CELTIC EXPLORATION LTD. 
By
(Stock Symbol "CLT" - TSX) November 10, 2011
Calgary, Alberta
Celtic Exploration Ltd. ("Celtic" or the "Company") is pleased to report its financial and operating results for the three months and nine months ended September 30, 2011. Summary of results for the third quarter are as follows:
Three months ended September 30, | |||
($000's, unless otherwise specified) | 2011 | 2010 | Change |
Revenue, before royalties and financial instruments | 55,298 | 47,989 | 15% |
Funds from operations | 34,626 | 30,963 | 12% |
Basic, $/share | 0.35 | 0.34 | 3% |
Diluted, $/share | 0.34 | 0.34 | 0% |
Profit (loss) | (1,592) | (1,897) | -16% |
Basic, $/share | (0.02) | (0.02) | 0% |
Diluted, $/share | (0.02) | (0.02) | 0% |
Capital expenditures, net of dispositions | 96,682 | 72,762 | 33% |
Weighted average common shares outstanding | |||
Basic, thousands | 97,650 | 90,089 | 8% |
Diluted, thousands | 100,900 | 92,110 | 10% |
Production | |||
Oil (bbls/d) | 3,859 | 3,747 | 3% |
Gas (mcf/d) | 71,691 | 76,555 | -6% |
Combined (BOE/d) | 15,808 | 16,506 | -4% |
Production per million shares (BOE/d) | 162 | 183 | -11% |
Realized sales prices, after financial instruments | |||
Oil ($/bbl) | 79.77 | 62.29 | 28% |
Gas ($/mcf) | 4.18 | 4.22 | -1% |
Drilling activity | |||
Total wells | 12 | 18 | -33% |
Working interest wells | 7.5 | 12.7 | -41% |
Success rate on working interest wells | 91% | 100% | -9% |
Summary of financial and operating results for the nine months ended September 30, 2011 are as follows:
Nine months ended September 30, | |||
($000's, unless otherwise specified) | 2011 | 2010 | Change |
Revenue, before royalties and financial instruments | 163,723 | 169,000 | -3% |
Funds from operations | 102,126 | 100,168 | 2% |
Basic, $/share | 1.07 | 1.12 | -4% |
Diluted, $/share | 1.04 | 1.10 | -5% |
Profit | 3,100 | 27,449 | -89% |
Basic, $/share | 0.03 | 0.31 | -90% |
Diluted, $/share | 0.03 | 0.30 | -90% |
Capital expenditures, net of dispositions | 238,007 | 110,724 | 115% |
Total assets | 932,905 | 710,764 | 31% |
Bank debt, net of working capital | 219,738 | 168,017 | 31% |
Shareholder's equity | 547,586 | 411,704 | 33% |
Common shares outstanding, thousands | 97,820 | 90,184 | 8% |
Stock options outstanding, thousands | 7,337 | 7,325 | 0% |
Weighted average common shares outstanding | |||
Basic, thousands | 95,402 | 89,701 | 6% |
Diluted, thousands | 98,502 | 91,139 | 8% |
Production | |||
Oil (bbls/) | 3,676 | 4,061 | -9% |
Gas (mcf/d) | 71,177 | 79,294 | -10% |
Combined (BOE/d) | 15,539 | 17,277 | -10% |
Production per million shares (BOE/d) | 163 | 193 | -16% |
Realized sales prices, after financial instruments | |||
Oil ($/bbl) | 79.64 | 67.53 | 18% |
Gas ($/mcf) | 4.24 | 4.52 | -6% |
Drilling activity | |||
Total wells | 46 | 47 | -2% |
Working interest wells | 31.0 | 33.7 | -8% |
Success rate on working interest wells | 98% | 94% | 4% |
Undeveloped land | |||
Gross acres | 710,513 | 494,587 | 44% |
Net acres | 643,557 | 432,777 | 49% |
Celtic Exploration Ltd. ("Celtic" or the "Company") is
pleased to report to shareholders the Company's
activities
in the third quarter of 2011. During the quarter, Celtic
drilled 12 (7.5 net) wells with an overall net success rate
of
91%. Production during the quarter averaged 15,808 BOE per
day, a decrease of 4% from 16,506 BOE per day in the third
quarter of 2010. Production during the third quarter did not
reflect the start-up of Resthaven
production that Celtic had previously expected to commence in
September 2011. Initial production from the
Company's Resthaven facility, which is tied into the
Simonette Gas Plant, was brought on-stream on October
28, 2011. In addition, partial production from Fir was
brought on-stream in late September, with little impact to
third quarter average production volumes. With the start-up
of Resthaven and Fir production, Celtic expects to show
significant production growth in the fourth quarter of
2011.
