Kelt Exploration Ltd. · TSX:KEL
Kelt Exploration — Investor Presentation (February 2020)
57 slides from Kelt Exploration's investor presentation, February 2020
Slide 1: Corporate Presentation February 2020
Corporate Presentation February 2020 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 • Kelt is committed to minimalizing impacts on the • Health and safety are a high priority • Kelt is committed to strong environment. and Kelt maintains a HS&E program corporate governance • Kelt enacted an Environmental Manage
Slide 4: Capital Structure
Capital Structure ● Stock Exchange listing TSX ● Trading symbol KEL ● Market capitalization $ 700 million ● Enterprise value $ 1.1 billion ● 52-week stock trading range $ 2.45 – $ 6.14 ● Common shares issued 187.8 million ● Stock options ( 10.0 MM ) & RSUs ( 0.9 MM ) 10.9 million ( 5.8% ) → 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 168.7 185.0 145.0 − 22% Equipment, Facilities, & Pipeline 117.7 129.0 70.0 − 46% Infrastructure [1] Land, Seismic & Asset Acquisitions, net of ( 0.9 ) 2.0 10.0 + 400% Property Dispositions Net Ca
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: Production Outlook
Production Outlook 2019 2020 2020/19 2018 Forecast Budget Change Oil ( bbls/d ) 8,403 9,360 12,600 − 13,400 35% - 43% NGLs ( bbls/d ) [1] 3,186 4,490 7,000 − 7,600 56% - 69% Gas ( Mcf/d ) 92,502 96,660 114,000 − 122,000 18% - 26% Combined ( BOE/d ) 27,006 29,960 38,500 − 41,000 29% - 37% Per MM Shar
Slide 9: Product Mix
Product Mix Production Operating Income Operating Income 2019 Forecast Split ( MM ) Split Oil & NGLs 46% $ 177.0 86% Gas 54% $ 36.0 14% Total 100% $ 206.0 100% Production Operating Income Operating Income 2020 Budget Split ( MM ) Split Oil & NGLs 52% $ 236.0 94% Gas 48% $ 16.0 6% Total 100% $ 252.0
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 $ 57.00 US $ 52.00 − 9% MSW Crude Oil ( CAD/bbl ) [2] $ 69.29 $ 69.20 $ 61.50 − 11% WTI-MSW Basis Differential ( CAD/bbl ) ( $ 14.98 or 18% ) ( $ 6.43 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 2.25 2.97 Kingsgate Waddington Dawn 19% 2.10 1.15 2.77 1.52 Boston St
Slide 13: Hedging
Hedging Commodity Index Term Quantity Fixed Price NYMEX to Malin Jan/2020 to NYMEX plus US $0.31625/MMBtu Natural Gas 10,000 MMBtu/d [ equivalent to CA $0.42 at Kelt’s 2020 forecasted Basis Differential Feb/2020 CAD/USD exchange rate of 1.320 ] WTI to MSW WTI minus US $7.85/bbl Crude Oil Jan/2020 4,
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 ) 60.80 54.70 − 10% 60.80 ─ 60.80 ─ 57.80 − 5% Kelt NGLs Price ( CAD/bbl ) 22.60 22.60 ─ 20.30 − 10% 22.60 ─
Slide 15: Netbacks
Netbacks 2019 2020 2020/19 ( $ / BOE ) 2018 Forecast Budget Change Revenue/Price 37.30 34.50 31.20 − 10% Realized hedging gain ( loss ) ( 0.60 ) ( 0.10 ) 0.50 − Royalties ( % of revenue/price ) ( 8.3% ) ( 4.9% ) ( 6.1% ) + 24% Transportation expense ( 3.92 ) ( 4.60 ) ( 3.60 ) − 22% Production expens
Slide 16: Financial Outlook
Financial Outlook 2019 2020 2020/19 2018 Forecast Budget Change Revenue ( $ MM ) 389.3 395.0 470.0 + 19% Operating income ( $ MM ) [1] 202.6 206.0 252.0 + 22% Adjusted funds from operations ( $ MM ) [1] 186.8 182.0 225.0 + 24% Per share – diluted ( $/share ) 1.01 0.99 1.19 + 20% 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 $1.50 Since 250 = 22% 2013 213 = 21% $1.25 200 1.19 163 $1.00 148 106 1.01 0.99 150 0.93 120 121 125 $0.75 105 87 100 84 73 0.61 77 76 $0.50 53 69 50 107 0
Slide 18: Reserves
Reserves December 31 December 31 NPV 10% BT NPV 10% BT Percent 2018 2019 Dec/31/2019 Dec/31/2019 Change ( MBOE ) ( MBOE ) ( $ MM ) ( $ / BOE ) Proved Developed 40,702 48,854 + 20% $ 514 $ 10.53 Producing Total Proved 158,443 224,582 + 42% $ 1,900 $ 8.46 Proved plus Probable 302,678 460,981 + 52% $ 3
