Kelt Exploration Ltd. · TSX:KEL
Kelt Exploration — Investor Presentation (December 2019)
60 slides from Kelt Exploration's investor presentation, December 2019
Slide 1: Corporate Presentation December 2019
Corporate Presentation December 2019 KeltExploration.com David J. Wilson President & Chief Executive Officer Sadiq H. Lalani Vice President & Chief Financial Officer www.keltexploration.com 0
Slide 2: Why Invest in Kelt?
Why Invest in Kelt ? VALUE CREATION OPPORTUNISTICALLY TAKING ADVANTAGE OF INDUSTRY DOWNTURNS BY ACCUMULATING RESOURCE DEVELOPMENT POTENTIAL AT HISTORICALLY LOW COSTS ● Kelt focuses on value creation resulting in annual growth in production and funds from operations per share over the long-term. ● Th
Slide 3: Environment, Social and Governance (ESG)
Environment, Social and Governance ( ESG ) Environment Social Governance • Commitment to minimalize our impacts on • Safety is a priority and Kelt maintains a • Kelt is committed to governance, the environment. HS&E program designed to protect the ethical business conduct and • Enacted an Environmen
Slide 4: Capital Structure
Capital Structure ● Stock Exchange listing TSX ● Trading symbol KEL ● Market capitalization $ 600 million ● Enterprise value $ 1.0 billion ● 52-week stock trading range $ 2.45 – $ 6.31 ● Common shares issued 184.3 million ● Stock options ( 10.8 MM ) & RSUs ( 0.9 MM ) 11.7 million ( 6.3% ) → average
Slide 5: Insider Commitment
Insider Commitment Insider Purchases Offering / Market Purchases Date Shares (MM) Amount (MM) Price/share $ 13.9 MM Equity Private Placement Feb-2013 3.7 $ 8.7 $ 2.32 $ 94.4 MM Equity Private Placement Apr-2013 5.7 $ 31.5 $ 5.55 $ 92.0 MM Equity Private Placement Aug-2013 0.5 $ 4.0 $ 8.00 $ 19.6 MM
Slide 6: Capital Expenditures
Capital Expenditures 2019 2020 2020/19 ( $ millions ) 2018 Forecast Budget Change Drilling & Completions 168.7 170.0 155.0 − 9% Equipment, Facilities, & Pipeline 117.7 122.0 70.0 − 43% Infrastructure [1] Land, Seismic & Asset Acquisitions, net of ( 0.9 ) 4.0 10.0 + 150% Property Dispositions Net Cap
Slide 7: Drilling Program
Drilling Program 2018 2019 Forecast 2020 Budget Drills Gross / Net Wells Gross / Net Wells Gross / Net Wells Alberta 16 15.1 8 8.0 4 4.0 British Columbia 17 17.0 24 24.0 21 21.0 Total [1, 2, 3] 33 32.1 32 32.0 25 25.0 2018 2019 Forecast 2020 Budget Completions Gross / Net Wells Gross / Net Wells Gro
Slide 8: 2019 Production Outlook
2019 Production Outlook 2019 2020 2020/19 2018 Forecast Budget Change Oil ( bbls/d ) 8,403 9,600 − 10,200 12,600 − 13,400 31% NGLs ( bbls/d ) [1] 3,186 4,600 − 5,000 7,700 − 8,300 66% Gas ( Mcf/d ) 92,502 96,000 − 102,000 110,000 − 118,000 15% Combined ( BOE/d ) 27,006 30,500 − 31,500 38,500 − 41,00
Slide 9: Product Mix
Product Mix Production Operating Income Operating Income 2019 Forecast Split ( MM ) Split Oil & NGLs 48% $ 177.0 83% Gas 52% $ 36.0 17% Total 100% $ 213.0 100% Production Operating Income Operating Income 2020 Budget Split ( MM ) Split Oil & NGLs 53% $ 234.0 89% Gas 47% $ 28.0 11% Total 100% $ 262.0
Slide 10: Commodity Prices
Commodity Prices ( CA$, unless otherwise specified ) 2018 2019 Forecast 2020 Budget 2020/19 Change WTI Crude Oil ( USD/bbl ) [1] US $ 64.94 US $ 56.00 US $ 52.00 − 7% MSW Crude Oil ( CAD/bbl ) [2] $ 69.29 $ 67.93 $ 62.09 − 9% WTI-MSW Basis Differential ( CAD/bbl ) ( $ 14.98 or 18% ) ( $ 6.34 or 9% )