In the third quarter of 2011, Celtic recorded funds from
operations of $34.6 million ($0.34 per share, diluted),
up
12% from $31.0 million ($0.34 per share, diluted) reported in
the same quarter of the previous year. Despite lower
production levels during the third quarter, funds from
operations increased primarily due to a higher realized
average sales price and lower production and transportation
expense per BOE.
Net capital expenditures during the quarter were $96.7
million and bank debt, net of working capital, at
September 30, 2011 was $219.7 million, up 31% from $168.0
million at September 30, 2010.
Subsequent to the end of the third quarter, Celtic issued 6.9
million common shares by way of short-form prospectus for
gross proceeds of $172.5 million. Also, subsequent to the end
of the third quarter, the Company announced that it had
entered into an agreement to acquire natural gas assets,
including production of approximately 2,500 BOE per day, at
Grande Cache, Alberta, adjacent to Celtic's core area at
Resthaven, for cash consideration of $50.0 million.
At Kaybob, Alberta, the Company drilled two (1.9 net)
Triassic Montney horizontal wells and one (0.3 net)
Cretaceous Bluesky horizontal well. Also at Kaybob, Celtic
participated in the drilling of two (0.2 net) Devonian
Beaverhill Lake wells in the Kaybob South BHL Unit # 1, one
(0.1 net) of which was unsuccessful.
At Inga, British Columbia, Celtic participated in the
drilling of two (0.8 net) Triassic Doig horizontal wells. The
first well located at 04-36-087-23W6 (40% WI) was completed
and after a five day test, the well was producing oil at a
rate of 1,070 barrels per day and natural gas at a rate of
3.5 MMCF per day (1,650 BOE per day combined), at a flowing
wellhead pressure of 12,627 kPa (1,830 psi). The second well
located at 01-33-087-
23W6 (40% WI) will be completed in the fourth quarter.
At Fir, Alberta, the Company drilled one (0.7 net) horizontal
well with a measured depth of approximately 4,000 metres.
This well, located at 08-27-059-22W5 will be completed in the
fourth quarter.
In the Greater Resthaven area of Alberta, Celtic carried out
three operations which further delineate this exciting
Triassic Montney play. The Company drilled two (2.0 net)
horizontal wells and drilled one (1.0 net) re-entry
horizontal well during the third quarter of 2011.
The first horizontal well that was drilled during the third
quarter is located north of the Simonette River near Jayar at
04-34-061-03W6 (100% WI). The well was drilled to a measured
depth of 5,130 metres and was completed with a 16-stage foam
fracture technique. After 82 hours of clean-up and flow, at
the end of the test, the well was producing natural gas at a
rate of 20.4 MMCF per day and condensate at 568 barrels per
day, at a flowing wellhead pressure of 12,863 kPa (1,837
psi).
The second horizontal well that was drilled during the third
quarter is in the central part of Celtic's Greater Resthaven
land block near Wanyandie located at 01-03-060-01W6 (100%
WI). The well was drilled to a measured depth of 4,597 metres
and was completed with a 13-stage foam fracture technique.
During the last 24 hours of the 6 day test, the well was
flowing natural gas at a rate of 4.1 MMCF per day and
condensate of 48 barrels per day, at a flowing wellhead
pressure of 1,052 kPa (150 psi).
The third operation during the third quarter was a re-entry
horizontal well located near Simonette at 04-11-062-
27W5 (100% WI). This well was intended to test an eight
section block near Simonette, away from Celtic's contiguous
block of lands in the Greater Resthaven area. The well has
been completed and is currently being tested.
Celtic has been active at recent Alberta crown land sales in
the Resthaven area. The company has increased its land
holdings with Triassic Montney rights to 461,357 gross acres
(720 sections) and 443,254 net acres (692 sections).
At Resthaven, Celtic has completed the Phase I construction
of gas gathering pipelines and a central compression and
dehydration facility located at 02-10-060-01W6 (the
"Resthaven facility"). The Company has started operating the
Resthaven facility, with the first compressor running, since
October 28, 2011. Natural gas from the Resthaven facility is
pipeline (12 inch) connected to the Simonette gas plant
operated by Keyera Corp. Two 100% working interest horizontal
wells have been tied-in to the Resthaven facility which is
currently producing at the first compressor's maximum
capacity of 12.7 million cubic feet per day.
A second compressor with a capacity of 15.3 million cubic
feet per day is expected to start up next week, at which
time, four additional 100% working interest horizontal wells
are expected to be tied-in to the Resthaven facility. As a
result, Celtic has aggregate capacity of 28.0 million cubic
feet per day from Phase I construction.
Phase II construction is currently underway as Celtic extends
the gas gathering pipeline system north of the Simonette
River. As part of this construction phase, the Company
expects to install a third compressor and additional
dehydration facilities by late December 2011, expanding the
aggregate capacity of the Resthaven facility to 50.0 million
cubic feet per day.