Slide 19: P+P Reserves – Future Development Capital
P+P Reserves – Future Development Capital December 31, 2018 December 31, 2019 FDC Net HZ FDC Net HZ ( $ MM ) Wells ( $ MM ) Wells Alberta Montney wells 332 59 582 101 B.C. Montney wells 744 140 1,463 270 TOTAL Montney wells 1,076 199 2,045 371 Other formation wells 355 77 355 85 Other expenditures 4
Slide 20: Finding, Development & Acquisition Costs
Finding, Development & Acquisition Costs As at December 31, 2019 Proved Proved + Probable 2019 capital expenditures + change in FDC ( $M ) 822,972 1,295,973 Reserve additions, net ( MBOE ) 77,053 169,217 FD&A cost ( $/BOE ) 10.68 7.66 2019 operating netback ( $/BOE ) 18.89 18.89 Recycle ratio 1.8 x
Slide 21: Operating Divisions
Operating Divisions Inga/Fireweed ● Montney light oil/condensate-rich gas ● Doig condensate-rich gas Oak/Flatrock ● Montney light oil/condensate-rich gas Inga/ Fireweed Oak/ Flatrock Pouce Coupe/Progress Pouce Coupe/Progress Wembley/Pipestone ● Montney light oil Grande Cache ● Montney and Doig gas ●
Slide 22: 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 Corporate Land Holdings T90 94-A-12 94-A-11 94-A-10 94-A-9 T88 Inga T88 [ as at January 2020 ] Flatrock T86 T86 Developed + Gross Net Net Oak Undeveloped Acres Acres Sections T84 T84 Fort St. John BC Montney 35
Slide 23: Kelt Montney Framework
#2 kelt exploration Kelt Montney Framework Inga / Fireweed Oak / Flatrock ; Pouce Coupe Progress La Glace Pipestone / Wembley A A A A A A A Melon, Ah Alla * — Proven Productive Montney Horizons = 8 — + Kelt Future Exploratory Horizons Within Core Areas = slz 22
Slide 24: Reserves by Operating Divisions
Reserves by Operating Divisions Inga/ Pouce Coupe/ Wembley/ Other Total Fireweed Progress Pipestone Properties Company Division Division Division [2] PDP Reserves ( MBOE ) 24,107 12,354 7,622 4,771 48,854 % Oil & NGLs 47% 35% 65% 17% 44% NPV 10% BT ( $MM ) $ 291 $ 122 $ 95 $6 $ 514 Proved Reserves (
Slide 25: British Columbia Montney Lands
British Columbia Montney Lands MONTNEY LAND HOLDINGS Extrapolation of previous BC Crown Land Sale Prices to Gross: 368,618 acres ( 576 sections ) Kelt’s Inga / Fireweed Montney Lands (139,963 acres) Net: 363,852 acres ( 569 sections ) Extrapolation to Date of BC Location / Sale Inga/Fireweed Crown S
Slide 26: 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 = 940 MBOE: (2) Inga (J5-9) 02/11-33-08
Slide 27: Inga / Fireweed Division – Delineation Drilling
Inga / Fireweed Division – Delineation Drilling 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: 141,543 acres ( 221 sections ) 03/A-65-I UM Net: 139,963 acres ( 219 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 U
Slide 28: Inga / Fireweed - Montney CGR
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 =
Slide 29: Inga / Fireweed Division – Development Drilling
Inga / Fireweed Division – Development Drilling 94-A-13 94-A-14 THE MONTNEY CUBE F G H E F G MULTIPLE STACKED MONTNEY HORIZONS 94-A-13 94-A-14 C B A D C B Fireweed 5-well Montney pad Fireweed 5-well 4 UM & 1 MM 94-A-12 94-A-11 Montney pad K(sfc B-62-I )J I L 5 UM K J (sfc C-61-I ) KEL Inga 2-10 Faci
Slide 30: 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 included 24 drills at Inga on the Company’s first 24-well multi-layer Montney cube pad that included eight Upper, seven IBZ, eight Middle and one Lower- Middle Montney well. ● Horizontal wells in each
Slide 31: 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 (5-9 Group 1) 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 (4-9 Group
Slide 32: 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 33: Oak / Flatrock Division