Slide 11: Gas Market Risk Management
Gas Market Risk Management GAS MARKET DIVERSIFICATION ● The Company has taken a diversified approach to selling its natural gas in order to reduce exposure to single market risk. ● Kelt has entered into several contracts that result in price exposure to various gas price hubs in North America. ● Est
Slide 12: North American Natural Gas Hubs
North American Natural Gas Hubs Kelt 2020 Forecast ─ Gas Hub Netbacks Station 2 Natural Hub Price Netback Hub Price Netback Gas % US$ / US$ / CA$ / CA$ / AECO Hub MMBtu [1] Mcf [2] MMBtu [1,3] Mcf [2,3] Sumas Empress Emerson NYMEX 2.75 3.59 Kingsgate Waddington Dawn 19% 2.70 1.74 3.53 2.28 Boston St
Slide 13: Hedging
Hedging Commodity Index Term Quantity Fixed Price NYMEX to Dawn Basis Jan/2019 to Natural Gas 10,000 MMBtu/d Minus US$0.0975/MMBtu Differential Dec/2019 Jan/2019 to USD CAD/USD US$1.0 MM/month CA$1.3050 Dec/2019 WTI to MSW Edmonton Basis Oct/2019 to Crude Oil 4,000 bbls/d Minus US$10.95/bbl Differen
Slide 14: 2020 Forecast Commodity Price Sensitivities
2020 Forecast Commodity Price Sensitivities Kelt Kelt Kelt CAD / USD 2020 Oil Price NGLs Price Gas Price Exchange Rate Forecast minus 10% minus 10% minus 10% minus 5% Kelt Oil Price ( CAD/bbl ) 60.90 54.81 − 10% 60.90 ─ 60.90 ─ 57.88 − 5% Kelt NGLs Price ( CAD/bbl ) 22.70 22.70 ─ 20.43 − 10% 22.70 ─
Slide 15: Netbacks
Netbacks 2019 2020 2020/19 ( $ / BOE ) 2018 Forecast Budget Change Revenue/Price 37.30 34.88 32.49 − 7% Realized hedging gain ( loss ) ( 0.60 ) ( 0.02 ) ( 0.00 ) − 100% Royalties ( % of revenue/price ) ( 8.3% ) ( 6.3% ) ( 6.7% ) + 6% Transportation expense ( 3.92 ) ( 4.68 ) ( 3.41 ) − 27% Production
Slide 16: Financial Outlook
Financial Outlook 2019 2020 2020/19 2018 Forecast Budget Change Revenue ( $ MM ) 389.3 410.0 490.0 + 20% Operating income ( $ MM ) [1] 202.6 213.0 262.0 + 23% Adjusted funds from operations ( $ MM ) [1] 186.8 190.0 235.0 + 24% Per share – diluted ( $/share ) 1.01 1.03 1.27 + 23% Capital expenditures
Slide 17: Focused on per Share Growth
Focused on per Share Growth PRODUCTION PER MILLION SHARES ( BOE / d ) FUNDS FROM OPERATIONS PER SHARE ( diluted ) 300 $1.75 CAGR Since CAGR 2013 Since $1.50 2013 250 = 22% = 22% 217 $1.25 1.27 200 168 103 $1.00 1.03 148 1.01 150 0.93 120 121 125 88 $0.75 105 100 84 73 0.61 77 76 $0.50 53 69 50 114 0
Slide 18: Operating Areas
Operating Areas Fort St. John ( BC ) : Inga/Fireweed & Oak/Flatrock ● Stacked Montney light oil and condensate-rich gas ● Doig condensate-rich gas Grande Prairie ( AB ) : Pouce Coupe/Progress, Spirit River, Fort St. John Valhalla/La Glace & Wembley/Pipestone Grande Prairie ● Stacked Montney light oi
Slide 19: Kelt Land Fairway
Kelt Land Fairway R13 R11 R9 R7 R5 R3 R1W6 R24W5 94-A-13 94-A-14 94-A-15 94-A-16 Fireweed T90 Corporate Land Holdings 94-A-12 September Gross Net Net 94-A-11 94-A-10 94-A-9 T88 Inga T88 Flatrock 2019 Acres Acres Sections T86 T86 Oak Developed 373,751 235,428 368 T84 T84 Fort Undeveloped 688,831 592,
Slide 20: Reserves
Reserves Dec/31 Dec/31 NPV 10% BT NPV 10% BT Percent 2017 2018 Dec/31/2018 Dec/31/2018 Change ( MBOE ) ( MBOE ) ( $ MM ) ( $ / BOE ) Proved Developed 37,858 40,701 + 8% $ 481 $ 11.82 Producing Total Proved 132,973 158,443 + 19% $ 1,499 $ 9.46 Proved plus Probable 235,601 302,678 + 28% $ 3,129 $ 10.3
