328,945
Change in non-cash investing working capital		(19,629	)		(27,322	)		17,161			(11,405	)
Capital expenditures, net of A&D		62,695			68,594			282,646			317,540
Property acquisitions (1)		(10	)		(12	)		(102	)		(933	)
Property dispositions (1)		50			-			50			41
Capital expenditures, before A&D		62,735			68,582			282,594			316,648
(1) Property acquisitions and property dispositions for the year ended December 31, 2023 includes $6.9 million of non-cash consideration. Property acquisitions and property dispositions for the year ended December 31, 2022 includes $2.5 million of non-cash consideration

 

Average capital employed

Kelt calculates average capital employed as the total of net debt plus the short and long term lease obligations and shareholders equity. Kelt uses average capital employed as a measure of long-term capital management and operating performance, and as a component in the calculation for ROACE. The table below provides a reconciliation of average capital employed to the most directly comparable GAAP measures of shareholders equity.

(CA$ thousands, except as otherwise indicated)		December 31, 2023			December 31, 2022			December 31, 2021
Net debt - beginning of period		9,789			28,220			(27,655	)
Current portion of lease obligations		505			609			684
Long-term portion of lease obligations		543			399			780
Shareholders' equity - beginning of period		901,424			722,724			603,684
Opening capital employed (A)		912,261			751,952			577,493
Net debt - end of period		12,997			9,789			28,220
Current portion of lease obligations		1,125			505			609
Long-term portion of lease obligations		332			543			399
Shareholders' equity - end of period		1,003,663			901,424			722,724
Closing capital employed (B)		1,018,117			912,261			751,952
Average capital employed (A+B)/2		965,189			832,107			664,723

 

Return on average capital employed

Kelt calculates ROACE, expressed as a percentage, as adjusted EBIT divided by the average capital employed. The components adjusted EBIT and average capital employed are non-GAAP financial measures. Kelt uses ROACE as a measure of long-term financial performance.

(CA$ thousands, except as otherwise indicated)		Three-year Average			December 31, 2023			December 31, 2022			December 31, 2021
Adjusted EBIT					115,787			211,659			136,132
Average capital employed					965,189			832,107			664,723
ROACE (%)		19%			12%			25%			20%

 

Capital Management Measures:

Funds from operations and adjusted funds from operations

Management considers funds from operations and adjusted funds from operations as a key capital management measure as it demonstrates the Company's ability to meet its financial obligations and cash flow available to fund its capital program. Funds from operations and adjusted funds from operations are not standardized measures and therefore may not be comparable with the calculation of similar measures by other entities. The most comparable GAAP measure is "Cash provided by operating activities". Funds from operations and adjusted funds from operations are calculated as follows:

		Three months ended December 31						Year ended December 31
(CA$ thousands, except as otherwise indicated)		2023			2022			2023			2022
Cash provided by operating activities		62,477			63,742			283,224			306,022
Change in non-cash working capital		1,697			28,742			(11,562	)		17,770
Funds from operations		64,174			92,484			271,662			323,792
Settlement of decommissioning obligations		2,444			367			4,538			3,200
Adjusted funds from operations		66,618			92,851			276,200			326,992

 

Net debt (surplus) and net debt (surplus) to adjusted funds from operations ratio

Management considers net debt (surplus) and a net debt (surplus) to adjusted funds from operations ratio as key capital management measures to assess the Company's liquidity at a point in time and to monitor its capital structure and short-term financing requirements. The "net debt (surplus) to adjusted funds from operations ratio" is also indicative of the "net debt to cash flow ratio" calculation used to determine the applicable margin for a quarter under the Company's Credit Facility agreement (though the calculation may not always be a precise match, it is representative).

"Net debt (surplus)" is equal to bank debt, accounts payable and accrued liabilities, net of cash and cash equivalents, accounts receivables and accrued sales and prepaid expenses and deposits. The Company believes that using a "Net debt (surplus)" non-GAAP measure, which excludes non-cash derivative financial instruments, non-cash lease liabilities, and non-cash decommissioning obligations, provides investors with more useful information to understand the Company's cash liquidity risk.

Net debt is calculated as follows:

		December 31, 2023			December 31, 2022
Bank debt		-			11,300
Accounts payable and accrued liabilities		85,171			83,288
Cash and cash equivalents		(14,340	)		(125	)
Accounts receivable and accrued sales		(52,646	)		(81,075	)
Prepaid expenses and deposits		(5,188	)		(3,599	)
Net debt		12,997			9,789

 

Supplementary Financial Measures

"Production per common share" is calculated by dividing total production by the basic weighted average number of common shares outstanding, as determined in accordance with GAAP.

P&NG sales, cost of purchases, gain (loss) on derivative financial instruments, royalties, revenue after royalties and derivative financial instruments, production expenses, transportation expenses, financing expenses, gross and net G&A expenses, realized gain (loss) on foreign exchange, other income (expense), share based compensation expense and depletion and depreciation on a $/BOE basis is calculated by dividing the amounts by the Company's total production over the period.

Adjusted funds from operations per share (basic and diluted), and net income and comprehensive income per share (basic and diluted) is calculated by dividing the amounts by the basic weighted average common shares outstanding.

Measurements

All dollar amounts are referenced in thousands of Canadian dollars, except when noted otherwise. This press release contains various references to the abbreviation BOE which means barrels of oil equivalent. Where amounts are expressed on a 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 and is significantly different than the value ratio based on the current price of crude oil and natural gas. This conversion factor is an industry accepted norm and is not based on either energy content or current prices. Such abbreviation may be misleading, particularly if used in isolation. References to "oil" in this press release include crude oil and field condensate. References to "natural gas liquids" or "NGLs" include pentane, butane, propane, and ethane. References to "liquids" include field condensate and NGLs. References to "gas" in this discussion include natural gas and sulphur.

Abbreviations

A&D	Acquisitions and Dispositions
P&NG	Petroleum and Natural Gas
MD&A	Management's Discussion and Analysis
TSX	the Toronto Stock Exchange
KEL	trading symbol for Kelt Exploration Ltd. on the TSX
GAAP	Generally Accepted Accounting Principles
SEDAR+	the System for Electronic Document Analysis and Retrieval
ROACE	return on average capital employed
bbls	barrels
bbls/d	barrels per day
Mcf	thousand cubic feet
Mcf/d	thousand cubic feet per day
BOE	barrel of oil equivalent
BOE/d	barrel of oil equivalent per day
NGLs	natural gas liquids

 

For further information, please contact:

Kelt Exploration Ltd., Suite 300, 311 - 6^th Avenue SW, Calgary, Alberta, Canada T2P 3H2

David J. Wilson, President and Chief Executive Officer (403) 201-5340, or
Sadiq H. Lalani, Vice President and Chief Financial Officer (403) 215-5310.
Or visit our website at www.keltexploration.com.

To view the source version of this press release, please visit https://www.newsfilecorp.com/release/200956