RE:Kelt Value - $8.70 to $9.70 Year End?Every presentation they make Kelt emphasizes that they have structured the company in such a way that they can sell a single play as tax efficiently (share swap) as possible. That leads me to believe that their plan is to sell plays rather than the whole company.
Kelt has 3 plays: Wembley, Pouce Coupe, and Oak.
If they sell Oak its because they've thrown in the towel. They've only really developed a single township (23,000 acres) and they have 8 of those. So unlikely.
Personally, I'm not a fan of developing Oak. Will take a lot of cash and time. Kelt is 12 years old, I've been invested 5 years, not really interested in a marginal oil play that is based in BC the graveyard of small canadian E&Ps. And you can bla bla bla LNG Canada all you want, didn't help US Natgas producers 1 iota (If anything it made it worse).
Pouce Coupe is a mumbo jumbo of (profitable) small plays: Charlie Lake Spirit River, Charlie Lake Pouce Coupe, Pouce Coupe Oil, Progress OIl, Pouce Coupe West (dry gas). Not attractive for big companies.so wouldn't get much for it. Plus it generates $$$. So unlikely.
Although if it were "connected" via pipeline, it could potentially be sold along with Wembley - see page 29 of the presentation...
That leaves us with Wembley. 110,000 acres (172 sections). 47% oil and NGLs, 1M EUR per well. 217MM of 2P reserves at December 31, 2023 ($1.7B NPV10 proved, $2.3B proved and probable). Enough for 30,000 boepd, 20 years RLI. Only 22% booked (188 locations booked, ~1 well per section across 2 zones). Only booked 2 out of 3 productive zones I believe. Wembley Charlie Lake not booked at all I believe.
So if there is going to be an asset sale, its very likely to be Wembley. But is it too early? Personally - reminder I'm a complete amateur - I think it absolutely is.
First, Wembley reserves arent fully booked/assessed yet IMO. This matters to valuation models - a lot.
Second, Kelt is a home run type of company, not doubles. They want the big transaction and are willing to wait for it. This is the only asset they own today that can make that happen in the foreseeable future.
Third, the longer they wait, the more companies/plays get sold....
Fourth, Wembley will start generating serious cashflow in 2025 which will open up many possibilities that were heretofore not available to them. From '23 to '25, Wembley will have gone from cashflow negative to cashflow neutral to positive cashflow. If Kelt plays their cards right, the discussion will no longer be solely what is the best place to drill this year to what do we do with all that cashflow (which is an infinitely better position to be in) - commodity prices willing of course.
All that gibberish aside, I really like Kelt's situation in Alberta. Their 2 plays Wembley and Pouce Coupe will both be cashflow positive in 2025 (unless WTI goes to $40) because they're oily while maintaining natural gas upside. if they connect Wembley and Pouce Coupe, I believe they'll realize further capital and other efficiencies. They can have their cake and eat it too - grow while generating cashflow. The Soul of a new Kelt machine after years of blood sweat and tears.
Whereas Oak is just a bunch of money, time and headaches. Who needs it?
My 2 dollars LOL. IM(amteur)O.