Kelt Exploration Ltd. ("Kelt" or the "Company") reports its financial and operating results to shareholders for the second quarter ended June 30, 2025. The Company's financial results are summarized as follows:
FINANCIAL STATEMENTS
Kelt's unaudited consolidated interim financial statements and related notes for the quarter ended June 30, 2025 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 7, 2025.
MESSAGE TO SHAREHOLDERS
Kelt Exploration Ltd. ("Kelt" or the "Company") reports its financial and operating results to shareholders for the second quarter ended June 30, 2025.
Kelt's average production for the three months ended June 30, 2025 was 38,734 BOE per day, up 26% from average production of 30,693 BOE per day during the corresponding period in 2024. Production for the three months ended June 30, 2025 was weighted 36% oil and NGLs and 64% gas. Certain oilier wells at Wembley/Pipestone were shut-in during the month of June for third-party gas plant maintenance operations.
Kelt's realized average oil price during the second quarter of 2025 was $82.52 per barrel, down 20% from $102.52 per barrel in the second quarter of 2024. The realized average NGLs price during the second quarter of 2025 was $36.67 per barrel, down 34% from $55.85 per barrel in the same quarter of 2024. Kelt's realized average gas price for the second quarter of 2025 was $2.32 per Mcf, up 41% from $1.65 per Mcf in the corresponding quarter of the previous year.
For the three months ended June 30, 2025, petroleum and natural gas sales were $116.4 million and adjusted funds from operations was $61.8 million ($0.31 per common share, diluted), compared to $109.1 million and $42.5 million ($0.21 per common share, diluted) respectively, in the second quarter of 2024. At June 30, 2025, the Company had net debt of $178.2 million, equating to 0.5 times forecasted 2025 adjusted funds from operations.
Net capital expenditures incurred during the three months ended June 30, 2025 were $91.0 million. During the second quarter of 2025, the Company spent $56.2 million on drill and complete operations and $30.1 million on facilities, pipelines and equipment.
2025 Outlook
The global economy is currently facing a multitude of inter-connected challenges, including slower growth, uncertain trade policies, persistent inflation, high interest rates, and geopolitical instability. These factors contribute to an economic environment of uncertainty, which in turn results in volatile fluctuations in commodity prices.
As a result, Kelt has entered into certain future contracts to sell its oil and gas production in order to protect the Company's ability to fulfill its planned $325.0 million capital expenditure program for 2025, of which $195.7 million was incurred during the first six months of the year.
Giving effect to the Company's commodity price forecast for the remainder of 2025 and including actual prices up to June 30, 2025, Kelt expects to realize a net gain of $21.7 million from derivative financial instruments during 2025, of which $13.0 million was realized in the first six months of the year.
Production during 2025 is forecasted to average between 42,000 and 45,000 BOE per day, an increase of 27% at the low end of the range and an increase of 36% at the high end of the range compared to average production of 33,115 BOE per day in 2024. The average production forecast for 2025 was reduced from the Company's previous guidance of 44,000 to 47,000 BOE per day to reflect the delayed start-up of the newly constructed third-party Albright Gas Plant ("Albright") at Wembley/Pipestone. The operator of Albright had originally planned to bring the plant on-stream in the fourth quarter of 2024. After several delays during construction and a longer than anticipated commissioning period, the operator now indicates that Albright is expected to be fully operational next week.
Kelt has 50 MMcf per day of raw gas processing service capacity at Albright and expects to ramp up production to the plant over the next two months. Unlike other sour gas processing plants in the area where there is an additional cost incurred to dispose of any acid gas, Albright was designed to recover sulphur from the gas processed through the plant. Although construction of the sulphur recovery unit resulted in many of the delays, it is expected to generate additional revenue from sulphur sales in the future. At maximum capacity, Kelt estimates that it will be able produce up to 120 tonnes of sulphur per day. At current net prices for sulphur, this would equate to additional sales revenue of approximately $8.0 million per year, offsetting a portion of the Company's overall net gas processing costs at Albright.
Adjusted funds from operations for 2025 is forecasted to be $325.0 million, unchanged from the Company's previous forecast. The Company increased its forecasted 2025 average WTI oil price by 6% from US$63.00 per barrel to US$66.50 per barrel. In addition, Kelt reduced its forecasted 2025 average AECO gas price by 9% from $2.46 per GJ to $2.23 per GJ. On December 31, 2025, the Company expects to have net debt of $126.0 million, representing 0.4 times forecasted 2025 adjusted funds from operations.
Operations Update
At Spirit River, Kelt has drilled and completed two Charlie Lake wells (3-14 pad) which are expected to commence production in the third quarter of 2025. At Pouce Coupe North, Kelt has drilled two Montney wells (9-12 pad) which are expected to be completed and put on production in the third quarter of 2025.
In its Wembley/Pipestone Division, Kelt has drilled and completed four Montney wells (9-17 pad). These wells, together with a fifth DUC well off the same pad, are currently testing and are expected to be put on production at their full capability through the new Albright Plant. Kelt has drilled and completed five additional Montney wells (6-9 pad) which are expected to be put on production in the third quarter of 2025. The Company has also drilled three Montney wells (16-8 pad) which are expected to be completed in September and commence production during the fourth quarter of 2025.
In its Oak/Flatrock Division, Kelt has now completed an extensive 3-D seismic shoot covering approximately 286 square kilometres or approximately 70,400 acres (110 sections). Drilling operations at Oak has commenced on a four well pad located at 5-32. These wells are expected to be completed and put on production during the fourth quarter of 2025.
With access to new gas processing capacity, Kelt expects to show significant production and cash flow growth in the second half of 2025. Management looks forward to updating shareholders with 2025 third quarter results on or about November 13, 2025.
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 2025. Readers are cautioned that this financial outlook may not be appropriate for other purposes.