Phase III construction will commence in 2012, at which time
the Company intends to extend its gas gathering pipelines to
the wells located in the southern block of its contiguous
land holdings. Celtic currently has four rigs operating in
the Resthaven area, drilling horizontal wells and expects to
keep these rigs operating throughout
2012 further delineating and de-risking the Company's 692
section Triassic Montney land base.
Celtic maintains its exit 2011 production guidance of
approximately 24,500 BOE per day. However, due to the K3 Gas
Plant outage and pipeline and facility construction delays,
certain production at Fir and Resthaven were brought
on-stream later than originally forecasted. As a result,
average production for 2011 has been reduced to between
16,800 and 17,000 BOE per day (previously between 18,400 and
18,700 BOE per day).
The Company's average commodity price assumptions for 2011
are US$92.50 (previously US$93.50) per barrel for WTI oil,
US$4.15 (previously US$4.30) per MMBTU for NYMEX natural gas,
$3.50 (previously $3.55) per GJ for AECO natural gas and a
US/Canadian dollar exchange rate of US$1.018 (previously
US$1.020). These prices compare to average 2010 prices of
US$79.43 per barrel for WTI oil, US$4.42 per MMBTU for NYMEX
natural gas, $3.95 per GJ for AECO natural gas and a
US/Canadian dollar exchange rate of US$0.970.
After giving effect to the aforementioned production and
commodity price assumptions, funds from operations
for 2011 is forecasted to be approximately $146.5 million or
$1.45 per common share, diluted (previous forecast was $158.0
million or $1.59 per common share, diluted) and net loss is
forecasted to be approximately $1.8 million or $0.02 per
common share, diluted (previous forecast was $3.2 million or
$0.03 per common share,
diluted).
Bank debt, net of working capital, is estimated to be $82.9
million by the end of 2011 or approximately 0.6 times
forecasted 2011 funds from operations.
The Company's announcement whereby it has entered into an
agreement to acquire assets at Grande Cache, Alberta is not
reflected in the guidance provided herein as that transaction
is not expected to close until December 2011.
Celtic continues to remain optimistic about its future
prospects. Celtic is opportunity driven and is confident that
it can continue to grow the Company's production base by
building on its current inventory of development prospects
and by adding new exploration prospects. Celtic will
endeavour to maintain a high quality product stream that on a
historical basis receives a superior price with reasonably
low production costs. In addition, the Company takes
advantage of royalty incentive programs in order to further
increase netbacks. Celtic will continue to focus its
exploration efforts in areas of multi-zone hydrocarbon
potential.
Celtic's Board of Directors has approved the Company's 2012
capital expenditure budget of $375.0 million. The Company
expects to spend $295.0 million on drilling and completing
wells, $60.0 million on facilities, equipment and pipelines,
and $20.0 million on land and seismic.
Celtic expects production in 2012 to average between 27,500
and 28,000 BOE per day. The Company recently added
significant production at Resthaven and Fir after installing
gas gathering pipelines and compression and dehydration
facilities and looks forward to continued growth from both
these areas in 2012. Average production in 2012 is expected
to be weighted 24% oil and 76% gas; however, operating income
in 2012 is expected to be weighted 52% oil and 48% gas. At
the low end of the range of 2012's average production
forecast, this represents a 64% increase from the forecasted
average production of 16,800 BOE per day for 2011. On a
production per share basis, the increase would be 53%.
Celtic expects to achieve continued efficiencies in its cost
structure in 2012. Production expense is estimated to be
$7.57 per BOE and royalties are expected to average 10.9%.
General and administrative expense is estimated to be at
industry leading low levels of $0.67 per BOE.
The Company's average commodity price assumptions for 2012
are US$82.50 per barrel for WTI oil, US$4.15 per MMBTU for
NYMEX natural gas, $3.65 per GJ for AECO natural gas and a
US/Canadian dollar exchange rate of US$0.9755. These prices
compare to forecasted average 2011 prices of US$92.50 per
barrel for WTI oil, US$4.15 per MMBTU for NYMEX natural gas,
$3.50 per GJ for AECO natural gas and a US/Canadian dollar
exchange rate of US$1.018.
After giving effect to the aforementioned production and
commodity price assumptions, funds from operations for 2012
is forecasted to be approximately $243.0 million or $2.22 per
common share, diluted and net loss is forecasted to be
approximately $10.0 million or $0.10 per common share,
diluted.
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 advisory regarding forward-looking statements below.