Slide 21: Kelt Montney Framework
& kelt exploration Kelt Montney Framework I Inga / Fireweed Oak / Flatrock ; Pouce Coupe Progress La Glace Pipestone / Wembley Middle (02) Lower Middle (D1 £ idle F 3 (O2Montney 4) _ = T ~ Lower Middle (01) == Lower Lower Middle Montney (O1/Sexsmith) ; | Lower Middle (D1/Sexsmith) Belloy — J Proven
Slide 22: British Columbia Montney Lands
British Columbia Montney Lands 94-A-13 94-A-14 94-A-15 94-A-16 G H E F G H E F G H E F G MONTNEY LAND HOLDINGS B A Fireweed D C B A D C B A D C B Gross: 368,618 acres ( 576 sections ) Net: 363,852 acres ( 569 sections ) 94-A-12 94-A-11 94-A-10 94-A-9 J I L K J I L K J I L K J OPERATIONS T88 ● Kelt h
Slide 23: British Columbia Montney Wells
British Columbia Montney Wells PRODUCTION RESERVES Kelt British Columbia Montney Drills Typical Well EUR’s Top 10 IP30 Wells ( gross sales, BOE/d ): Inga / Fireweed Upper Montney ( UM ) (1) Inga (B5-9) 05/16-33-087-23W6 UM 2,148 ( 80% oil/ngls ) Sproule 2P EUR = 860 MBOE: (2) Fireweed 00/C-31-I/94-A
Slide 24: Inga / Fireweed Montney Lands
Inga / Fireweed Montney Lands 94-A-13 94-A-14 MONTNEY LAND HOLDINGS F A-65-I MM G 02/A-65-I UM B-90-A UM H (sfc C-10-H) E F G Gross: 142,297 acres ( 222 sections ) 03/A-65-I UM Net: 140,718 acres ( 220 sections ) 94-A-13 94-A-14 B-65-I UM (sfc B-33-I) C-26-A UM (sfc A-6-A) A-58-I UM C-85-I UM 2019 D
Slide 25: Inga / Fireweed - Stacked Montney Resource Potential
Inga / Fireweed - Stacked Montney Resource Potential THE MONTNEY CUBE ● Kelt has been successful delineating MULTIPLE STACKED MONTNEY HORIZONS the Upper and Middle Montney at Inga/Fireweed. ● Initial results from the Montney IBZ have been encouraging and Kelt will continue with its delineation progr
Slide 26: Inga 6-Section / 3-Pad / 72-Well Montney Development Plan
Inga 6-Section / 3-Pad / 72-Well Montney Development Plan ● Kelt’s 2019 / 2020 capital expenditures to include 24 drills at Inga from the Company’s first 24-well multi- layer Montney cube pad that is expected to include eight Upper, seven IBZ, eight Middle and one Lower Middle Montney well. ● Horizo
Slide 27: Inga / Fireweed Montney CGR (Condensate to Gas Ratio)
Inga / Fireweed Montney CGR (Condensate to Gas Ratio) 94-A-13 94-A-14 94-A-13 94-A-14 F G H E F G H F G H E F G H 94-A-13 94-A-14 94-A-13 94-A-14 C B A D C B A C B A D C B A 02/14-24 02/15-33 IP30 – 1,609 BOE IP30 - 2,066 BOE (CGR - 402 bbls/MMcf) (CGR - 509 bbls/MMcf) 94-A-11 94-A-11 1 Year Cum = 2
Slide 28: Inga 24-well Montney Cube Pad – Initial Results
Inga 24-well Montney Cube Pad – Initial Results ● Aggregate combined sales volumes from the first six wells for initial production of 30 days (720 operating hours) was 6,569 BOE per day (77% oil and NGLs). ● Aggregate combined sales volumes from the second group of six wells for initial production o
Slide 29: Inga / Fireweed DOIG Development Wells
Inga / Fireweed DOIG Development Wells ● Kelt drilled two Doig wells at Inga in 2017 and two more wells in 2018. ● 2P Type Curves target EURs of 1,300 MBOE (51% gas / 49% oil/ngls). ● Kelt has 36 (33.4 net) future 2P HZ wells booked as inventory in the Doig in its Dec/31/18 reserves evaluation. ● Th
Slide 30: Inga Gas Processing & Liquids Handling
