Kelt Exploration Stock Price, News & Analysis

Kelt Exploration Ltd. (TSX: KEL; OTC symbol KELTF) is a Canadian oil and gas company active in the crude petroleum and natural gas sector. The company reports its results and guidance in Canadian dollars and discloses production and reserves on a barrels of oil equivalent ("BOE") basis, where natural gas volumes are converted to oil equivalence at six thousand cubic feet per barrel and sulphur volumes are converted at 0.6 long tons per barrel. Kelt's operations generate a mix of crude oil, field condensate, natural gas liquids ("NGLs") and natural gas.

Kelt describes its business using petroleum and natural gas ("P&NG") sales, adjusted funds from operations ("AFFO"), capital expenditures and net debt as key measures. These non-GAAP and other specified financial measures are commonly referenced in its public disclosures as tools to monitor investment in exploration and evaluation, property, plant and equipment, and acquisition and disposition activities, as well as to assess liquidity and capital structure. The company emphasizes measures such as operating netback and net realized prices for oil, NGLs and gas to evaluate operational efficiency and price realizations.

Operating focus and core divisions

Kelt reports activity across several operating divisions in Western Canada. In its Wembley/Pipestone Division, the company has focused on Montney and Charlie Lake wells and has contracted raw gas processing capacity at third-party gas plants, including the CSV Midstream Solutions Corp. Albright Gas Plant. Kelt has indicated that it expects to be particularly active in this division, drilling and completing multiple Montney and Charlie Lake wells and using firm processing service to bring shut-in production back on stream as new gas processing capacity becomes available.

In its Pouce Coupe/Progress/Spirit River Division, Kelt has reported drilling Montney and Charlie Lake wells and has contracted raw gas firm processing service at a third-party gas plant at Gordondale West. The company has also referenced a Spirit River area within this division, where it has drilled Charlie Lake wells. In its Oak/Flatrock Division, Kelt has undertaken an extensive 3-D seismic program covering approximately 286 square kilometres (about 110 sections of land) and has drilled multi-well pads, with some completions timed to align with its broader capital program.

Production profile and commodity mix

Kelt regularly discloses average daily production volumes and product mix. In its public updates, the company has reported production that is weighted to both liquids (oil and NGLs) and gas, with liquids generally representing around one-third to just under forty percent of total BOE volumes and gas making up the balance. For example, Kelt has disclosed that production in certain quarters was weighted approximately 36% to oil and NGLs and 64% to gas, and has also reported annual averages where liquids comprised about 37% of total production and gas 63%.

The company highlights that references to "oil" in its disclosures include crude oil and field condensate, while references to "NGLs" include pentane, butane, propane and ethane. References to "liquids" include field condensate and NGLs, and references to "gas" include natural gas and sulphur. Kelt cautions that the BOE conversion ratio is based on energy equivalency at the burner tip and does not represent a value equivalency at the wellhead.

Capital program and growth plans

Kelt publishes detailed capital expenditure budgets and financial and operating guidance. For example, the company has announced annual capital programs in the hundreds of millions of Canadian dollars, with the majority allocated to drilling and completing wells, and significant portions directed to facilities, pipelines, equipment, land purchases and seismic programs. In its guidance, Kelt has outlined plans to drill and complete dozens of net wells per year across its core divisions and has linked these programs to forecasted production growth in BOE per day.

The company also provides forecasted commodity price assumptions for WTI crude oil, MSW crude oil, NYMEX Henry Hub gas, DAWN gas, AECO NIT gas and Station 2 gas, along with assumed foreign exchange rates. These assumptions underpin Kelt's forecasts for P&NG sales, adjusted funds from operations, capital expenditures and net debt metrics. Kelt often presents sensitivity analyses showing how changes in realized prices for oil, NGLs and gas could affect adjusted funds from operations.

Financial measures and risk management

Kelt uses net realized price as a non-GAAP measure, calculated by dividing P&NG sales after cost of purchases by production, reflecting realized selling prices plus the net benefit of oil blending and third-party natural gas sales. The company may purchase butane and crude oil from third parties for blending, with the objective of selling blended oil at a premium. Kelt also emphasizes funds from operations and adjusted funds from operations as capital management measures, describing them as indicators of its ability to meet financial obligations and fund its capital program.

Another key measure is net debt, defined as bank debt, accounts payable and accrued liabilities, net of cash and cash equivalents, accounts receivable and accrued sales and prepaid expenses and deposits. Kelt monitors its net debt to adjusted funds from operations ratio to assess liquidity and capital structure and references this ratio in connection with its credit facility margin determination. The company also discloses the use of derivative financial instruments and has outlined specific oil and gas hedge positions and expected gains from these contracts in certain periods.

Reserves and independent evaluation

Kelt reports oil and gas reserves under National Instrument 51-101 guidelines and has engaged independent qualified reserves evaluators. The company has disclosed a change in evaluator to McDaniel & Associates Consultants Ltd., noting that this aligns Kelt with many Montney producers in Western Canada that also retain McDaniel. Kelt has reported proved developed producing, proved and proved plus probable reserves in BOE, with associated breakdowns between oil and NGLs and gas, and has highlighted year-over-year changes in these categories.

The company has also provided details on the composition of its oil and NGL reserves, including the proportions of light oil, condensate and pentane plus, butane, propane and ethane within proved plus probable reserves. Kelt has discussed reserve evaluation methodologies, such as decline analysis and assumptions regarding final decline values, and has indicated that changes in these assumptions can affect late-life gas reserve estimates.

Corporate governance and shareholder matters

Kelt is listed on the Toronto Stock Exchange under the symbol KEL and has reported on shareholder meetings, board composition and governance-related resolutions. The company has disclosed results of votes on the election of directors, amendments to restricted share unit plans, approval of a performance share unit plan and the appointment of its external auditor. It has also reported on director retirements and new director appointments, including committee roles such as chair of the audit committee and membership on the reserves committee.

Risk factors and forward-looking information

Kelt's public disclosures include extensive advisories regarding forward-looking information and financial outlooks. The company cautions that historical results are not necessarily indicative of future performance and that changes in forecasted commodity prices and variances in production estimates can significantly impact funds from operations and earnings. It notes that non-GAAP and other specified financial measures do not have standardized meanings under GAAP or applicable securities legislation and may not be directly comparable to similar measures used by other entities.

In its outlook discussions, Kelt has referenced macroeconomic conditions such as global economic slowdowns, trade tensions, inflationary pressures, high interest rates and geopolitical risks, and has linked these to commodity price volatility. In response, the company has described entering into future contracts to sell oil and gas production at specified prices to support its capital expenditure programs and financial position.

Key terminology and measurements

Kelt provides detailed definitions and abbreviations in its disclosures. Common terms include P&NG (petroleum and natural gas), MD&A (Management's Discussion and Analysis), TSX (Toronto Stock Exchange), GAAP (Generally Accepted Accounting Principles), BOE (barrel of oil equivalent), NGLs (natural gas liquids) and various units such as bbls, bbls/d, Mcf, Mcf/d, MMcf and GJ. The company reiterates that BOE figures may be misleading if used in isolation and that the conversion ratio is based on energy equivalency rather than price equivalency.

Overall, Kelt Exploration Ltd. presents itself as an oil and gas producer with a focus on Western Canadian resource plays, using detailed operational, financial and reserves disclosures to describe its activities, capital programs and performance metrics.