Kelt Exploration Ltd.: Kelt Reports Financial and Operating Results for the Three and Six Months Ended June 30, 2024

Calgary, Alberta--(Newsfile Corp. - August 8, 2024) - Kelt Exploration Ltd. (TSX: KEL) ("Kelt" or the "Company") reports its financial and operating results to shareholders for the three and six months ended June 30, 2024.

The Company's financial results are summarized as follows:

FINANCIAL HIGHLIGHTS		Three months ended June 30									Six months ended June 30
(CA$ thousands, except as otherwise indicated)		2024			2023			%			2024			2023			%
Petroleum and natural gas sales		109,093			110,061			-1			235,484			249,632			-6
Cash provided by operating activities		46,419			68,163			-32			108,912			168,323			-35
Adjusted funds from operations (1)		42,457			58,810			-28			103,633			150,810			-31
Basic ($/ common share) (1)		0.22			0.31			-29			0.53			0.78			-32
Diluted ($/ common share) (1)		0.21			0.30			-30			0.52			0.77			-32
Net income and comprehensive income		10,905			25,799			-58			22,752			42,135			-46
Basic ($/ common share)		0.06			0.13			-54			0.12			0.22			-45
Diluted ($/ common share)		0.05			0.13			-62			0.11			0.22			-50
Capital expenditures, net of A&D (1)		73,810			45,035			64			153,991			121,664			27
Total assets		1,328,148			1,174,609			13			1,328,148			1,174,609			13
Bank debt		12,611			-			-			12,611			-			-
Net debt (surplus) (1)		63,084			(18,580	)		-440			63,084			(18,580	)		-440
Shareholders' equity		1,033,204			948,215			9			1,033,204			948,215			9
Weighted average shares outstanding (000s)
Basic		195,566			192,538			2			195,110			192,300			1
Diluted		199,620			196,366			2			198,957			195,842			2
(1) Refer to advisories regarding Non-GAAP and Other Financial Measures.

Financial Statements

Kelt's unaudited consolidated interim financial statements and related notes for the quarter ended June 30, 2024 will be available to the public on SEDAR+ at www.sedarplus.ca and will also be posted on the Company's website at www.keltexploration.com on August 8, 2024.

Kelt's operating results for the second quarter ended June 30, 2024 are summarized as follows:

OPERATIONAL HIGHLIGHTS		Three months ended June 30									Six months ended June 30
(CA$ thousands, except as otherwise indicated)		2024			2023			%			2024			2023			%
Average daily production
Oil (bbls/d)		7,599			8,158			-7			8,178			7,956			3
NGLs (bbls/d)		3,069			3,588			-14			3,283			4,105			-20
Gas (mcf/d)		120,148			107,752			12			122,040			112,214			9
Combined (BOE/d)		30,693			29,705			3			31,801			30,763			3
Production per million common shares (BOE/d) (1)		157			154			2			163			160			2
Net realized prices, before derivative financial instruments (1)
Oil ($/bbl)		102.52			92.98			10			95.90			96.05			-
NGLs ($/bbl)		55.85			40.67			37			53.89			49.53			9
Gas ($/mcf)		1.65			2.57			-36			2.30			3.33			-31
Operating netbacks ($/BOE) (1)
Petroleum and natural gas sales		39.06			40.72			-4			40.69			44,83			-9
Cost of purchases		(1.61	)		(0.91	)		77			(1.61	)		(1.25	)		29
Combined net realized price, before derivative financial instruments (1)		37.45			39.81			-6			39.08			43.58			-10
Realized gain (loss) on financial instruments		(0.27	)		(1.17	)		-77			(0.13	)		2.95			-104
Combined net realized price, after derivative financial instruments (1)		37.18			38.64			-4			38.95			46.53			-16
Royalties		(6.17	)		(2.76	)		124			(5.58	)		(4.63	)		21
Production expense		(10.87	)		(9.79	)		11			(10.64	)		(10.59	)		-
Transportation expense		(3.59	)		(3.54	)		1			(3.52	)		(3.27	)		8
Operating netback (1)		16.55			22.55			-27			19.21			28.04			-31
Land holdings
Gross acres		793,318			799,239			-1			793,318			799,239			-1
Net acres		581,056			582,828			-			581,056			582,828			-
(1) Refer to advisories regarding Non-GAAP and Other Financial Measures.

Message to Shareholders

During the second quarter of 2024, Kelt recorded positive earnings for the fifteenth consecutive quarter. Net income was $10.9 million ($0.05 per common share, diluted) for the three months ended June 30, 2024.