Inga Gas Processing & Liquids Handling KELT FACILITY ( “Inga 2-10 Facility” ): ● The Company constructed a 100 MMcf/d compression, dehydration, liquids handling and frac water facility located at Inga which is currently in operation. ● The Inga 2-10 Facility will compress raw gas that will be delive
Slide 31: Oak / Flatrock Montney Lands
Oak / Flatrock Montney Lands MONTNEY LAND HOLDINGS 02/13-13 UM (sfc 13-12) Gross: 206,260 acres ( 322 sections ) T87 Net: 204,988 acres ( 320 sections ) OPERATIONS 00/16-6 UM 00/13-5 MM T86 ● Oil and gas exploration activity targeting the (sfc 5-31) Montney at depths of 1,500 to 1,600 metres. ● Expe
Slide 32: Alberta Montney Lands
Alberta Montney Lands MONTNEY LAND HOLDINGS T80 Gross: 178,080 acres ( 278 sections ) Net: 153,188 acres ( 239 sections ) OPERATIONS Pouce Coupe ● Kelt continues with development of the Montney oil play T78 at Pouce Coupe. The first five-well pad was completed Progress in Q1-17. The second five-well
Slide 33: Alberta Montney Wells
Alberta Montney Wells PRODUCTION RESERVES Kelt Alberta Montney OIL Drills Typical Well EUR’s Top 10 IP30 Wells ( gross sales, BOE/d ): Pouce Coupe Montney OIL Sproule (1) Pouce Coupe 03/07-18-078-11W6 LMM (D1) 2,045 ( 66% oil/ngls ) 2P EUR = 585 MBOE: (2) Pouce Coupe 02/06-18-078-11W6 MM (D2) 2,004
Slide 34: Wembley / Pipestone Montney Lands
Wembley / Pipestone Montney Lands MONTNEY LAND HOLDINGS Gross: 107,680 acres ( 168 sections ) Sexsmith 00/1-35 UMM Gas Plant T75 Net: 103,955 acres ( 162 sections ) (sfc 12-19) (0.3% WI) OPERATIONS 00/13-6 UMM ● Kelt has entered into an agreement with Tidewater T74 (sfc 11-31) Midstream and Infrastr
Slide 35: Valhalla / La Glace Montney Lands
Valhalla / La Glace Montney Lands Kelt 14-29 MONTNEY LAND HOLDINGS La Glace Facility (100% WI) 1-5 MM Gross: 107,680 acres ( 168 sections ) 02/13-33 MM 15-33 UM Sexsmith T75 Net: 103,955 acres ( 162 sections ) 14-32 Gas Plant MM 2-28 MM (0.3% WI) OPERATIONS 1-27 MM 02/4-23 MM ● Ownership in pipeline
Slide 36: Net Asset Value
Net Asset Value Dec/31 Dec/31 NET ASSET VALUE PER SHARE ( diluted ) ( millions ) Change $20.00 2017 2018 CAGR Since P&NG reserves, NPV10% BT 2,111.5 3,128.6 + 48% $17.50 2013 = 23% Decommissioning obligations, ( 12.8 ) ( 9.0 ) − 30% $15.00 NPV10% BT [1] 15.51 Undeveloped land 239.1 279.7 + 17% $12.5
Slide 37: Future Considerations
Future Considerations ● The Company has numerous potential future drilling opportunities on its existing lands that will provide for continued growth in the years to come. ● The Company has amassed vast Montney acreage in new plays to complement its existing development Montney lands. ● The Company
Slide 38: Appendix
Appendix ● Convertible Debentures ● 2019 Forecasted Commodity Prices ● Quarterly Oil & Gas Prices - 2018 Actual & 2019 Forecast ● Reserves: FD&A Costs and FDC required to develop P+P Reserves ● Annual Reserves and Production Growth Charts ● Annual Cash Costs Chart ● Environment, Social and Governanc
Slide 39: Convertible Debentures
Convertible Debentures ● TSX trading symbol KEL.DB ● Principal amount issued $ 90.00 million ● Principal amount outstanding $ 89.91 million ● Coupon / Maturity date 5.0% / May 31, 2021 ● 52-week trading range $ 98.15 – $ 132.00 → D&O’s purchased $14.7 million (16%) of the total Debenture offering, a
Slide 40: 2019 Forecasted Commodity Prices
