Kelt Exploration Ltd T.KEL

Kelts Evaluation verses Tamarack Valley Energy

[MyHoneyPot]

Compare TVE to Kelt

If you take a look at Tamarack Valley Energy, TVE they are forcasting 68-72 thousand boe day. The enterprize value of TVE is about 3.5788 billion dollars. They are carrying 1.356 Billion in debt. 

TVE has 561 million shares and they pay a 15 cent dividend a year so they are paying 84 million dollars a year in dividends, and 265 million in debt servicing costs. 

Kelt has a marketcap of 943 million enterprise value with zero debt and has only 193 million shares. So TVE enterprise value is roughly 4X that of Kelt with roughly twice the production. 

The sustainability of TVE you really have to be concerned about with 1.356 billion in debt. The company needs almost 400 million just to service the debt and pay a 15 cent dividend, that it really cant afford!

TVE capital budget of 425 million compared to Kelts capex of 285 million dollars. 

So Kelt capital spend is 67% of the Capital Budget of TVE, and Kelt will average about half of their production, and has zero debt. Kelt does not have 400 million is servicing charges to the debt and to the shareholders. 

TVE and Kelt are both big into charlie lake, TVE has about twice as much land there. 

But TVE has nothing like Oak and Wembley/Pipestone, and Pipestone is ready for full field development, Kelt also has production behind the pipe in Pipestone waiting for plant.

TVE is not there yet and they have balance sheet issues before they could proceed with any kind of project like this. TVE is very capital constrained because they have to maintain a higher production level, and they have client and debt servicing of 400 million. 

So kelt appears to be trading at a huge discount when you compare it to TVE, and TVE shares are weighted down by a mountain of debt. 

Also kelt has way more upside with it current fiscal framework, no dividend payments, low cost company framework, a CEO that doesn't take a salary. 

The stock is trading way to cheap and it should be at least 10 dollars if you think it should be valued at 1/2 the value of TVE. However i think with Pipestone, Charlie Lake, and Oak plus progress, pouc etc it could be value at 60-75% the value of TVE and be worth 15 dollars a share. 

TVE share price also is likely depressed because of the huge debt load the company is on its plate. So Kelt could be even cheaper than i think. 

IMHO

[PabloLafortune]

Tamarack is hard to compare for me. 80% liquids, netback 60% higher at current natgas prices? They'll sell some assets apparently to focus on Charlie Lake and Clearwater. Oil reserves are 2X Kelt, much less gas. 

[MyHoneyPot]

Tamarack Valley Charlie lake is about twice the size of Kelts, they need about 400 million a year just to service the debt and pay a dividend they can not afford. I can't imagine that TVE is not in the penality box with that kind of debt load so i think the stock is trading at a depressed price. Their Heavy oil trades at a 30% discount compared to light and about 60% of their oil is heavy

[Seppelt]

Why on earth would someone compare a mainly oily company to a Montney gassy company with less than half production. At least TVE is building a gas plant in the Charlie Lake instead of relying on third parties, probably ready by now, and its low cost heavy oil in Clearwater will benefit from narrower differentials when TMX is in service later this year. I own both and a lot more Kelt alone with

[PabloLafortune]

I understand your frustration believe me but if oil prices had stayed low for longer, Kelt would have survived while many indebted peers might have disappeared. So there was a risk reward calculus that was reasonable to make at the time for me. I always choose the shortest line at customs but it doesnt always work out. Also, the way I see it now, with Kelt's decline being 32% per PNE

[MyHoneyPot]

Very simple Kelt has 3 major resource plays it is pursuing, Charlie Lake, with land adjacent to TVE. Wembley/Pipestone  62% liquids in the same area. Oak gas they are not pursuing right now.  Kelt Charlie Lake             53% liquids Kelt Wembley/Pipestone 62% Liquids TVE are on record claiming Charlie lake is best low risk light oil play in Canada

[Relaxrelax]

Lol! Yes, more debt but maybe factor in TVE 65,000 barrels per day vs 27k.  EOM

[PabloLafortune]

You're right on TVE, thank you. Current liabilities exceeds current assets by $459M. $265M debt due within a year plus another $123M income tax due. Netback was $42 in Q4 ($82 WTI), $35-36 in Q1? ($76 WTI), WTI is $77-78 now... Interest, dividend and taxes are $11 or so, SG&A and SBC another $2, capex $19, leaves $3-4 per boe as FCF or $100M a year.  Seems they need to raise an

[Relaxrelax]

So you 2 guys know more than Nuttall (a professional oil stock investor) now? I'm sure he would be able to put several holes in both your opinions.  Anyhow, let me know when either of you start running an energy fund.