Kelt's average production for the three months ended June 30, 2024 was 30,693 BOE per day, up 3% from average production of 29,705 BOE per day during the corresponding period in 2023. Second quarter production was negatively affected by shut-ins resulting from third-party gas processing plant maintenance operations (as previously disclosed in the Company's news release dated July 5, 2024).

Production for the three months ended June 30, 2024 was weighted 35% oil and NGLs and 65% gas. Certain oilier wells at Wembley/Pipestone had to be shut-in during the third-party gas plant maintenance operations. Kelt expects its oil and NGLs weighting to be in the 38% to 39% range during the second half of 2024.

Kelt's realized average oil price during the second quarter of 2024 was $102.52 per barrel, up 10% from $92.98 per barrel in the second quarter of 2023. The realized average NGLs price during the second quarter of 2024 was $55.85 per barrel, up 37% from $40.67 per barrel in the same quarter of 2023. Kelt's realized average gas price for the second quarter of 2024 was $1.65 per Mcf, a decline of 36% from $2.57 per Mcf in the corresponding quarter of the previous year.

For the three months ended June 30, 2024, petroleum and natural gas sales were $109.1 million and adjusted funds from operations was $42.5 million ($0.21 per common share, diluted), compared to $110.1 million and $58.8 million ($0.30 per common share, diluted) respectively, in the second quarter of 2023. At June 30, 2024, the Company had net debt of $63.1 million, equating to 0.2 times forecasted 2024 adjusted funds from operations.

Net capital expenditures incurred during the three months ended June 30, 2024 were $73.8 million. During the second quarter of 2024, the Company spent $57.6 million on drill and complete operations and $13.8 million on facilities, pipelines and equipment.

Capital Program - Second Half of 2024

As previously disclosed, Kelt elected to defer the start-up of certain gassier wells in its drilling portfolio to November/December 2024.

Kelt's planned 2024 capital expenditure program remains unchanged at $325.0 million, however, the Company has seen reductions in previously estimated drill and complete costs on its Montney multi-well pads. Kelt may commence its 2025 drilling program in the fourth quarter of 2024 if this trend continues.

Kelt's remaining capital expenditures planned for 2024 during the second half of the year of $171.0 million includes the following highlights:

• At Wembley/Pipestone, the Company has drilled 13 of its 14-well Montney program for 2024. Six of these wells have been completed and fracing operations for the remaining eight wells are planned in the second half of the year.

• At Wembley/Pipestone, Kelt is preparing to add significant volumes as it awaits construction completion of a new third-party gas plant where the Company has 50 MMcf per day of raw gas firm service processing. Start-up of the new gas plant is expected prior to the end of 2024.

• At Pouce Coupe/Progress/Spirit River, two of its 6-well Charlie Lake program have been drilled. The remaining four wells are expected to be drilled by the end of the third quarter and fracing operations for all six wells are planned in the second half of the year.

• At Pouce Coupe West, Kelt has three DUCs that it expects to complete in the fourth quarter of 2024.

• At Oak/Flatrock, the Company has three DUCs that it expects to complete during the second half of 2024.

With the start-up of 26 new wells, Kelt expects to bring a significant amount of production on stream prior to the end of the year providing the Company with the ability to show significant production growth.

Management looks forward to updating shareholders with 2024 third quarter results on or about November 7, 2024.

Changes in forecasted commodity prices and variances in production estimates can have a significant impact on estimated funds from operations and profit. Please refer to the advisories regarding forward-looking statements and to the cautionary statement below.

The information set out herein is "financial outlook" within the meaning of applicable securities laws. The purpose of this financial outlook is to provide readers with disclosure regarding Kelt's reasonable expectations as to the anticipated results of its proposed business activities for the calendar year 2024. Readers are cautioned that this financial outlook may not be appropriate for other purposes.

Advisory Regarding Forward-Looking Statements

This press release contains forward-looking statements and forward-looking information within the meaning of applicable securities laws. The use of and of the words "will", "expects", "believe", "plans", potential", "forecasts" and similar expressions are intended to identify forward-looking statements. In particular, this press release contains forward-looking statements pertaining to the following: Kelt's expected price realizations and future commodity prices; its expected oil and NGLs weighting; the start-up date of the postponed wells; the cost and timing of future capital expenditures and expected results; the expected timing of wells bring brought on-production; the expected timing of production additions from capital expenditures; the ability to show significant production growth; the expected reductions in drill and complete costs; obtaining and the expected timing around third party additional processing capacity; and the Company's expected future financial position and operating results.