2019 Forecasted Commodity Prices ( CA$, unless otherwise specified ) Jan-Sep Oct-Dec (E) 2019 Forecast WTI Crude Oil ( USD/bbl ) [1] US $ 57.00 US $ 53.03 US $ 56.00 MSW Crude Oil ( CAD/bbl ) [2] $ 69.57 $ 63.06 $ 67.93 WTI-MSW Basis Differential ( CAD/bbl ) ( $ 6.19 or 8% ) ( $ 6.81 or 10% ) ( $ 6.
Slide 41: Kelt's 2019 / 2020 Oil Price Forecast
Kelt’s 2019 / 2020 Oil Price Forecast ( CA$/bbl ) ( US$/bbl ) 100.00 100.00 KELT Realized WTI ( 2019 Forecast = CA$66.33 ) ( 2019 Forecast = US$56.00 ) 90.00 ( 2020 Forecast = CA$60.90 − 8% ) ( 2020 Forecast = US$$52.00 − 7% ) 90.00 80.56 80.62 80.00 80.00 72.17 70.00 68.16 67.16 70.00 65.41 69.46 6
Slide 42: Kelt's 2019 / 2020 Gas Price Forecast
Kelt’s 2019 / 2020 Gas Price Forecast ( CA$/Mcf ) ( US$/MMBtu ) 8.50 8.50 KELT Realized NYMEX Henry Hub ( 2019 Forecast = CA$3.41 ) ( 2019 Forecast = US$2.70 ) 7.50 ( 2020 Forecast = CA$2.86 − 16% ) ( 2020 Forecast = US$2.75 + 2% ) 7.50 6.37 6.50 6.50 5.50 5.18 5.50 4.50 4.50 3.49 3.59 3.50 3.20 3.5
Slide 43: Finding, Development & Acquisition Costs
Finding, Development & Acquisition Costs As at December 31, 2018 Proved Proved + Probable 2018 capital expenditures + change in FDC ( $M ) 381,046 596,004 Reserve additions, net ( MBOE ) 35,298 76,905 FD&A cost ( $/BOE ) 10.80 7.75 2018 operating netback ( $/BOE ) 20.56 20.56 Recycle ratio 1.9 x 2.7
Slide 44: Sproule P+P Reserves – Future Development Capital
Sproule P+P Reserves – Future Development Capital December 31, 2017 December 31, 2018 FDC Net HZ FDC Net HZ ( $ MM ) Wells ( $ MM ) Wells Alberta Montney wells 176 37 332 59 B.C. Montney wells 638 103 744 140 TOTAL Montney wells 814 140 1,076 199 Other formation wells 342 74 355 77 Other expenditure
Slide 45: Annual Growth in Proved plus Probable Reserves
Annual Growth in Proved plus Probable Reserves ( since inception ) RESERVES ( MBOE ) 400,000 CAGR since 2013 = 39% 350,000 302,678 300,000 250,000 235,601 194,066 173,831 200,000 150,507 133,813 150,000 122,173 99,110 100,000 96,130 59,198 64,836 128,847 50,000 101,788 42,388 71,893 54,377 16,810 34
Slide 46: Annual Production Growth
Annual Production Growth ( since inception ) PRODUCTION ( BOE / d ) 55,000 CAGR since 50,000 2013 = 39% 45,000 38,500 − 41,000 40,000 35,000 30,500 − 31,500 18,300 − 30,000 27,006 19,700 25,000 22,130 16,000 − 20,947 18,577 17,000 20,000 15,417 15,000 12,756 12,888 13,168 11,879 20,300 − 10,000 21,7
Slide 47: Environment, Social & Governance (ESG)
Environment, Social & Governance ( ESG ) Health & Safety Safety is paramount in Kelt’s corporate culture. The Company is committed to safe and environmentally responsible operations for the benefit of its employees, contractors and the communities we work in. We reinforce our commitment through the
Slide 48: Environment, Social & Governance (ESG)
Environment, Social & Governance ( ESG ) Air Quality Kelt’s air emission roadmap is focused on continuous improvement to meet provincial and federal standards. Kelt’s emissions management framework includes air monitoring, utilizing renewable and alternative energy, creating energy efficiencies and
Slide 49: Environment, Social & Governance (ESG)
Environment, Social & Governance ( ESG ) Corporate Governance The following documents relating to the Company’s corporate governance matters are available on the internet at www.keltexploration.com: ● Advance Notice Policy ● Disclosure, Confidentiality and Trading Policy ● Articles of Incorporation,