[Oldnagger]

Many moons ago , I would tune in BNN , listen to Eric Nuttall, buy his top picks, only to watch them go down. Next show he would explain that things changed and he had decided to sell out before the real damage was done. Fool me once , shame on you , twice shame on me . I much prefer to read these boards and then make up my own mind. Have been doing that for over 3 years now. Time well spent

[Relaxrelax]

Well if you knew anything, they just paid 2.2 billion in cash and stock for Delta.  Manic doesn't make that debt disappear right away.  As for Nuttall, he does sell eventually but he sure knows more than anyone on this board.  TVE is still a top 5 holding for now, I don't see Kelt in there.  His comments are still the number 1 talk of stockhouse.   You, not so much

[MyHoneyPot]

Its just like Baytex and Ranger, i know a lot about the Eaglesford, i worked in Houston since 2000. I was part of the evolution of the eaglesford, and really pioneer was the first movers in that play.  Baytex buying Rangers land because they were bad operators is kind of a Joke to me, hearing Eric say that made me laugh has he every put his spreadsheet down and went to the field? I hope

[Relaxrelax]

84 million and 265 million is peanuts when you're generating over 5 million a day in revenue.  There were a lot of synergies in the Clearwater purchase so you can expect costs to go way down in the next few earnings reports.

[Relaxrelax]

Baytex and TVE have invested billions to grow their companies.   Your comparison is a joke.  You're a minor oil company..  Pick someone in your league to make a comparison with.  You can't compare a low cap to a mid cap.  A 25k producer to a 75k boe producer.  It make no sense.  Anyways, enough of my time.  Go compare yourself to CVE.

[Relaxrelax]

Why don't you compare yourself with a Journey, Gear or Pipestone, someone in your small producing league.  If oil stays where it is or goes up, your thesis is irrelevant.  You're a small cap company taking on no risk comparing yourself to something that is much bigger taking on a lot of risk.  I think BTE and TVE investors understand this or they would be in Kelt, a small

[MyHoneyPot]

Obviously you don't know what your talking about and have not looked at the play areas the Kelt is developing.  Kelt has developed large play areas and made mountains of cash historically.  Next year Kelt will be producing 45,000 boe once the plant is in place and Webley/Pipestone play are a 62% liquids rich montnry play with Charlie lake above the montney.  Kelt is currently

[PabloLafortune]

So went thru the #s for a 3rd time...: Q1 guesstimated field netback $36 per boe. interest/dividend/G&A $9 per boe. Capex $19 per boe. FCF: $8 per boe or $200M per year.  Cashflow required to meet their debt repayment and taxes obligations this year: $15 per boe. Conclusion: asset sales or equity raise required of at least $200MM. This excludes cash used for buybacks or provisions for

[PabloLafortune]

To clarify, above analysis is for TVE.

[alta0264]

The market seems to have taken a different view of Kelt the last 2 or 3 weeks. Trying to buy even fairly small number of shares might move things more than expected. Is someone trying to cover a short carefully or is the selling finally dried up as Kelts value becomes more obvious?

[MyHoneyPot]

I don't think people realized that Kelts project for 2023, is a 25% growth in production and to produce 34000 boe day. However the reall projection is 25% increase in 2023 average production to 34,000 boe a day, and drilling the wells that will support 7,000 additional boe a day in 2024 when the additional plant comes on.  Year End 2023 Kelt will be in a position to produce 41,000 boe

[PabloLafortune]

MHP, doesn't include Oak a few addl K boepd production there as well. Natgas will recover by then for sure. I looked at SWN, the hedges fall off dramatically starting in 2024.  So even though these natgas producers haven't cut drilling back in reaction to low prices like they did in the past (see chart inside Antero presentation), they'll eventually be forced to.

[PabloLafortune]

My ooma speculation - LOL - is that some of that Spartan special dividend will be "converted" into Kelt shares.

[Seppelt]

Oak is on hold. First, there was an issue with First Nations and now gas is barely hanging above $2. And then it's Station 2, the worst hub to sell gas. I don't even look at it anymore, hope it has recovered from ridiculous lows. Kelt has no debt is a very old story not worth mentioning unless promoting the stock and nothing else to say. That was one of the reasons I bought a lot of it

[PabloLafortune]

There is a good Bloomberg article on natgas today "shale gas drillers brace for $8B cashflow drop off" What it doesnt mention is the storage overhang is minuscule* relative to actual production (4 days). So once cuts are made pricing could recover quickly. Doesnt mean we've hit bottom yet.