Kelt Exploration Ltd T.KEL

Pouce Coupe Progress Spirit River (Montney/Charlie Lake)

[PabloLafortune]

So at Enercom, Kelt CFO Sadiq Lalani emphasized that this division is a cash generator for the company. It produced 15,260 boepd in 2023 with 34% liquids (25% oil?) and $24.87 of netback ($138.5M of field cashflow).

The division is composed of 4-5 sub plays (it would be very helpful if they had 1 page on the presentation that summarized the individual plays in this division, production level, netback level, EUR, IP 365, decline, sustaining capital, booked (reserves) and mgmt locations - all the rest could be in the appendix).

1) Pouce Coupe/Progress oil which is so-so (I recall IP365 of 600 boepd with 40% liquids) ROI drilling wise (but a money maker if not drilling) and which they are not drilling in 2024, An unknown # of drilling locations booked and estimated by mgmt.

2) Pouce Coupe West 3 wells drilled and completed but whose bringing on line has been postponed to Q4 due to low natural gas prices. This is a minuscule dry gas play with high EUR (would be a perfect candidate to book 50% natural gas hedges for even for 2025).

3) Charlie Lake Spirit River ~50% oil and NGLs. 6 wells coming on line in Q4. It only has 27 locations booked (55 estimated by mgmt - that was once 100 so not sure what's up with that) but obviously strong cashflow generator.

4) Charlie Lake Pouce Coupe - recently acquired, planning for development in 2025.

Due to the postponement of Pouce Coupe West and very few (1?) wells brought on line year to date, I suspect this play to show a decline in production this year with a substantial increase in 2025 from the 9 wells being brought on line in Q4 (3 Pouce Coupe West, 6 Spirit River Charlie Lake) possibly followed by new wells from Charlie Lake Pouce Coupe.

The company is adding 35MMcf of gas processing capacity in the area which should - if oil/liquids % is maintained - translate to 22,000 boepd.

I don't believe they will sell this - it generates money and because its a mixed bag of small plays, there wouldn't be much interest anyhow (not from big companies willing to pay a premium at least).

IM (amateur) O, from an integrated field standpoint, it would actually make sense to sell Pouce Coupe West and use that gas plant processing capacity to process natural gas produced by oilier wells. This is because Kelt overall development in Alberta is constrained by processing capacity. But its amateur hour because its not that simple - some of the gas can't be processed at some of the plants.

Of note they are connecting Wembley to Pouce Coupe via 3rd party pipeline (CSV). They haven't elaborated on why they are doing this.

IMAO, if the intent was to sell it along with Wembley, integrating this division to Wembley would make complete sense. Otherwise it will be difficult to sell (at least for a premium) because of the nature of the play(s). IOW, IMAO Kelt would get more for it sold with Wembley (if the aforementioned pipeline fully integrates the fields) than standalone.

The division generated $24.87 of netback in 2023 when nat gas prices were better than today. @ 22,000 boepd guesstimated production post processing capacity increase, that would translate to $200MM of annual field cashflow - not too shabby.

Certainly that if commodity prices cooperate (and with some judicious natural gas hedging...), it should consistently generate significant free cashflow. This could be used to fund other plays if need be or to grow via acquisitions in the area. Or, ___ forbid, return to shareholders.

[MyHoneyPot]

I think this is good thinking and those high deliverability gas wells will still be there when the gas prices firm up, as a planning process hedging the gas out some time in the future and timing the production accordingly makes good sense.  IMHO