Sensitivities to changes in commodity prices would affect
forecasted 2012 funds from operations and profit as
follows:
(i) A change of 10% in the AECO natural gas price of $0.365
per GJ, would affect funds from operations by
$17.2 million ($0.15 per common share) and profit by $12.9
million ($0.12 per common share);
(ii) A change of 10% in the WTI oil price of US$8.25 per
barrel, would affect funds from operations by $6.9 million
($0.06 per common share) and profit by $5.2 million ($0.05
per common share); and
(iii) A change of 10% in the US/Canadian dollar exchange rate
of US$0.0976 per CAD, would affect funds from operations by
$34.5 million ($0.31 per common share) and profit by $25.8
million ($0.23 per
common share).
Bank debt, net of working capital, is estimated to be $215.0
million by the end of 2012 or approximately 0.9 times
forecasted 2012 funds from operations.
Upon closing of the previously announced agreement to acquire
assets at Grande Cache, Alberta, the Company will provide
revised 2012 guidance to reflect the impact of the
acquisition.
In spite of continued AECO natural gas prices below $4.00 per
GJ, Celtic is able to generate profitable returns on its
investments due to the nature of its asset base that is
primarily made up of predictable and repeatable resource type
development in liquids-rich natural gas formations.
Given the success from recent well completions, Celtic
maintains its exit 2011 production guidance of approximately
24,500 BOE per day. However, due to the K3 Gas Plant outage
and pipeline and facility construction delays, certain
production at Fir and Resthaven were brought on-stream later
than originally forecasted. As a result, average production
for 2011 has been reduced to 16,800 BOE per day
(previously
18,400 BOE per day).
Celtic's Board of Directors has approved the
company's 2012 capital expenditure budget of $375.0
million. Oil and gas production for 2012 is forecasted to
average between 27,500 and 28,000 BOE per day. Celtic's
previous announcement whereby it has entered into an
agreement to acquire assets at Grande Cache, Alberta is not
reflected in the guidance provided herein as that transaction
is not expected to close until December
2011.
The Company is excited about its active exploration program
and looks forward to updating shareholders with further
results in the near future. Celtic continues to maintain a
flexible financial position so that it can pursue
opportunities as they arise.
The information set out herein under the heading "2011 Guidance" and "2012 Guidance" is "financial outlook" within the meaning of applicable securities laws. The purpose of this financial outlook is to provide readers with disclosure regarding Celtic's reasonable expectations as to the anticipated results of its proposed business activities for 2011 and 2012. Readers are cautioned that this financial outlook may not be appropriate for other purposes.
Forward-looking StatementsThis press release contains expectations, beliefs, plans, goals, objectives, assumptions, information and statements about future events, conditions, results of operations or performance that constitute "forward-looking information" or "forward-looking statements" (collectively, "forward-looking statements") under applicable securities laws. Undue reliance should not be placed on forward-looking statements. Forward-looking statements are based on current expectations, estimates and projections that involve a number of risks and uncertainties, which could cause actual results to differ materially from those anticipated by the Company and described in the forward-looking statements. We caution that the foregoing list of risks and uncertainties is not exhaustive. Events or circumstances could cause actual dates to differ materially from those estimated or projected and expressed in, or implied by, these forward-looking statements. The forward-looking statements contained in this press release 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.
Non-IFRS Financial Measurements
This press release contains the terms "funds from
operations", "operating netback" and "production per share"
which do not have a standardized meaning prescribed by IFRS
and therefore may not be comparable with the calculation of
similar measures by other companies. Funds from operations
and operating netbacks are used by Celtic as key measures of
performance. Funds from operations and operating netbacks are
not intended to represent operating profits nor should they
be viewed as an alternative to cash provided by operating
activities, net earnings or other measures of financial
performance calculated in accordance with IFRS. Operating
netbacks are determined by deducting royalties, production
expenses and transportation expenses from oil and
gas revenue. Funds from operations are determined by adding
back change in non-cash operating working capital to cash
provided by operating activities. The Company calculates
funds from operations per share using the same method and
shares outstanding which are used in the determination of
earnings per share.
All dollar amounts are referenced in Canadian dollars, except
when noted otherwise. Where amounts are expressed on a barrel
of oil equivalent ("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. References to oil in this discussion include crude
oil and natural gas liquids ("NGLs"). NGLs include
condensate, propane, butane and ethane. References to gas in
this discussion include natural gas and sulphur.
Management is required to make judgments, assumptions and estimates in the application of IFRS that have a significant impact on the financial results of the Company. These estimates and assumptions are developed based on the best available information and are believed by management to be reasonable under the existing circumstances. New events or additional information may result in the revision of these estimates over time.
FINANCIAL STATEMENTS
Celtic's unaudited financial statements and related notes for
the interim period ended September 30, 2011 will be available
to the public on SEDAR at www.sedar.comand
will also be posted on the Company's website at www.celticex.comon November 10, 2011.
For further information, please contact:
Sadiq H. Lalani, Vice President, Finance and Chief Financial Officer (403) 215-5310. Or visit our website site at www.celticex.com.