Oak / Flatrock Division 00/1-9 UM 00/4-10 UM MONTNEY LAND HOLDINGS (sfc 5-33) 00/14-24 UM 00/16-6 UM 00/13-5 MM 02/13-13 UM (sfc 13-12) 00/12-2 MM Gross: 206,260 acres ( 322 sections ) (sfc 5-31) (sfc 10-27) T87 Net: 204,988 acres ( 320 sections ) OPERATIONS 00/8-11 UM 00/5-12 UM T86 ● Oil and gas e
Slide 34: Alberta Montney Lands
Alberta Montney Lands MONTNEY LAND HOLDINGS T80 Gross: 193,600 acres ( 303 sections ) Net: 167,674 acres ( 262 sections ) OPERATIONS Pouce Coupe ● Kelt commenced development of the Montney oil play at T78 Pouce Coupe with its first five-well pad that was Progress completed in Q1-17. The second five-
Slide 35: 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 ): Wembley Montney GAS Sproule 2P (1) Pouce Coupe 03/07-18-078-11W6 LMM (D1) 2,045 ( 66% oil/ngls ) EUR = 920 MBOE: (2) Pouce Coupe 02/06-18-078-11W6 MM (D2) 2,004 ( 68
Slide 36: Wembley / Pipestone / La Glace Division – Upper Middle Montney
Wembley / Pipestone / La Glace Division – Upper Middle Montney MONTNEY LAND HOLDINGS Gross: 110,880 acres ( 173 sections ) Sexsmith 00/1-35 UMM Gas Plant T75 Net: 107,155 acres ( 167 sections ) (sfc 12-19) (0.3% WI) 00/13-6 UMM OPERATIONS (sfc 11-31) T74 ● Kelt has entered into an agreement with Tid
Slide 37: Wembley / Pipestone / La Glace Division – Middle Montney
Wembley / Pipestone / La Glace Division – Middle Montney Kelt 14-29 MONTNEY LAND HOLDINGS La Glace Facility (100% WI) 1-5 MM Gross: 110,880 acres ( 173 sections ) 02/13-33 MM 15-33 UM Sexsmith T75 Net: 107,155 acres ( 167 sections ) 14-32 Gas Plant MM 2-28 MM (0.3% WI) OPERATIONS 1-27 MM 02/4-23 MM
Slide 38: Net Asset Value
Net Asset Value Dec/31 Dec/31 NET ASSET VALUE PER SHARE ( diluted ) ( millions ) Change $22.50 2018 2019 CAGR Since $20.00 2013 = 22% P&NG reserves, NPV10% BT 3,119.6 3,988.5 + 28% 18.78 Undeveloped land 279.7 350.6 + 25% $17.50 Net bank debt ( 196.4 ) ( 328.1 ) + 67% $15.00 15.51 Proceeds from exer
Slide 39: 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 40: Appendix
Appendix ● Convertible Debentures ● Quarterly Oil & Gas Prices – 2018/2019 Actual & 2020 Forecast ● Environment, Social and Governance ( ESG ) ● Board of Directors ● Management ● Abbreviations ● Disclaimers 39
Slide 41: 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 $14.7 million (16%) of the total Debenture offering, a
Slide 42: Kelt's 2020 Oil Price Forecast
Kelt’s 2020 Oil Price Forecast ( CA$/bbl ) ( US$/bbl ) 100.00 100.00 KELT Realized WTI ( 2019 Forecast = CA$67.00 ) ( 2019 Forecast = US$57.00 ) 90.00 ( 2020 Forecast = CA$60.80 ) ( 2020 Forecast = US$$52.00 ) 90.00 80.56 80.62 80.00 80.00 72.17 70.00 68.16 67.16 70.00 69.46 63.25 61.82 61.82 67.88
Slide 43: Kelt's 2019 / 2020 Gas Price Forecast
Kelt’s 2019 / 2020 Gas Price Forecast ( CA$/Mcf ) ( US$/MMBtu ) KELT Realized NYMEX Henry Hub 8.00 ( 2019 Forecast = CA$3.25 ) ( 2019 Forecast = US$2.62 ) 8.00 ( 2020 Forecast = CA$2.50 ) ( 2020 Forecast = US$2.25 ) 7.00 7.00 6.37 6.00 6.00 5.18 5.00 5.00 4.00 4.00 3.20 2.81 3.55 2.95 2.84 2.79 3.00
Slide 44: 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 45: 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 46: 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 47: 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 48: 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 49: 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 50: 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 51: 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 52: 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 53: 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 54: 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 55: 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 56: 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 57: 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 56
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