Certain information with respect to Kelt contained herein, including management's assessment of future plans and operations, contains forward-looking statements. These forward-looking statements are based on assumptions and are subject to numerous risks and uncertainties, many of which are beyond Kelt's control, including the impact of general economic conditions, industry conditions, volatility of commodity prices, currency exchange rate fluctuations, imprecision of reserve estimates, environmental risks, competition from other explorers, stock market volatility and ability to access sufficient capital. As a result, Kelt's actual results, performance or achievement could differ materially from those expressed in, or implied by, these forward-looking statements and, accordingly, no assurance can be given that any events anticipated by the forward-looking statements will transpire or occur.

In addition, the reader is cautioned that historical results are not necessarily indicative of future performance. The forward-looking statements contained herein are made as of the date hereof and the Company does not intend, and does not assume any obligation, to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise unless expressly required by applicable securities laws.

Certain information set out herein may be considered as "financial outlook" within the meaning of applicable securities laws. The purpose of this financial outlook is to provide readers with disclosure regarding Kelt's reasonable expectations as to the anticipated results of its proposed business activities for the periods indicated. Readers are cautioned that the financial outlook may not be appropriate for other purposes.

Non-GAAP and Other Key Financial Measures

This press release contains certain non-GAAP financial measures and other specified financial measures, as described below, which do not have standardized meanings prescribed by GAAP and do not have standardized meanings under the applicable securities legislation. As these non-GAAP, and other specified financial measures are commonly used in the oil and gas industry, the Company believes that their inclusion is useful to investors. The reader is cautioned that these amounts may not be directly comparable to measures for other companies where similar terminology is used.

Non-GAAP Financial Measures

Net realized price

Net realized price is a non-GAAP measure and is calculated by dividing the Company's P&NG sales after cost of purchases by the Company's production and reflects Kelt's realized selling prices plus the net benefit of oil blending and third-party natural gas sales. In addition to using its own production, the Company may purchase butane and crude oil from third parties for use in its blending operations, with the objective of selling the blended oil product at a premium. Marketing revenue from the sale of third-party volumes is included in P&NG sales as reported in the Consolidated Statement of Net Income and Comprehensive Income in accordance with GAAP. Given the Company's per unit operating statistics disclosed throughout this press release are calculated based on Kelt's production volumes, and excludes the sale of third-party marketing volumes, management believes that disclosing its net realized prices based on P&NG sales after cost of purchases is more appropriate and useful, because the cost of third-party volumes purchased to generate the incremental marketing revenue has been deducted.

Combined net realized prices referenced throughout this press release are before derivative financial instruments, except as otherwise indicated as being after derivative financial instruments.

Operating income and operating netback

Operating income is a non-GAAP measure calculated by deducting royalties, production expenses and transportation expenses from petroleum and natural gas sales, net of the cost of purchases and after realized gains or losses on derivative financial instruments. The Company also presents operating income on a per BOE basis, referred to as "operating netback" or "operating income per BOE", which allows management to better analyze performance against prior periods, on a comparable basis, and is a key industry performance measure of operational efficiency.

See the "Adjusted Funds from Operations" section of Kelt's Management's Discussion and Analysis as at and for the three months ended March 31, 2024, which provides a reconciliation of the operating netback from P&NG sales, which is a GAAP measure.

Capital expenditures

"Capital expenditures, before A&D" and "Capital expenditures, net of A&D" are measures the Company uses to monitor its investment in exploration and evaluation, investment in property plant and equipment, and net investment in acquisition and disposition activities. The most directly comparable GAAP measure is Cash used in investing activities, and is calculated as follows:

		Three months ended June 30						Six months ended June 30
(CA$ thousands, except as otherwise indicated)		2024			2023			2024			2023
Cash provided by investing activities		61,222			68,467			137,611			114,548
Change in non-cash investing working capital		12,588			(23,432	)		16,380			7,116
Capital expenditures, net of A&D		73,810			45,035			153,991			121,664
Property acquisitions		(104	)		(144	)		(773	)		(92	)
Capital expenditures, before A&D		73,706			44,891			153,218			121,572

Capital Management Measures:

Funds from operations and adjusted funds from operations

Management considers funds from operations and adjusted funds from operations as a key capital management measure as it demonstrates the Company's ability to meet its financial obligations and cash flow available to fund its capital program. Funds from operations and adjusted funds from operations are not standardized measures and therefore may not be comparable with the calculation of similar measures by other entities. The most comparable GAAP measure is "Cash provided by operating activities". Funds from operations and adjusted funds from operations are calculated as follows:

		Three months ended June 30,							Six months ended June 30,
(CA$ thousands, except as otherwise indicated)		2024			2023				2024			2023
Cash provided by operating activities		46,419			68,163				108,912			168,323
Change in non-cash working capital		(5,001	)		(9,924		)		(7,267	)		(18,751		)
Funds from operations		41,418			58,239				101,645			149,572
Settlement of decommissioning obligations		1,039			571				1,988			1,238
Adjusted funds from operations		42,457			58,810				103,633			150,810

Net debt (surplus) and net debt (surplus) to adjusted funds from operations ratio

Management considers net debt (surplus) and a net debt (surplus) to adjusted funds from operations ratio as key capital management measures to assess the Company's liquidity at a point in time and to monitor its capital structure and short-term financing requirements. The "net debt (surplus) to adjusted funds from operations ratio" is also indicative of the "net debt to cash flow ratio" calculation used to determine the applicable margin for a quarter under the Company's Credit Facility agreement (though the calculation may not always be a precise match, it is representative).

"Net debt (surplus)" is equal to bank debt, accounts payable and accrued liabilities, net of cash and cash equivalents, accounts receivables and accrued sales and prepaid expenses and deposits. The Company believes that using a "Net debt (surplus)" non-GAAP measure, which excludes non-cash derivative financial instruments, non-cash lease liabilities, and non-cash decommissioning obligations, provides investors with more useful information to understand the Company's cash liquidity risk.

Net debt (surplus) is calculated as follows:

		June 30, 2024			June 30, 2023
Bank debt		12,611			-
Accounts payable and accrued liabilities		98,651			72,222
Cash and cash equivalents		(511	)		(43,061	)
Accounts receivable and accrued sales		(42,250	)		(41,599	)
Prepaid expenses and deposits		(5,417	)		(6,142	)
Net debt (surplus)		63,084			(18,580	)

Supplementary Financial Measures

"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.

P&NG sales, cost of purchases, gain (loss) on derivative financial instruments, royalties, revenue after royalties and derivative financial instruments, production expenses, transportation expenses, financing expenses, gross and net G&A expenses, realized gain (loss) on foreign exchange, other income (expense), share based compensation expense and depletion and depreciation on a $/BOE basis is calculated by dividing the amounts by the Company's total production over the period.

Adjusted funds from operations per share (basic and diluted), and net income and comprehensive income per share (basic and diluted) is calculated by dividing the amounts by the basic weighted average common shares outstanding.

Measurements

All dollar amounts are referenced in thousands of Canadian dollars, except when noted otherwise. This press release 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 cubic feet per barrel and sulphur volumes have been converted to oil equivalence at 0.6 long tons per barrel. The term BOE may be misleading, particularly if used in isolation. A BOE conversion ratio of six thousand cubic feet per barrel is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead and is significantly different than the value ratio based on the current price of crude oil and natural gas. This conversion factor is an industry accepted norm and is not based on either energy content or current prices. Such abbreviation may be misleading, particularly if used in isolation. References to "oil" in this press release include crude oil and field condensate. References to "natural gas liquids" or "NGLs" include pentane, butane, propane, and ethane. References to "liquids" include field condensate and NGLs. References to "gas" in this discussion include natural gas and sulphur.

Abbreviations

A&D	Acquisitions and Dispositions
P&NG	Petroleum and Natural Gas
MD&A	Management's Discussion and Analysis
TSX	the Toronto Stock Exchange
KEL	trading symbol for Kelt Exploration Ltd. on the TSX
GAAP	Generally Accepted Accounting Principles
SEDAR+	the System for Electronic Document Analysis and Retrieval
bbls	barrels
bbls/d	barrels per day
Mcf	thousand cubic feet
Mcf/d	thousand cubic feet per day
MMcf	million cubic feet
MMcf/d	million cubic feet per day
Oil	includes crude oil and field condensate combined
BOE	barrel of oil equivalent
BOE/d	barrel of oil equivalent per day
NGLs	natural gas liquids

For further information, please contact:

Kelt Exploration Ltd., Suite 300, 311 - 6^th Avenue SW, Calgary, Alberta, Canada T2P 3H2

David J. Wilson, President and Chief Executive Officer [phone], or
Sadiq H. Lalani, Vice President and Chief Financial Officer [phone].
Or visit our website at www.keltexploration.com.

To view the source version of this press release, please visit https://www.newsfilecorp.com/release/219199

SOURCE: Kelt Exploration Ltd.