Slide 50: Board of Directors
Board of Directors Robert J. Dales [2, 3, 4, 7] Geri L. Greenall [2, 3, 6] William C. Guinan [1,5] President, Valhalla Ventures Inc. Chief Financial Officer, Partner, Borden Ladner Gervais LLP Chief Compliance Officer & Portfolio Manager, Camber Capital Corp. Notes: [1] Chairman of the Board [2] Mem
Slide 51: Management
Management David David J. Wilson Sadiq H. Lalani Douglas J. Errico Alan G. Franks Bruce D. Gigg President & Chief Executive Officer Vice President & Chief Financial Officer Vice President, Land Vice President, Production Vice President, Engineering David A. Gillis Douglas O. MacArthur Patrick W. G.
Slide 52: Abbreviations
Abbreviations GAAP: Canadian generally accepted accounting principles as set out in the CPA Canada Handbook – Accounting. IFRS: International Financial Reporting Standards as issued by the International Accounting Standards Board (“IASB’). FFO: Funds from operations WTI: West Texas Intermediate MSW:
Slide 53: Disclaimer
Disclaimer Forward Looking Statements Certain statements included in this corporate presentation (the “Presentation”) constitute forward looking statements or forward looking information under applicable securities legislation. Such forward looking statements or information are provided for the purp
Slide 54: Disclaimer
Disclaimer The actual results of operations of the Company and the resulting financial results will likely vary from the amounts set forth in the analysis presented in this Presentation, and such variation may be material. The Company and its management believe that the FOFI has been prepared on a r
Slide 55: Disclaimer
Disclaimer Risks and Uncertainties Forward looking statements or information are based on current expectations, estimates and projections that involve a number of risks and uncertainties which could cause actual results to differ materially from those anticipated by the Company and described in the
Slide 56: Disclaimer
Disclaimer Oil and Gas Advisories Barrel of Oil Equivalent Presentation This Presentation 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
Slide 57: Disclaimer
Disclaimer Reserves Unless otherwise specified, reserve estimates disclosed in this Presentation were prepared by Sproule Associates Limited (“Sproule”) in accordance with National Instrument 51- 101 Standards of Disclosure for Oil and Gas Activities (“NI 51-101”) and the Canadian Oil and Gas Evalua
Slide 58: Disclaimer
Disclaimer Financial Advisories All dollar amounts are referenced in Canadian dollars, except when otherwise noted. Non-GAAP Financial Measures and Other Key Performance Indicators This Presentation contains certain financial measures, as described below, which do not have standardized meanings pres
Slide 59: Disclaimer
Disclaimer Other Key Performance Indicators 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. NPV10% BT: the anticipated net present value of the future net cash flow befor
Slide 60: Corporate Presentation
Corporate Presentation KeltExploration.com Kelt Exploration Ltd. Suite 300, East Tower 311 – Sixth Avenue SW Calgary, Alberta Canada T2P 3H2 Phone: 403-294-0154 Fax: 403-291-0155 Website: www.KeltExploration.com 59
Kelt Exploration — Investor Presentation (December 2019) on 6ix